SMC Working PArts - Oct/Nov 2014 by SMC Business Councils

Driving the growth of small business and manufacturing in Pennsylvania

OCTOBER/NOVEMBER 2014

WORKING PARTS magazine

PERSPECTIVE

A Lawyer’s Take on Highmark/ UPMC Consent Decree

page

SPECIAL REPORT The New Entrepreneur

page

E-CORNER

Take Control of Your Energy Dollars

page

GRASSROOTS LOBBYING

Influence Policy, Affect Change

page

Risks &

Rewards 16 page

This year’s SBA Award winners come from diverse backgrounds and share a passion for helping others inside and outside the workplace.

OCTOBER/NOVEMBER 2014

IN THIS ISSUE COVER STORY This year’s SBA Award winners come from diverse backgrounds and share a passion for helping others inside and outside the workplace.

16 DEPARTMENTS

5 7 29 30

SECTIONS

CHAIRMAN’S MESSAGE president’s MESSAGE SMC HOMEBASE NEWS & EVENTS

parting shot

THOUGHT LEADERS

The New Entrepreneur

Velocity Equipment Solutions

ON THE COVER 2014 SBA award winners: From left: Kelly Collier, Nelson Cano and Michael Cherock. Photo: Ed Rombout Photography

EXPERT TIPS & ADVICE

10 11

Funding a Business Venture

Starting a Business Begins with Legal Advice

24 25

Alternative financing ideas for start-ups

Start-up Mistakes to Avoid Ideas not to get lost in the white noise

Your partner in business planning, risk mitigation and more

Pulse WHAT’S HAPPENING NOW

Grassroots Advocacy

An investment in your future

Grassroots Lobbying SMC creates opportunities, here’s a recap

PERSPECTIVE LEADING POINTS OF VIEW

Highmark and UPMC in 2015 and beyond

Defying conventional perceptions

Innovation Works grant takes this New Castle manufacturer to the next level

How 2

The insurance landscape is clearer as January 1 nears

special report

26 22

E-CORNER ENTREPRENEUR’S ADVICE

Take Control of Your Energy Dollars Bolster your bottomline with these questions

An Open Letter to PA’s Members of Congress The cost impact of ACA on small business and jobs

Health Savings Accounts

Whistleblowing Made Easier

Tax-free way to pay for costs not covered in your HDHP

Update on two bills that expand enforcement of PWL

You’re Invited!

Join us at our Holiday Party To kick off the holiday season, join SMC for a festive evening at Pittsburgh’s leading winery with current and prospective members. Celebrate the most joyous time of year by making new connections and renewing ties with prospects and customers or clients. Bring employees, associates and friends as your way of saying “thank you” for all they’ve helped you accomplish this year. To reflect the spirit of the season, we’ll be accepting donations for Toys for Tots and local food banks.

Thursday, December 11, 2014 6:00 – 8:00 pm NARCISI WINERY 4578 Gibsonia Road • Gibsonia, PA 15044 Register today! Call Shannon at 412.371.1500 ext. 1607 or e-mail shannon@smc.org or visit http://smc.org/WRHP2014 Sponsorship opportunities available Special offers for group ticket purchases

Where PA Businesses Go to Grow

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CHAIRMAN’S MESSAGE

Entrepreneur, Intrapreneur This issue of Working PArts focuses on entrepreneurship. On the following pages, you’ll read Gina Mazza’s excellent cover story about winners of the Small Business Administration’s winners of the Business Person of the Year, Exporter of the Year and Young Entrepreneur of the Year Awards. Michael Cherock, Nelson Cano and Kelly Collier, and thousands more like them, are the backbone of an economic resurgence in southwestern and central Pennsylvania. You’ll also gain insights to how today’s entrepreneur is different from those who started businesses five, 10 and 20 years ago, as well as get pointers on obtaining the best value for your energy dollars, how to pursue alternative sources of funding, how to determine whether a problem requires a complex or elegantly simple solution, and much more. Whether you’ve been in business for decades or are starting a new venture, always thinking and acting like an entrepreneur can have tremendous benefits for your company. In today’s hyper-competitive business climate, all of us need to be thinking continually about how we can do things more efficiently, and develop or modify strategies and tactics toward that end. Conditioning employees and strategic partners to adopt entrepreneurial mindsets and become intrapreneurs is an ongoing

responsibility of everyone in an ownership or management position. Incidentally, the term intrapreneur was coined more than 35 years ago by Gifford Pinchot III, a renowned author, entrepreneur and co-founder of the Bainbridge Graduate Institute in Seattle. Mr. Pinchot is also the grandson of Gifford Pinchot, who served as Pennsylvania’s 28th governor in the 1920s and '30s. Intrapreneurship, like any other aspect of business, can be challenging, but it can also be rewarding in every sense of the term. If employees and partners are always thinking about how to improve operating efficiencies to save time and money, and create new revenue streams for the company, positive results are likely to follow. In the same vein, challenging members of your team to think continually — and creatively — about ways to develop new sources of revenue will get them focused in the right direction. That’s particularly true if there are incentives for making significant and measurable contributions to the company’s growth. The days of being able to sit back and admire one’s accomplishments are long-gone; only the companies that innovate continually will thrive. When reading this issue of Working PArts , ask yourself which new ideas your company has put in-place recently, or is considering.

Mark Shelleby SMC Chairman of the Board of Directors

WORKING PARTS magazine

Driving the growth of small business and manufacturing in Pennsylvania A Bi-Monthly Publication of SMC Business Councils Publisher: Steven B. Shivak Design & Production: Levy MG Printing: NPC, Inc. SMC Business Councils Board of Directors Chairman of the Board Mark Shelleby Vista Metals, Inc. Chairman-Elect/Secretary Brian Stein S&S Intersource LLC Treasurer Abraham Moosa Janney Montgomery Scott Immediate Past Chairman Dan Galbraith Solutionist Ray Amelio Fragasso Financial Advisors Anita Brattina AllFacilities, Inc. David Carlson Creekside Springs, LLC Vice Chair/Benefits George Halula Shiloh Services John Nikoloff ERG Partners Vice Chair/Membership Bill Ringle Principal, SystemRingel Vice Chair/Government Relations Eric Riske General Window Cleaning, Inc. Vice Chair/Communications George Sackandy Fusionmarx Vice Chair/Human Resources Kelly Scott Manpower Working PArts is published six times per year by SMC Business Councils. Subscriptions: $50 per year to U.S. residents; foreign subscriptions: $100 (contingent upon location). Single copy: $10. Change Service Requested. The companies featured in this magazine and the products and services displayed are chosen to provide information of interest to small business and manufacturers. Working PArts and SMC Business Councils do not specifically endorse any of the products or practices described in the magazine. We reserve the right to reject advertising. Correspondence regarding editorial copy should be addressed to: Editor, Working PArts 600 Cranberry Woods Dr., Suite 190 Cranberry Township, PA 16066 Telephone: 412-371-1500

