MN Sundays and Supply Chain Risk

I’m a planner when it comes to business. Every “I” is dotted, and every “T” is crossed. My personal life is a different story. Outside of work, I usually just go with the flow and let my better half take care of planning. She loves to plan, and most of the time it’s not a big deal. I just have to look at her little planner book to figure out where I need to be, when I need to go to the dentist, and usual stuff like that. Again, most of the time that approach works out pretty well.

Then comes the conundrum. Picture this: it’s Sunday, the Packers are getting ready to beat up on the Bears and Jay Cutler once again, and we’re hosting a football party at our place. The grill is ready to go, we’ve got a good spread inside the house, and naturally my throat is starting to get dry. It’s a good thing I have a stocked liquor cabinet and fridge full of… uh oh.

I completely forgot my brother came by last Tuesday from Green Bay, and the two of us did our best to solve the world’s problems. Not only did my head feel the pain Wednesday morning, but so did my liquor cabinet. It’s 11:34 a.m., and I live in Minnesota which is bad news for this guy. It’s time to pick up some 3.2 beer from the grocery store and some soda (or “pop” I guess they call it here). I’m going to hear about this for a long time…

While that didn’t actually happen, this is a foreign concept to those of you who live in 76% of our great country. If you’re a 24 percenter like me, you start to wonder whether your first state government was filled with Mormons, Puritans and Quakers. Off-sale alcohol is banned on Sundays here in Minnesota. It is either the result of a genius lobby put forth by the bar and restaurant association where on-sale is permitted on Sundays, or it’s an old fashioned law with more noble intentions in mind. Lucky for me, I live right on the border of MN and WI.

In between all this, there is an inherent supply chain problem in my personal life that I’ve solved. While planning ahead would have taken care of this, living in a border town has done the same thing. Knowing the impending supply disruption that comes every Sunday, I have the option of stocking up ahead of time to avoid this issue. I also have alternate suppliers located in WI that I can fall back on in the event I fail to plan ahead and need to restock my inventory on a Sunday.

Supply chain risk is a real problem for many businesses as well. There are hundreds of concrete contractors around Minnesota right now struggling with a cement shortage. Between the packed rail system, delayed barges this spring, and manufacturing disruptions down south, there isn’t nearly enough cement to go around. Many of these fall projects have had to be delayed and or pushed back to next spring. To a business that makes its hay while the sun shines and before the snow flies, this can be devastating.

So what’s a business to do? There are three common approaches to handling this type of risk: inventory management, alternative sourcing/supplier arrangements, and business interruption insurance.

Utilizing inventory management systems provides you the most control in preventing a supply chain disruption. By keeping accurate count of your inventory and analyzing usage trends, you should have a good idea of how quickly you go use up your inventory and how often you should be ordering replacements. You’ll always know what is available and how many days you can work with what you have on hand. As businesses now keep fewer inventories and “just in time” shipping has become more and more commonplace, inventory management is even more important because there isn’t a large inventory stockpile waiting to be used.

Finding an alternative supplier or sourcing arrangement can help you avoid disruption if your main artery shuts down. This isn’t possible in all industries, especially in the cheese world where your suppliers of brine and rennet are very limited. But in most types of business, a little planning and research can help you identify two or three backups should your main source of a certain product no longer be able to meet your demands.

Last but not least, you can purchase dependent business interruption insurance. For those of you in the cheese industry and others as well that rely on a sole supplier for certain products or ingredients, you can purchase this coverage to protect your lost income should there be a covered cause of loss at this named supplier. If you lose two or three months of cheese production because your supplier of rennet had a fire in their plant, you would be reimbursed by your insurance carrier for your lost profit during that time. The same can be applied to other industries as well.

 

It’s time for me to practice what I preach. Supply chain risk is a very real threat to businesses today, and also to those of us who live in Minnesota. You can bet my inventory will be well-stocked every Sunday when the Packers play.

Andy Bertram CPCU, ARM-E
abertram@cobrown.com
651-800-6173

Why Prescott, WI Matters to You

Just across the Mississippi River from Hastings, MN lies Prescott, WI. A town of about 4,300 people in Pierce County, Prescott is more than a small border town filled with Packer and Brewer fans. Prescott is also a textbook example of why you should never ignore what’s going on in the world of politics. You see, Prescott is also home to a brand new industrial park, sprawling with new construction.