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Nobody knows the industrial marketplace better than Levy MG. Industrial Strength Marketing Levy MG’s industrial marketing smarts and your business goals give us the foundation to develop a well-defined strategy. We pinpoint the right marketing tools and create engaging content with top-notch design. And then deliver everything — from e-blasts to lead-generating direct mail to sales literature — to the right people with great results. Contact Dave Levy at davelevy@levymgi.com, 412.201.1900, ext. 16 or 412.812.2280.

www.levymgi.com BR ANDING • DESIGN • PR • TR ADESHOWS • WEBSITES

President’S MESSAGE

Who’s Your Chief Listening Officer? I remember a commercial back in the '80s for one of the major airlines. It centered on a company president who, after learning he lost his oldest customer, decided he needed to get back in the air to try to win back the business. Flash-forward to today, and most of us conduct assessments of why customers leave. In some cases, we spend a lot of time figuring out why we lost a customer. Unfortunately, once a customer has left, the post-mortem data is used for internal purposes instead of salvaging the relationship. How many of us gather data on why we won the business in the first place? At that point, our new customer is telling us, “YES, I think you are valuable and can help me succeed.” Regardless of the role we play or the database we have, all of us should wear the title of Chief Listening Officer. Simply put, we all have the opportunity to better understand our customers through asking and listening. How we absorb that information, and use it later when our customers need it, can make us indispensable to them time after time. By demonstrating such knowledge, our customers will know they can rely on us anytime, even in areas outside of our core expertise. As business leaders, being a Chief Listening Officer enables us to gather information from our customers and enhance their experiences in dealing with the people who make our organizations go. Many times we learn just as much, if not more, from what our customers are not saying. By being good listeners from the start, customers will think we can read their minds when we launch a new product or service.

I, along with the rest of the SMC team, love to meet with members to hear about the great things they are doing. These meetings energize and excite me because I hear what is working and what additional services members need to attract and retain customers, fueling additional growth. As a Chief Listening Officer, I’ve met hundreds of members in different industries and specialties. As a result, I refer members to each other. Moreover, each member of the SMC team — a Chief Listening Officer in his or her own right — does the same. This value-added service is at the heart of SMC’s mission is to help you generate more revenue and maximize profitability. If we don’t have the expertise or tools to address your specific matter, we know members who are ready and able to help! As the leader of your organization, how are you creating a culture in which everyone is a Chief Listening Officer? Introverts and extroverts agree that strong customer bonds ensure customer loyalty. So, create a process that works for you and your team. That method should include gathering and collecting data, and sharing the efforts — and results — with everyone. Also share testimonials from your customers who express how pleased they are with your company, and especially with individuals on your team. Think of it this way: Do you want to spend time each month reviewing a report detailing customers lost, or would you rather have an office of Chief Listening Officers who share stories about why your customers stay loyal to you year after year? At SMC, you know where we stand.

President, SMC Business Councils SMC.ORG

PERSPECTIVE LEADING POINTS OF VIEW

Highmark & UPMC in 2015 & Beyond by Joseph a. vater, jr., esq

With much fanfare, the Corbett Administration and the Attorney General announced the Consent Decrees signed by Highmark and UPMC on June 27, 2014. The purpose of the Consent Decrees was to establish a framework for the likely expiration on January 1, 2015, of the contract between Highmark and a number of UPMC facilities and physicians.

of care services provided following an Emergency Room visit shall be in-network, including related inpatient admission through discharge. UPMC has, however, made it clear that its interpretation of this provision applies only until the patient is stabilized. There will be no balance billing in the case of emergency treatment. If the visit is not deemed an emergency, however, the visit may be treated as an out-of-network visit. One possible implication of this provision is that, if patients are transferred after being stabilized, such transfers may result in duplicative testing and costs.

Furthermore, the Consent Decrees’ provisions will cover any hospital, facility, physician services or any other provider services acquired by UPMC, or with which UPMC has an agreement to handle provider contracting.

Vulnerable Populations The Consent Decrees require UPMC and Highmark to contract at in-network rates for all of its hospital, physicians and continuity of care services for CHIP, Highmark Signature 65 Program, Medigap and commercial retiree carve outs so long as Highmark does not make unilateral material changes to these programs. While initially an open question, it appears that both UPMC and Highmark agree that any individual who has Highmark coverage as an active employee, and who is at least 65 years-old, is entitled to treatment at all of UPMC facilities on an in-network basis.

Although the Consent Decrees answered some questions, many matters were left to differing interpretations. Further negotiations stemmed from differences between both parties and have the potential to become subject to dispute resolution procedures. The Consent Decrees were followed by additional negotiations between Highmark and UPMC, and by Highmark’s filing a Transition Plan and a revised Transition Plan (“Transition Plan”), which was submitted on August 29, 2014.

Out-of-Network UPMC Hospitals These UPMC hospitals will be out-ofnetwork as of January 1, 2015:

In-Network UPMC Hospitals The Consent Decrees require UPMC and Highmark to enter into an agreement for hospital and physician services, and followup care services, through December 31, 2019, at these hospitals:

Emergency and Trauma Services

• UPMC Hamot & Kane Community Hospital • UPMC Horizon • UPMC Altoona • UPMC Bedford • UPMC Northwest • Western Psychiatric Institute and Clinic The Consent Decrees also stipulate that any facility, physician services or other provider services located or delivered outside 8

the counties of Allegheny, Beaver, Butler, Washington and Westmoreland will be considered in-network. Additionally, UPMC Mercy and Children’s Hospital of Pittsburgh will remain in-network, with Mercy’s contract expiring on June 30, 2015, with a one-year run-out, and Children’s Hospital’s contract expiring on June 30, 2022. If Highmark and UPMC are unable to agree on reimbursement, the rates for 2015 will be the current rates plus medical MBI (inflation). If UPMC and Highmark are unable to agree on reimbursement for 2016, the matter will go to arbitration.

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• UPMC East • UPMC McKeesport • UPMC St. Margaret • UPMC Passavant • UPMC Presbyterian, Shadyside & Magee • Magee Women’s Hospital of UPMC In addition to the UPMC hospitals, facilities and providers who will be in-network, and various other services will be treated as in-network. The Consent Decrees require UPMC and Highmark to negotiate in-network rates and patient transfer protocols for emergency and trauma services for hospital, physician and appropriate continuity of care services at all UPMC and Allegheny Health Network hospitals. This provision is limited to the treatment of emergency conditions for which the patient is admitted. It is anticipated that the parties will agree on appropriate medical protocols for the transfer of patients to in-network facilities. The Transition Plan indicates that all hospital, physician and appropriate continuity

That interpretation means UPMC will treat all Medicare patients as in-network, regardless of whether they have Medicare as their primary or secondary insurance. Necessary Services The Consent Decrees also require that, where UPMC is the local provider of services which a patient’s treating physician deems necessary, and that the Pennsylvania Department of Health has determined are not available from another source, UPMC will not balance bill any member who is outof-network. This provision of the Consent Decrees is likely to lead to confusion about its applicability in specific cases. Oncology Services The Consent Decrees provide that Highmark subscribers may access, as if innetwork, UPMC services, providers, facilities and physicians involved in the treatment of cancer. This provision applies only if a

Summary As employers approach January 1, 2015, the insurance landscape is clearer than it was several months ago. For example, Highmark indicates in its Transition Plan that about 81 percent of all UPMC physicians will be innetwork. Highmark is establishing a website at www.YourNetwork2015.com that will include an online directory to search for doctors who will be in the Highmark PPO Blue Network as of January 1.

patient’s treating physician determines that a patient diagnosed with cancer should be treated by a UPMC oncologist, and if the patient agrees to be treated. Furthermore, UPMC and Highmark are to negotiate an agreement for the treatment of illness which results from cancer treatment, including illnesses related to mental health, endocrinology, orthopedics and cardiology. Continuation of Care The Consent Decrees provide that a Highmark member’s continuation of care during a course of treatment at UPMC shall be on an in-network basis at in-network rates. Although the Consent Decrees provide that the need for the continuing course of treatment shall be determined in the first instance by the patient’s treating physician in consultation with, and in accordance with, the wishes of the patient or the patient’s representative, the Transition Plan indicates that the member, in consultation with the UPMC physician, makes the determination. Those in-network services will include all services reasonably related to the treatment including, but not limited to, testing and follow up care. This provision is likely to generate confusion. For example, which of these diseases or conditions would be included under this provision: Diabetes? High Blood Pressure? High Cholesterol? Safety Net The Consent Decrees and the Transition Plan also allow a one-year safety net, beginning January 1, 2015, for any current UPMC

patient and Highmark subscriber who used UPMC providers and services during the 2014 calendar year, but is not in a continuing course of treatment, and is not able to find comparable physicians and services in his or her locality during the one- year period. Community Blue An unresolved issue related to the Consent Decrees is whether the terms of the Consent Decrees apply to Highmark’s Community Blue Plan, which was a limited network that excluded many UPMC providers and facilities. The Transition Plan acknowledges that the Consent Decrees apply to the Community Blue Program. The Transition Plan, however, establishes that the Community Blue Program will be modified to allow access to UPMC providers as described under the Consent Decrees, but in many cases at a higher member cost sharing obligation. Related Fiscal Protection The Consent Decrees limit balance billing to Highmark policyholders who use an out-of-network UPMC facility or physician for services not covered in the Decrees. The patient’s balance bill will be limited to the difference between Highmark’s payment and 60% of the actual charge. For example: Charge

$10,000

Highmark’s Payment

$4,500

60% of Charge

$6,000

Balance Bill Maximum

$1,500

Sadly, UPMC has already challenged that percentage, and has indicated that Highmark’s directory is not correct. That situation burdens a patient with Highmark coverage to determine whether a doctor is in-network; and if not, whether the patient is willing to bear the additional out-of-network costs. For now, the safest way to determine the network status of a particular doctor is to check with both the doctor and Highmark. One can simply call 1-888-BLUE-428 or the member service number on the Highmark identification card to confirm with a Highmark representative whether a doctor will be in-network in 2015. Additionally, other UPMC physicians may be treated as in-network due to the provisions of the Consent Decrees, including Continuation of Care, Safety Net, Vulnerable Population and Oncology Services. As a result of these terms of the agreements, the disruption for 2015 may be less severe than anticipated. Nevertheless, employers should begin to identify the various insurance options that best serve them and their employees. One can only hope that issues relating to emergency room services and continuation of care will be worked out so that employers are able to understand the implications of their decisions to remain with Highmark as their insurance provider, or to change carriers. WP About the Author Mr. Vater is a partner with Meyer, Unkovic & Scott, practicing in the firm’s Employment Law and Employee Benefits Section. He represents group health plans and has served on SMC’s Government Relations Committee, and as a member of SMC’s Health Care Working Group. SMC.ORG

How 2 EXPERT TIPS & ADVICE

FINANCIAL

Funding a Business Venture by George Dukovich Do you have an idea for a business? Or perhaps you want to support a child’s entrepreneurial spirit and help fund his or her business venture. No matter the case, you’ll need startup financing to turn that idea into a tangible reality. Starting up a business may be considered too risky for more traditional bank loans, so you may need to rely on alternative funding. The Business Plan Seeking funding from a non-traditional source doesn’t mean that you don’t need a business plan. Whether you decide to selffinance or look for an investor, you need a sound business plan that details the strategy and required resources for the business. Any smart investor will want to see the plan and its main points before making a decision to invest in your business. Visit the Small Business Administration’s website (www.sba. gov) for more guidance. Self-Financing Without Disrupting Your Finances If you decide to self-finance your business venture, there are several alternatives to consider instead of using high interest-rate credit cards or withdrawing funds from your 401(k). These options include a margin loan or a securities-based line of credit (SBLC), both of which are collateralized by securities in your brokerage accounts. These borrowing solutions won’t disrupt your investment portfolio by selling off securities. Family and Friends In lieu of a bank loan, invite your friends and family to invest in your business. It’s best to have a frank conversation with them

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so they understand the money may not be returned if the business does not succeed. As with all money matters, it’s a good idea to document your agreement and note any perks or equity to which your investors are entitled. Leaning on an Angel “Angel” investors generally are affluent individuals or groups that provide capital for a startup business in exchange for equity. Angels have earned their name by typically being friendly and patient, and by providing their business wisdom. Be Part of the Crowd There are two types of crowdfunding. The first is donation-based through websites like Kickstarter and GoFundMe to help fund projects or business ideas in return for products, perks or rewards. The second is called investment crowd funding, where individuals seek capital self-ownership stakes online in the form of equity or debt. Because this type of funding is relatively new, government regulations associates with it are not set in stone. We should expect more on this front in the coming months. Type of NonTraditional Financing Self-Financing with Pledge Securities for an SBLC or Margin Loan

Family & Friends

Qualifying for a Business Grant Some business grants are available through state and local programs, non-profit organizations and other groups, particularly for initiatives like expanding childcare centers, creating energy-efficient technology and tourism marketing campaigns. Such grants usually require you to match funds or combine the grant with other forms of financing, such as a loan. Starting a new business is a big decision and choosing the right type of financing is an even bigger one. The key is to do your homework and ask many questions. Talk with your financial advisor, tax professional and lawyer about your funding options to ensure you are making the right choice to put your business on the path to success, and to ensure that your long-term financial plans stay intact. WP About the Author George Dukovich, CFP, is the Pittsburgh Branch Manager for Raymond James Financial Services, Inc.