In May of 2013, a new set of state business-to-business taxes were approved by the Minnesota Legislature. One of the tax hikes added a state sales tax to business-related warehousing and storage services. It targeted all tangible goods that are sent through third party warehousing and distribution. Essentially, you could argue that the majority of goods produced in our state our consumed in our state would have been subject to some sort of new tax. Minnesota had the dubious distinction of being the only state in the nation implementing a tax on third party warehousing and distribution.

To say tax policy doesn’t affect business decisions is ignorant at best, though admitted ignorance has been a common theme here in MN that last four years. I won’t get real political here, but when several businesses signed up to build new warehouses and distribution centers in Prescott after the tax was passed, it wasn’t a coincidence. (In full disclosure, our legislators eventually repealed the tax this spring, but the damage was already done.) A few of these businesses pulled out, but United Natural Foods (UNFI) is in the process of constructing a 300,000 square foot distribution and warehouse that will add up to 314 new jobs and inject $37.8 million into the WI economy.

Think for a moment what that tax would have meant to their business. Had they ignored what was going on at the legislative level, they may have wound up building here in the wonderful city of Hastings. We have the land available here for them, and we would have loved to see them set up shop in our industrial park. You could argue Hastings was a better location because of our vicinity to the cities and other major highways. Had they ignored our legislation and built here, they also would have been saddled with the burden of paying this extra tax that is not around in 49 other states. That would’ve had a huge impact on their profitability, and it all could have been avoided (and was).

Taxes are just a small portion of the red tape and other legislative issues that can impact your business. Different bills and amendments get passed into law each year, sometimes under the radar, and it is important to know how they affect you so you can plan for the future. Rather than ignoring politics, you should be actively involved trying to put people in office who are going to support your interests. As a small business, there are many different trade associations or business interest groups who will do the lobbying for you and keep you in the loop about what’s coming through the pipeline. You could also have someone on your staff tasked with staying up to speed on any and all laws and pending legislation that will affect your business. Regardless of what you do, do something!

Before you vote this year, remember the story about Prescott, WI. If you haven’t previously done so, make a conscious effort to pay more attention and get more involved in your local politics. The future of your business depends on it.

Andy Bertram CPCU, ARM-E
abertram@cobrown.com
651-800-6173
www.northriskpartners.com

Be the Best Boss and Save Your Business

I have one bit of advice that will make you the best boss ever, and at the same time, I could save your business. What is that magical advice you may ask? Mandatory vacation. No, that is not a typo.

Wouldn’t it be great if your employer came in and told you that you were required to take five consecutive days of vacation? I can just imagine him saying, “Andy, you’ve been working too hard. As a condition of your employment here, I am requiring you to take a five day vacation. Forget about those financial reports and the payroll you planned on doing. It’s non-negotiable. I don’t want to see or hear you at all next week.”

As an employee, I’m thrilled that I’m “required” to take five days off because let’s face it, I doubt I’d do it on my own. I hate doing payroll at the end of the month. Not to mention that balancing the books often means late days at the office.

As an employer, my boss is very shrewd. He probably isn’t real concerned that I never take a day off. In fact, he loves it. And he also doesn’t have some sick desire to do payroll and balance the books. What he does want is to make sure that the numbers are the numbers are the numbers.

We typically put individuals in charge of our finances that we have a great deal of trust in. Whether it’s a family member or employee, if we were concerned about them embezzling money, fudging numbers, etc, we wouldn’t put them in that position in the first place, right?

Because of this trust, it can be easy to ignore the possibility of malfeasance. Make no mistake. Payroll fraud is real.  According to the Association of Certified Fraud Examiners, it’s the number one source of accounting fraud and employee theft.  According to an article in Forbes:

• Payroll Fraud happens in 27 percent of all businesses
• Payroll fraud occurs nearly twice as often (14.2 percent) in small organizations with less than 100 employees than in large ones (7.6 percent).
• The average instance of payroll fraud lasts about 36 months. That’s three years of paying ghost employees or overpaying existing ones.

http://www.forbes.com/sites/matthewgarrett/2013/09/10/payroll-fraud-a-big-threat-and-how-to-avoid-it/

Trust is an important aspect of every successful business. You need to be able to delegate to thrive in your career, and you need to be able to provide your employees the flexibility to do their jobs well. Great things can happen if you let them. Trust, but verify.

So go ahead, be the best boss around. Let your trusted employees know they deserve a vacation. It may just save your business.