Advantages • Easy • No setup fees • Won’t disrupt investment portfolio

• Convenient & quickly available • Simplified contract

Disadvantages • May not be suitable for all investors • Requires minimum withdrawal amount • Conflict if business fails & money lost • Added pressure on you as business owner • Funds may be limited

• Substantial funding available (generally) Angel Investor

• More contractual strings • Access to business wisdom & insight • Access to capital at low to no cost

Crowdfunding*

Grants

• Fewer contractual strings • Allows you to begin marketing & building a customer base • Access to capital at low cost

• May be hard to find • Managing divergent interests for the business can be challenging

• Funds may be limited, or come in over time instead of upfront when needed to start the business • Use of funds strictly defined & limited to certain types of business ventures

*Description of donation crowdfuding model only; rules for equity crowdfunding do not yet exist.

How 2 EXPERT TIPS & ADVICE

SALES & MARKETING

Start-Up Mistakes to Avoid by George sackandy

The technological age is in full swing. Every day thousands of start-ups form and even more entrepreneurs begin down the road to make their ideas a reality. All of this is possible by the immeasurable power of the internet. These endless possibilities, however, do come with a price. Most startups and entrepreneurial ventures get lost in the white noise. Below are just a few of the mistakes many businesses make to keep them from reaching the success they set out to find. 1. Not Having a Website Surprisingly enough, there are several thousands of businesses out there operating without websites — a staggering 58% of businesses actually. A website is the backbone of your online presence. This is not to say that a business cannot have an online presence without a website. That is very possible, but just makes the job of marketing your business that much harder. In a recent survey, 56% of Americans said they would not trust a business that does not have a website. 2. Ignoring the Importance of Social Media Twitter, LinkedIn, Facebook, social media is everywhere nowadays. These are a business’s direct link to their consumer, and that link should be utilized as often as possible. Take the opportunity to post announcements, company events, legislative trends, news articles, anything and everything that cements the relationship between you and your consumers. These sites are where most of America spends their free time, so use that to your advantage.

3. Disregarding SEO More often than not, the first step people are going to take when finding a business is typing a word or phrase into a search engine. SEO, or Search Engine Optimization, is the process of optimizing your website’s content to make it more readily available to those who are using these engines. This can be the difference of having your website appear in the top ten on a Google search or on the fifth page. While professionals specialize in this kind of work, the simplest, and cheapest, option is Google Analytics. 4. Not Branding Emails While your website may reflect your outward message, branding your emails, adding your business’s name to the end of your email address, ensures professionalism when communicating directly. This professionalism instills a level of confidence in your consumers. It shows that you have done your research and that you are taking your business seriously. 92% of small businesses feel that branding their email creates

immediate credibility. And, the process is extremely simple. 5. Neglecting Domain Forwarding Domain forwarding is the process of linking your website directly to your social media, or other, outlets. In the time of email this was an unnecessary process. With the rise of social media, however, it is important that your tweets or posts link directly back to your website and not the social media website’s. This is also particularly useful if your business changes its name or is utilizing an uncommon domain extension a search for abc.com would redirect to abc.org. 6. Operating While Not in a Business Directory While most people use search engines to find businesses, others may also use business directories like Yellow Pages or the Pittsburgh Business Directory. Adding your business to these directories is simple, and usually free, and can bring your business in front of the eyes of thousands who would not see it otherwise. WP

How 2 EXPERT TIPS & ADVICE

LEGAL

Starting a Business Begins with Getting Strong Legal Advice Protections by Jacques L. Moye, Sr. ClarkHill

Starting a business has risks of the personal, financial and legal varieties. As such, engaging legal counsel early on in the business formation process is critical. For an entrepreneur, the right attorney can be a valuable partner in business planning, risk mitigation and asset protection. In particular, entrepreneurs should consult with an attorney early on with respect to the following. Shielding Personal and Family Assets Choosing the right business entity for your business is crucial. An attorney will help you determine an appropriate business form, create the business entity, and document and file your business, all in a way that will protect your personal assets from potential business losses and liability and help you to achieve your tax and other financial objectives. Raising Capital Whether an entrepreneur or business owner receives counsel on innovative and cost-effective solutions for access to capital can make or break a startup or small business. A legal advisor will help you navigate the regulations and the different funding options available, make the best choice for your company, and protect your interest when accepting outside funding. 12

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Protecting Your Intellectual Property Donâ&#x20AC;&#x2122;t attempt to navigate patent and trademark waters on your own. Your attorney will prepare and file trademark, copyright and patent applications to protect your unique product or process. Additionally, integrating intellectual property development policies with your employee handbook, along with the creation of non-disclosure agreements, can protect your valuable trade secrets. Making Sense of State and Federal Regulations Local and federal regulations, including those on environment, employment, finance and advertising, change continually, and many of those changes are sweeping. Your legal advisor will ensure you understand and comply with regulations affecting your business. Employee Relations Businesses and owners are faced with many employment-related matters. From hiring to formulating policies and benefit packages to discipline, disputes and dismissal of employees or consultants, an attorney will provide you with the knowledge to assess, prevent and resolve these issues. Managing Relationships All successful businesses are built on strong relationships. Be sure that your

relationships with business partners, suppliers, vendors, customers and employees are based on sound, well-drafted agreements by engaging an attorney to review and create contracts to best protect your company. What should you look for in an attorney or law firm? Successful business leaders value attorneys who know their businesses, have relevant experience, are accessible and responsive, and formulate solutions. The early stages of a business can be unstable. Value predictability in your attorney. To get the most value for legal services, find an attorney or firm that can provide service in multiple areas, rather than engaging several firms. To control costs further, ask for predictable fee structures. Entrepreneurs are attracted to both the risks and rewards of starting a new venture. Protect yourself, your vision and the people you care about by seeking legal assistance early and often. WP ABOUT THE AUTHOR Jacques L. Moye, Sr. is an attorney in Clark Hill PLCâ&#x20AC;&#x2122;s Corporate Practice Group. For more information on Clark Hillâ&#x20AC;&#x2122;s services, including E2, a program tailored to emerging enterprises and entrepreneurs, visit www.clarkhill.com