 

Andy Bertram CPCU, ARM-E

Risk Advisor

C.O. Brown

651-800-6173

abertram@cobrown.com

Dash to the Finish Line - Ensuring a Successful Transition Starts Now

You’re out on a walk on a peaceful summer morning. There is a cool breeze blowing off the Mississippi, and you’re soaking up the early morning sunshine. The soothing lapping of the water on the rocks is suddenly interrupted by a steady thump, thump, thump of a running animal pounding the pavement behind you. The thumping keeps getting closer and closer, harder and harder, until suddenly you can hear the breathless panting of the grizzly bear running you down from behind. Just before you take off in a panicked sprint, praying for dear life, you turn around only to see this guy drop a quick wave as he lumbers by on his early morning run. That’s right, no grizzly, just me.

To say I’m not a graceful runner is an understatement. While I may not be much of a runner, I am stubborn, competitive and determined. I also enjoy a good challenge, so when I saw the Warrior Dash was coming to Afton, MN this year, I didn’t hesitate to sign up. After months of training and prep work, race day was here. The first 200 yards went as planned, and then came the first unexpected obstacle. That’s right; this one was not on the list. We had to run from the bottom of the ski hill all the way to the top. And then back down. And repeat again, and again. I don’t know how many hills and wrenches were thrown my way that day, but I’ll bet my thighs could tell you.

Regardless, I managed to power through and finish the race within two minutes of my goal. Did it go as planned? Not exactly. Did I consider it a success? Absolutely. I had mentally and physically prepared to finish the race, and that’s what I did.  Even though it wasn’t perfect, all of that preparation paid off and I was able to cross the finish line. After the first hill, I had to adapt and switch gears. In a perfect world, unexpected hills and twists would never happen. In the real world, you need to be practical and realize that things won’t always go as planned. If that sounds a lot like running a business, it’s because it works the same way.

I’d guess that when you took on the challenge of starting your business, you had a general goal in mind on where you wanted it to go. That goal probably didn’t include working every day for the rest of your life. By being flexible and creative, you persevered to get where you are today. As you’ve had to switch gears, it can be easy to forget to do so in other areas too. What does your final game plan look like? Are you so caught up in the day to day that you haven’t spent any time on your exit strategy?

Succession planning is a talent and organizational improvement initiative that enables an organization to grow and thrive now and in the future. Having a clear picture of the future of your business will allow steps to be taken now to ensure the future success and direction of the company. Your business can neither succeed nor grow without a clear understanding of how the business will continue after the departure of key leaders of the business, including yourself. Not only is it imperative for the long-term success of your business, but I’d assume you want to make sure you’ll be getting paid for your investment when you retire.

Succession planning isn’t limited to retirements only. Think of your critical employees, yourself included, and how your business would be affected by their loss. A life insurance guy would talk end of the world type stuff, but let’s consider more likely scenarios – disability, retirement, moving away, joining a competitor. Life and Disability policies are available for two risks, but for the others it’s critical that a backup plan be established that includes cross-training your employees. Good planning is good business, and failing to do so could put your future and the future of your business in jeopardy. Succession planning should be part of a broader enterprise risk management plan. That’s right, not just insurance risk management, but a holistic approach to address those risks you can’t insure for. If your broker isn’t helping you with this already, it’s time to find someone that will.

Flying by the seat of your pants has a time and a place for certain things. Solidifying your future plans and protecting your business does not make the list. If you haven’t already done so, now is a great time to start as you make your dash to the finish line – your retirement.

 

Andy Bertram CPCU, ARM-E

651-800-6173

abertram@cobrown.com

Tracking Employee Performance and Man Points

Inspired this past weekend by my boys, I decided that it was a good time to
restock my supply of man points. While no one significant event comes to mind, I’m sure I’ve done
enough things since getting married that would get me close to the break even mark. I had an 8 foot
diameter tree stump in the middle of my backyard, and it had been taunting me since I moved in last
summer. This stump had outstayed its welcome, and it was time for it to go.

Burning this stump into oblivion looked better on paper than in practice.  My fire hardly turned the stump black. Dynamite would have worked well, but the city doesn’t appreciate that sort of fun.  This tree was probably around when the Vikings landed here, so it’s taken on the worst nature could throw at it and was probably laughing at my feeble attempt to take it out.  Enter plan b): it was time to man up and rent a stump grinder. I could have gone with the Cadillac of stump grinders, but instead fought the stump for eight hours with the more primitive, manual grinder. That’s right, eight hours of abuse to my body so I could earn some of those man points back.