SPECIAL REPORT

The New Entrepreneur Defies Conventional Perceptions by TODD MILLER Declining opportunities on traditional paths of employment, combined with the increasing role of technology in business, higher financing standards and the accelerating pace of globalization mean that today’s entrepreneur tends to be vastly different from the person who started a business five, 10 and 20 years ago. In contrast to people’s perceptions of the traditional entrepreneur — a young person with a good idea and little else – many of today’s entrepreneurs tend to be experienced professionals who: • Want to “try something new” or have been forced to change careers through downsizing • Have developed a highly innovative product or process which can’t be replicated easily or at all • Know that he or she can’t “go it alone” and seeks help from outside experts • Look for business opportunities beyond the region “It’s normal today for displaced professionals to try their hand at entrepreneurship,” says Mel Pirchesky, president of Eagle Ventures, a Shadyside-based venture capital firm that has been funding technology start-ups for more than 30 years. “Although younger entrepreneurs often have more passion than their older counterparts, experienced business people tend to have more persistence. They know it can take time for things to develop, and they have the patience to follow through.” The Small Business Development Center (SBDC) at Duquesne University is a valuable resource to help individuals who are interested in starting their own businesses. “With seed and venture capital funding starting to open up again, and so many

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resources at the federal and state levels available to entrepreneurs, people need to take advantage of the help that’s out there,” said Mary McKinney, Ph.D., director of the Small Business Development Center (SBDC) at Duquesne University. The SBDC also has satellite offices in Beaver, Butler and Lawrence Counties. Dr. McKinney, who has headed the local SBDC since 1986, was quick to point out that the Pennsylvania Department of Community and Economic Development, one of the SBDC’s funding sources, provides

complimentary assistance of all kinds to companies based in the Commonwealth. Such help includes developing market opportunities in more than 20 countries. “That resource is extremely helpful to entrepreneurial and other closely held businesses that produce any kind of product or service,” said Dr. McKinney. “Additionally, the federal government, through the office of the U.S. Trade Representative, helps companies for a modest fee to develop new markets in more than 200 countries. Companies that fail to take advantage of the assistance

HAVE WORKED AS EMPLOYEES AT OTHER COMPANIES FOR MORE THAN SIX YEARS BEFORE LAUNCHING THEIR OWN COMPANIES.

that’s out there may be missing out on some excellent opportunities. “It used to be a big deal for a business to look across the country for opportunities. Today, it’s nothing for a Pittsburgh company to be doing business anywhere in the world.” Strengthening Established Companies When a closely held company realizes it needs to improve its operations to remain competitive, Innovation Works’ Innovation Adoption Program (IAP) can be useful. Velocity Equipment Solutions (VES) a New Castle-based manufacturer of blow molding machinery, water bottling equipment and plastic conveyor systems wanted to develop innovative new product offerings for its market, turned to the (IAP) for help with innovation. The IAP, an initiative geared to smalland medium-sized manufacturers, is funded by state and federal sources. The Program is administered regionally by Innovation Works, an Oakland-based provider of seed-stage funding and business consulting services. Through Innovation Works (IW), VES received $30,000 which it used for capital expansion and project management. “VES is an excellent example of an established company that knew it needed help and used public funds to obtain services at below-market rates,” said Afshan Khan, the IAP manager who is employed by IW. According to Tom Blaszkow, VEC’s president, “With the help of Innovation Works, we have been able to update our production lines and keep up with customer demand. As a result of this program, we are solidifying our position as a market leader.”

OF BUSINESS FOUNDER WERE MARRIED WHEN THEY STARTED THEIR BUSINESS. ADOPTED FROM VISUAL.LY/WHO-ARE-ENTREPRENEURS

Non-Traditional Revenue Sources The proliferation of companies in the Pittsburgh region which make computer software and hardware, such as those incubated in Innovation Works’ AlphaLab and its Alpha Lab Gear counterpart, represent potential opportunities for entrepreneurial companies.

Velocity Equipment Solutions Takes Advantage of Local Resources Collaborating with InnovationWorks (IW), Velocity Equipment Solutions (VES), a New Castle-based manufacturer of blow molding machines for plastic bottle manufacturing, developed two new technologies for making HDPE containers.

“Within the next year, some of the companies that completed our initial incubator program earlier this year may be looking for manufacturing partners in the region,” said Ilana Diamond, managing director of AlphaLab Gear. “That type of interdependence is good for the regional economy.” An entrepreneur and AlphaLab Gear alumnus likely to be in the market for local manufacturing assistance is Arden Rosenblatt, co-founder and CEO of PieceMaker Technologies. Mr. Rosenblatt and his team of fellow Carnegie Mellon University students recently used their eight months at AlphaLab Gear to develop in-store printers that monogram plastic toys and jewelry. Earlier this year, the company installed its first unit in S.W. Randall Toyes in Squirrel Hill. “As a Pittsburgh-based company, we want to partner with suppliers who are located in the region because it helps the region grow and makes it collaboration easier,” said Mr. Rosenblatt. As the regional economy continues to diversify and competition becomes more intense as a result of technological advances and globalization, the new entrepreneur has many resources at his or her disposal to develop highly innovative products, processes or services, and market them to customers around the corner and around the world. WP

By leveraging its own funds with a $30,000 grant from IW, VES embarked on a two-year program to improve the technologies its blow molding machines use. As a result of this collaboration, VES is now competes for business with companies 25 times its size. According to Tom Blaszkow, VES’s president, “We’re now seeing tremendous interest in our technology from companies in the UK, Belgium, South Africa and Australia.” In fact, a customer in the UK recently expressed interest in a $70 million order for 70 machines. Over the next two years, VES expects to add 11 employees to its current total of 32. “We’ll be hiring machine builders who are highly skilled technical craftsmen,” says Mr. Blaszkow. “They will hold well-paying jobs in an economically distressed area.”

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COVER STORY

risks

By GINA MAZZA

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rewa

ards

SBA awardees display innovation, humanity in their entrepreneurial pursuits The U.S. Small Business Administration’s Pittsburgh District Office recently honored several area entrepreneurs for their contributions to the region’s economy. For Michael Cherock, 42, being an entrepreneur is not something you explicitly choose, but more a result of how you view the world and deal with what is given to you. “Growing up, I was always curious and wanted to know how things worked,” he says. The son of a Navy man, Michael enlisted during his junior year at Norwin Area High School. “The Navy was all I knew, along with electronics,” he recounts. “After my father’s tour ended, we located to Pittsburgh and he worked in construction. I knew from a young age, that wasn’t a good fit, so I helped with electrical components, which I transitioned into the Navy.”

the USS Columbia (SSN-771) and was discharged with paralysis in his left hand. He then became the first member of his family to graduate from college, obtaining graduate and undergraduate degrees in architectural engineering from Penn State University.