That got me wondering. Did I earn a hundred man points? A thousand? Several thousand?
How do I track that, and how do I know where I stand? For something as important as this, it may be
necessary to keep some sort of tally so I don’t ever fall behind.  Then I started thinking about those of you who are running a business. Hopefully you see your employees working hard every day. Maybe you see them taking an unexpected or extra break that was not approved, perhaps for a smoke. Was it a onetime deal, or does it happen quite frequently?

I’ve heard from many business owners that they are considering cracking down on these non-approved breaks for many different reasons. Well there’s a simple reason that sticks out in my head – money.  If your employees are taking extra breaks throughout the day, you’re not getting what you paid for.  Let’s say you pay an employee $20/hour, 40 hours/week. Instead of working the 40 hours you are paying the employee for, you are actually only getting 35 hours of service due to these extra breaks or other distractions from the job. At $20/hour, 52 weeks/year, you are losing $5,200 per year on just that one employee alone.  And that doesn't even include what you are paying in benefits.  When was the last time you saw those costs go down?  I thought so.

My buddies seem to keep track of my man points, though sometimes I think they shortchange me a bit.  Lucky for you, you can keep track of your employee performance to make sure you're getting your money's worth.  How often do you do performance reviews?  What does your review process look like?  Are there incentives to improve performance such as bonuses, extra vacation days, you name it?  I suppose if you were getting an extra $5,200 out of your employees that you didn't get last year, a $100 performance bonus gift card or extra day of vacation is probably a win-win situation.

Just like your financial planner will give you updates on your stocks, mutual funds, and other investments, it's time you do the same with your company's biggest investment - human capital. 

Good luck!

Andy Bertram CPCU, ARM-E
C.O. Brown
651-800-6173
abertram@cobrown.com

Untangling Your Fishing Line - Delegating in Your Business

My family and I went on our first family vacation this weekend.  By family vacation, I mean a work trip with some family time squeezed in there as well.  Since my two little men are now well on their way to the age of four, I knew it was time for them to start collecting some man points.  While I’m not sure how many man points I’ve accumulated over the years, I know I’m fairly certain I’m still in positive territory.  Since it’s never too early to start, I wanted to make sure that they had a solid bank of man points at an early age.  It’s a precautionary thing just in case they have a moment of weakness and drink pink cocktails or go clothes shopping with their girlfriends when they get a little older.

As part of their christening, I did what any proud father would do – took them to Fleet Farm to pick out their first fishing pole.  Now from my recollection of fishing with my dad, I remember having a knack for creating the most unimaginable rats’ nests ever.  Whether it was operator error or a problem with the reel, I’d like to place blame solely on the equipment.  With that in mind, I found every “cool” open faced reel I could locate.  It didn’t matter.  Hunter found a mini Star Wars kiddie combo, and Jack found the Spiderman equivalent, each with the dreaded closed face reel.  While my memory isn’t clear, I probably had nightmares that night about fishing line wrapped and tangled and knotted and looped and the worst possible rats’ nest you could imagine.

With the rods ready and our bags packed, we headed up to the resort to relax and catch some fish.  My boys have the attention span of, you guessed it, a couple of three year olds, so I wasn’t sure how long they’d last out on the boat.  When we got to our first spot, it wasn’t more than five minutes in that we had our first tangle.  Hunter’s pole was a mess, so I spent some time cleaning that up.  The next thing I know, Jack’s line was tangled around the back of the boat, and repeat the process.  I had my line in the water for a little bit, but not too long.  The fish weren’t biting there, so we packed up and moved to another spot.  After what seemed like milliseconds, I was already untangling some more lines.  I’m not sure why I thought I may actually get some fishing in.  I remember being a kid myself and wreaking havoc on my dad’s poles, leaving him no time to fish. 

If you’re a business owner, many of your days, weeks, and months are probably spent untangling the fishing lines in your business.  There are a lot of important things that can help you succeed and grow that you probably want to do, but somewhere in between the idea and actually following through another rats’ nest came your way to untangle.  Have you put off a long-term business model and set goals to work towards?  Did you plan on attending some of your industry’s top trade shows but instead had to put them off?  Maybe on the safety and risk management side you recognize the need to implement a culture of safety to reduce your workers compensation costs and boost morale.  Risk management sometimes can be the toughest thing to devote time to because your ROI may take a year or more to materialize, and with other coals on the fire it often gets pushed back.

One of the toughest things in business and personal life can be delegating some of these less important tasks to someone else.  Do you have someone in your business who may be equipped to untangle some of those lines you’ve been dealing with?  If you don’t, could you train them?  Correct me if I’m wrong, but I’m going to take a wild guess and assume that you didn’t hire someone you didn’t think you could trust.  If that’s the case, stop hesitating and start delegating.  You’ll appreciate your newfound time, and you’ll probably find yourself enjoying your time at work a lot more doing the things you want to be doing. 

We all know that no one can do certain things as well as we can.  Some things though can be done by someone else close to our perfection, and that’s usually okay.  The things that really need our expertise should get our undivided attention, but prioritizing is a good place to start.  By letting go a bit, putting your trust in your employees and delegating those less important tasks to them, you’ve now given your business another chance to succeed.

So think about your business and your personal life.  What types of rats’ nests are you dealing with that would be better off being handled by someone else?  If you were to hand off one or two of these time consuming, menial tasks to someone else today, think of the things you could accomplish.  If you don’t, you’re risking not reaching your full potential in the future, missing those opportunities to grow and improve your profitability.  You aren’t in business to fail, so stop running it that way.

In today’s day and age, you’re either growing or you’re dying.  Start focusing on what really matters, and don’t get caught up in the day to day.  If you haven’t already, today is looking like a great day to start delegating. 

 

A big thanks to the MSBOA for putting together a great conference this past weekend.  And by the way, Jack did manage to catch his first smallmouth bass and wanted me to put it on the wall.  I think that’s worth a few man points.

 

Andy Bertram CPCU, ARM-E

abertram@cobrown.com

651-800-6173

An Ode to the Fake ID: Identity Theft, Data Breach and Cyber Liability

I’ve lived in either Wisconsin or Minnesota my entire life.  However, during different periods in college I actually grew up in Oregon and South Dakota as well.  I couldn’t tell you the names of the towns in either state that I purportedly lived in now, but I sure knew them back then.  I also knew the liquor stores and bars that weren’t real careful when they checked IDs (with the exception of one fateful day when I had to give up my Oregon residency and take up South Dakota).

It seemed in college there was always a guy who could hook you up with a bad fake ID for the right price.  No one was ever hurt while we were out having a good time, and they served their purpose for a few years.  Was it illegal?  Absolutely, and it was also very dumb for a guy majoring in Criminal Justice with full intentions of becoming a peace officer.   I’m not going to talk right now about the importance of training your bouncers, checking IDs or liquor liability.  What I am going to scratch the surface on is the up and coming threat of data breach, identity theft and cyber liability.

While our guy in college may not have been very sophisticated, today’s identity thieves are and have gotten very good at what they do.  It seems just about every week we hear about a large data breach – Target before Christmas and Ebay more recently.  What we don’t often hear about is some of the attacks on small or medium sized businesses.  78% of small and medium sized businesses experienced a data breach in the past two years.  Every year, cybercriminals steal $1 billion from these businesses in the U.S. and Europe.  And of those that suffer a major data loss, 72% shut down within 24 months.

Not all of these data losses were the result of a data breach.  Some were the result of poor backup procedures, but many of them were.  And unfortunately for you, their guy is a lot more sophisticated than our guy was in college.  With our world being more interconnected than ever, there are more and more ways where they can steal your information.  Point of sale computers.  Credit card machines.  Online databases.  Physical breach of confidential records in storage.  Employment records.  Hacking into your computer or mainframe.  Your smart phone.  Online payment systems.  The list goes on.

So how do you fare?  What are your true exposures?  For most people, when they hear data breach they only think of cyber liability.  Cyber liability is very important for many businesses, but it’s also important to understand what your coverage actually entails.  While many businesses may not have a true cyber liability exposure, they still face the possibility that confidential information could be compromised.  It could be by a current employee in good standing.  It could be someone breaking into your business.  Disgruntled employee.  Or it could be someone you know and trust and would never expect.  Regardless of who is a suspect, it is a very real threat to businesses today.

While the cyber liability may not apply in these situations, data breach does and could be used to cover a claim.  It’s important for you to know that coverage is available, it covers a huge exposure, and not all things are created equal.  Even if you do not have the online presence that many businesses do today, you still could fall victim to one of these very sophisticated, 21^st century criminals.  It’s important to know what your policy does and does not cover.

Identity theft is a much more lucrative business than selling fake IDs to college kids, and it’s here to stay.  The best thing you can do is take steps to prevent a breach, and in case it does happen, making sure you have the coverage you need to ensure your business’s survival.  Good luck!

Andy Bertram CPCU, ARM-E
abertram@cobrown.com
651-800-6173