“When I left the Navy, I got bored pretty fast,” Michael admits. He ran a small contracting company, owned a movie rental store and taught at a state college before working as a staff engineer for local companies. But instead of these positions adding a sense of groundedness to his career, he felt lost at sea in the business world. “I felt a leadership deficiency,” he explains. “The architectural engineering world was more about what we did versus how and why. I remembered from the Navy that while a submarine is an engineering marvel, Michael Cherock it’s the willingness of sailors AE Works Ltd. working together that kept the sub working.” SBA Small Business

Being in the Navy provided a structure that fostered Person of the Year Cherock set out to create Cherock’s natural curiosa business that mirrored his ity. “That’s how I ended up in experiences in the Navy, so submarines,” he recalls. “In that he formed AE Works Ltd. in 2007, working environment, not everything is going to out of the basement of his house on Mount be solved. You have to be open to learning Washington. The startup phase wasn’t exactly continuously.” smooth sailing, he recalls. “Two years after At age 25, then working as a submarineopening, we were a two-person shop and qualified nuclear-trained power-plant operworking non-stop.” ator, Cherock suffered a hand injury aboard Continued on next page >

“We operate as a triple bottom line business where community involvement is just as valued as the pursuit of profit.” Michael Cherock, President & Founder, AE Works

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cover story Around that time, Cherock met with former SBA Pittsburgh District Director Carl Knoblock, who led him to the Government Agency Coordination Office to pursue government contracting. As a result, Cherock received a pivotal project in 2009 that set AE Works on a new course. “We were contracted to install a new generator and several other infrastructure projects at the Armed Forces Retirement Home [in Washington, DC], located at President Lincoln’s summer home, and that project really opened up a new door for us. Government contracting coupled with private-sector projects provided us with more than enough work; in fact, we hired five additional people.”

a triple-bottom-line business model where community involvement is just as valued as the pursuit of profit. Cherock’s personal mantra is that everything in the world (including business) is about people, teamwork, culture and camaraderie. He and his crew continually give back to the community, with an emphasis on veterans. “We visit veterans during the holidays, cook dinners at the VA, donate food to the food banks, things like that,” he says. The company supports programs at Soldiers and Sailors Memorial Hall and Museum, The City of Pittsburgh Mayoral Transition Team and the Veterans Leadership Program of Western Pennsylvania.

But uncharted waters still lay ahead in terms of how to finance the projects. With Knoblock’s assistance, AE Works was approved for three SBA Patriot Express loans, a now-discontinued SBA loan program that provided business loans to military personnel and their families. Those loans enabled AE Works’ growth.

Cherock’s successful transition from his military experience to a successful business owner is noteworthy, SBA’s White comments: “He not only brings his military and collegiate expertise, but that sense of teamwork and pride which empowers employees and has resulted in his tremendous growth. Most importantly, Cherock and his AE Works team remain committed to the area sharing their good fortune with many veteran groups.”

Today, the AE Works team of 31 people occupies offices in Pittsburgh’s East Liberty, State College and Silver Spring, Maryland. True to Michael’s original vision for how to lead an organization, AE Works operates as

AE Works employees 31 and has offices in Pittsburgh, State College and Silver Spring, MD.

SBA Awardees Contribute to Regional Economy

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Cherock received his awards as the Pittsburgh District Office and Pennsylvania Small Business Person of the Year on May 23 at Soldiers & Sailors Memorial Hall and Museum in Oakland, where AE Works Ltd. constructed the Remembrance Garden and the building’s green roof, one of the largest in the city. “I’ve never been a big award person, but this is a heck of an award,” Michael responds. This summer, Cherock traveled to Washington, DC, to compete for the U.S. SBA’s title of Small Business Person of the Year. And the accolades keep coming. At a June 20 gala at the Wyndham Hotel in Pittsburgh, Cherock was also recognized as Ernst & Young’s 2014 Entrepreneur of the Year in the Service category for Western Pennsylvania and West Virginia.

Kelly Collier

ActivAided Orthotics Western Pennsylvania SBA Young Entrepreneur of the Year When Kelly Collier, 25, was an undergraduate at Carnegie Mellon University studying biomedical engineering and materials science, she signed up for a class in entrepreneurship solely because it happened to fit into her schedule. “I took that class out of convenience,” she recalls. Little did she realize that it would form the basis of her career trajectory. Early on in that course, the professor had the students fill out career assessment questionnaires. According to Collier’s results, she has an affinity for business, leadership and entrepreneurship. “That was kind of a funny surprise, but I ended up loving that course,” she says. “The assessment results did make sense because as an engineering student, I always had a tendency to be interested in the commercialization aspect of the stuff I was building. How it would be manufactured? What’s the best way to sell it? Who would purchase it? “I always thought it was odd that someone would want to be an entrepreneur just to be an entrepreneur,” she continues. “I was very much not like that, but as an avid swimmer, I had a problem with back pain and saw that many of my classmates had this same problem. I wanted to find a solution for it.”

That was all the motivation Kelly needed to pursue designing a back brace in the form of a posture-corrective shirt, which she undertook as her senior project at CMU. The assignment grew into a post-graduate business, which she cleverly named ActivAided Orthotics. “Once we created it, tangibly produced it and saw that it actually worked, it was just too exciting to let it go,” she comments. “When I factored in that it could also help so many other people out there, it changed my life plan. I think it’s a big driver when you’re personally tied to what you’re working on.” The West Mifflin native, who always did well in school, was on pins and needles when developing the product prototype. “The only B’s I’d ever received were in home economics, so it took me about 15 hours to personally stitch each of the first five prototypes using my mom’s sewing machine,” she says. With those completed, Kelly started networking. One morning, she attended the Open Coffee Club at Pittsburgh’s AlphaLab accelerator, which is funded partly through SBA grants. “I walked into AlphaLab and immediately knew that everything about it was awesome,” she enthuses. “All it took was that one day and I was determined to work with them.” “Kelly is the type of entrepreneur we love to see come into AlphaLab and grow after completing our training program,” says Jim Jen, director. “Kelly’s business has gone from a rough prototype into a dynamic, growing company with medical distributors all over the country.” The posture-corrective shirt enables the body to naturally align the spine, which leads to better posture, less pain and a better appearance. “It’s an undershirt but it rehabilitates the back,” Collier explains. “It’s not restrictive or immobilizing, but more of a performance sportswear shirt worn a few hours a day.” Now, ActivAided Orthotics has a loyal following of more than 500 customers, including Harrison Ruopp, a defenseman with the Pittsburgh Penguin organization. At the start of the hockey season, Ruopp was experiencing a lot of back pain and was told

RecoveryAid is a shirt that will train you to perform with proper body mechanics and correct posture for back pain relief. Over time, the muscles become reconditioned to instinctively maintain proper form, and you are able to live pain free naturally.

by a physician that he would need a back brace. His first reaction was “Whoa!” . . . until he saw the shirt. “It’s stylish, not restrictive and I can put it on and go out,” he says. “I have poor posture from playing hockey and working on our grain farm back home [in Saskatchewan, Canada], but wearing the shirt for a few hours a day has helped me.” Collier says that running a business is more difficult than obtaining degrees in biomedical engineering and materials science. “This is real-world responsibilities and the stakes are higher,” Collier says. “When patients love and appreciate the product and tell us that they’re thankful and grateful that we’ve built this company, it makes the hard work worth it.” Kelly’s efforts to revamp the traditional rigid back brace into a functional, flexible shirt have enabled her to collect honors as the U. S. SBA’s Western Pennsylvania Young Entrepreneur of the Year. White says that Collier’s invention clearly merits the award: “It’s incredible that a simple shirt will be able to help so many athletes plagued by back pain.”

Collier didn’t just thank her peers and mentors at her SBA awards ceremony on August 4, she has invited them — along with clinicians and community leaders — to a free physical medicine symposium hosted by ActivAided Orthotics. The event took place at the Riverside Center for Innovation, where Kelly spoke about treatment through innovation and previewed prototypes of the company’s newest products: a device that stabilizes and balances hip muscles along with a sock that designed to rehabilitate Achilles Tendinopathy. “My personality belongs in this sort of environment,” Kelly concludes, reflecting on her path to becoming an entrepreneur. “It’s our nature to always think that we need to achieve more, and you get bogged down in feeling like you’re not doing enough. So it’s really awesome to get an award like this, to just pause and say to myself, okay, this is not what most 25-year-olds are doing. Life is pretty amazing. These awards are really important because they make you feel appreciated. Someone is noticing all the hard work you’re doing.” Continued on next page >

“I had a problem with back pain and… I wanted to find a solution for it.” Kelly Collier, Chief Executive Officer, ActivAided Orthotics SMC.ORG

cover story

Cima Software Corporation

SBA Awardees Contribute to Regional Economy

"I'm very committed to this region. Bringing technology developed in Pittsburgh to Latin America makes it special." Nelson Cano, CEO, Cima Software (ADM), re-sold and implemented third-party software targeted at large organizations. In the process, Cano discovered that “mid-size companies were having similar problems but the products on the market were either too expensive or complex for them.”

Nelson Cano

Cima Software Corporation SBA Regional Exporter of the Year Nelson Cano, 46, has always wanted to share Pittsburgh products with his native country of Peru. He relocated to Pittsburgh from Lima in 1995, at age 25, to join extended family members and enroll in Duquesne University’s International Program, where he earned a graduate assistant scholarship in the finance department. Cano went on to earn both an MBA and a master’s degree in management information systems. Yet Nelson always wished to remain connected to his Latin American roots. Having already held several jobs in Lima, he was looking for a way to link these work experiences with whatever he would be doing in the U.S. Partnering with his father in 1999, Cano ran a Pittsburgh-based trading company that marketed U.S.-made products to Latin America. “That venture took me onto a different path and into the document imaging world, because one of the products we were developing was a check scanner for banks in Latin America,” he explains. By 2003, Cano had become part of a trio that sought to design, code and implement a document and content management software program to assist human resource and financial departments in optimizing their business processes. That company, Automated Documents Management 20

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So in 2004, he began designing a software program called DocuClass. The first version rolled out in 2007 under the company name CIMA. “Many human resource and accounting department personnel spend 50 percent of their time in administrative tasks,” he says. “Our software features tools that automatically scans, verifies, classifies and routes documents through a business flow.” By 2013, Cano had fine-tuned his software and some of the largest corporations in the world — Coca-Cola, Kellogg’s, Chevron and Emerson — were interested in purchasing it. That software offering enabled Cano to take a Pittsburgh-based product back to Peru; in fact, CIMA’s Latin American office is situated in Lima. Today, Cano heads up a team of 35, located in Pittsburgh, Peru and Europe, who design software packages in Portuguese, German, Spanish and Greek. While his initial customers were U.S. schools and hospitals, his Peruvian roots became a competitive exporting edge. “The product already was in Spanish and there were no barriers for me,” he says. “It was easy to meet clients. I understood the language and culture. There was a strong need for this type of product.” Cano travels the world about 10 times each year to increase sales and instruct on how to use the software. “We spend a few weeks with each new client offering hands-on training on utilizing the software’s capabilities. I also exhibit at trade shows, looking for more Latin-American exporting opportunities.”

Cano’s efforts to develop business application software to market to corporations in Latin America and Europe have earned him honors as the SBA Pittsburgh District Exporter of the Year. As a graduate of Duquesne University, it was fitting that Cano was feted at Duquesne University’s 16th Annual Entrepreneur’s Growth Conference on June 5. “It was quite a surprise and it was really special to receive the award at my alma mater,” he says. “I am very committed to this region, and the fact that I’m bringing technology that has been developed here in Pittsburgh to Latin America makes it special, as well.”

Cano illustrates how exporting can help Pittsburgh-based companies grow, says the SBA’s White. “His education and business acumen became the catalyst for him to create a software package that really is needed by companies throughout the world. Cano’s Latin American roots helped him successfully export to that sector of the global economy. I’ve heard that cima means ‘peak of the mountain’ in Spanish. I believe this award testifies that Cano has indeed reached that peak.” WP

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e-corner ENTREPRENEUR’S ADVICE

Take Control of Your Energy Dollars pricing, which way the market is trending, and who is offering the pricing. Each of these is discussed in greater detail in the following questions.

by JOHN HOLMES President, Corporate Energy Advisors

As today’s economy continues to lack the stability business owners would like to see, many are looking for opportunities to bolster their bottom lines. While increasing revenue is an obvious answer, that is often easier said than done. To help business owners get the best value for their energy dollars, here are some questions that owners should be asking themselves and their energy suppliers. What is my true “Price to Compare”? Your “Price to Compare”, (PTC), is a critical value to know. It gives you the baseline cost for the electricity supply. Where the utility advertises a value on their invoices, it is not your real PTC because of a number of factors that enter into its calculation. If your utility has a demand value in their tariff rate, a portion of that charge may impact your particular PTC. This also means your PTC varies from month to month, depending on your demand. That is why it is critical to look at your PTC over the course of a year, taking into consideration the highs and lows for the annual period. 22

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The same is true for transmission charges. It is important to know whether there is a demand and consumption component for your PTC, because that can impact your cost. For some utilities, while there may not be a direct charge for demand, it affects your charge by “tiering” your rate for your kWh charge. “Tiering is where the demand becomes a multiplier and is used to divide your monthly kWh into various tiers, each priced at a different rate. There may be certain other charges that are eliminated when going to an alternative supplier for your electric generation. A detailed review of your utility’s tariff rate is critical to knowing how to calculate your PTC. Once you know that cost, determining whether you are receiving savings from alternative suppliers becomes much easier. How can I be sure I am getting the best price in the marketplace? Besides knowing your PTC, there are other factors that enter into the equation, such things as contract term, fixed or variable

How do I really shop my energy load for the maximum savings? The key is maintaining control of the process. Consider this, when someone offers you their product/services for sale, what is their basis? It is to sell to their customers at the highest low cost. Why? Because that is how they make their money, the profit on the sale. Energy companies are no different. Their goal is to save you money while making the best profit for their company. The most often – used approach is to minimize the value of your energy use; to make you a very small fish in a very big pond. So, unless you have sufficient usage to be able to stand alone in your negotiations, the better approach is to aggregate your usage with others of similar or higher volume, with those on the same utility, etc. A number of organizations who have developed energy purchasing as a benefit for their members use this approach as a way to provide better savings. How long should be the contract term? The biggest factor impacting the decision of contract term is the marketplace itself. Remember, the utilities are purchasing at least a portion of their electric generation on the open market, just like alternative suppliers. In a stable market environment, the simple rule is negotiate a longer term. This provides the best savings over the longer period of time. What if the market pricing is volatile? Then a shorter term would probably be advantageous. This is because there will be price adjustments with your utility. Remember your savings is based on your current PTC, not what it was when you first signed the agreement. If the utility lowers any of the costs associated with your PTC, then your real savings decreases. If the utility raises the costs, then you save even more,

compared to what you would have been paying to the utility. You also need to weigh the priority between savings and price certainty. Some consumers will exchange a measure of savings to know their electric costs will be stable for a longer period of time. All these factors go into making the decision on contract term. It is good to know what is critical for your company before beginning negotiations. Does it really matter who I select as my energy supplier? The larger your usage, the more it matters. There are primarily two different types of companies offering alternative energy supply: generators and marketers. Generators are what the description implies; they directly generate at least a portion of their own electric supply. Marketers are sales organizations who enter into agreements with those that generate the electricity and then sell it to consumers. What makes the difference? Because generators have a vested interest in the marketplace, they are more in tune to

â&#x20AC;&#x153;Before you negotiate electricity rates, know whether savings or price certainty is most important to your company.â&#x20AC;? John Holmes, President, Corporate Energy Advisors the factors that can impact electric supply costs. They also have a better handle on ancillary costs that could impact pricing. Their pricing may be slightly higher, but their supply is much more stable. If there are any sudden changes in the marketplace that negatively impacts their pricing, they can generally weather the storm and honor their commitment to their clients. Marketers, on the other hand, have no long-term investment in the marketplace. Their sole investment is in their sales organization. Their negotiated agreements with the generators are typically pegged to the

NYMEX market, so their costs vary on the marketplace. In a stable environment, they are able to project what they think the cost of electric generation may be, and thus can offer slightly lower pricing than a generator. However, if there is any sudden change in the marketplace, their costs change, and if they are unable to pass that change on to their customers, they will walk away from the agreement rather than take the hit. This puts their customers in the position of returning to the utility, and negotiating new agreements with other providers. WP

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Pulse WHAT’S HAPPENING NOW

GOVERNMENT RELATIONS

Grassroots Advocacy: Influence Policy, Affect Change

There are benefits for you in this process, too, of course. Getting involved will put your company and your employees at the front of political discussions; and you can help your elected officials effectively engage other members and influence policy. By sharing your story without filters, you can not only have a positive impact on your business, but the community and your industry. You will also create opportunities to affect change that will benefit your company in the long run. Becoming a grassroots advocate also helps you develop relationships with policymakers who will ensure you become a resource to them in the future for similar issues that impact you and your community. Small business owners have built their companies with investment of hard work, sweat and leadership. Maintain them by investing in your business’s future with grassroots lobbying. I would encourage your participation in grassroots lobbying days by attending legislator visits to the district. Even inviting elected officials to meet you at your business to better understand your company, employees and business first-hand is a smart idea.

by JOHN NIKOLOFF Founder, ERG Partners

With the current political climate and frustration over impacts of government policy on small business – whether Obamacare, regulation, or impossible to understand tax changes – the business community has an opportunity to lead a charge and have a direct impact through communications and lobbying. Grassroots advocacy is important, both for your business and for good government policy. That’s a bottom-line fact. In Pennsylvania alone this session, more than 3,400 bills and 1,000 resolutions have been introduced for consideration by the General Assembly. Hundreds of changes in regulations, organization of state government, and policies have been proposed. 24

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Elected officials truly want to do what’s best for their district and the Commonwealth. They are from all walks of life: bankers, insurance agents, health care providers, attorneys, engineers, businessmen and women. They don’t claim expertise on all the issues that come before them. And few have a large staff on which to rely to understand the complexities of legislation. They need to hear from experts about unique issues and impacts of policies – grassroots lobbying is your chance to do that, because you are the experts. No one knows the issues facing your business and industry like you. No elected official wants to make decisions without good information, and none wants to be in a position where the “unintended consequences” of their decisions have negative impacts on the people they serve.

In the end you will benefit and so will policymakers. Good communications and good information really can mean good government! WP About the Author John Nikoloff is a founder of ERG Partners, and has 25 years of experience and success as president and CEO of two Harrisburg-based public affairs and lobbying firms representing dozens of small businesses, corporations and trade associations. John has served in executive positions under three Governors, and served several years on the staff in the State Senate and House of Representatives. He has managed major legislative issues, grassroots and grass “tops” campaigns and has been in a leading role in passage of more than 100 bills. John has been on the SMC Business Councils’ Board of Directors since 2006.

Pulse WHAT’S HAPPENING NOW

GOVERNMENT RELATIONS

Grassroots Lobbying

We Moved!

CAMPAIGN RECAP • Enact a permanent solution for Section 179 of the IRS code. Fair treatment is required under corporate tax reform for those businesses who file at the individual level/pass-through entities. SMC members Responded to “Calls-to-Action”

John Nikoloff ’s great article on page 24 is an excellent overview of grassroots lobbying. SMC creates opportunities for you and your employees to do grassroots lobbying. Consider these results: Grassroots Lobbying Trip to Harrisburg, April 28, 2014 Thirty members traveled to the state capitol where our teams had face-to-face meetings in 27 offices. 2014 State Position Papers were delivered to another 51 offices, increasing coverage by 27% over 2013. Key messages: • Reauthorize and adequately fund the Pennsylvania Health Care Cost Containment Council (PHC4) • Continue the phaseout of the Capital Stock and Franchise Tax (CSFT) Grassroots Lobbying Trip to Washington D.C., June 23-24, 2014, with the National Small Business Association (NSBA). Members met with Pennsylvania congressmen and senators and delivered 2014 Federal Position Papers to our congressional delegation. Key messages: • Improve the Affordable Care Act.

Rather than just click a button and send form letters, members were provided key points on the issues and they composed their own brief letters which were tailored around their businesses and emailed them to lawmakers. That’s what John Nikoloff means when he says, “They need to hear from experts about unique issues and impacts of policies – grass roots lobbying is your chance to do that, because you are the experts Grassroots Lobbying Efforts — It all adds up. PHC4 reauthorization legislation will be voted on by the House of Representatives during the fall session. The CSFT is on track to phase out and both items are included in the 2014-2015 state budget. And lastly, SMC Board Member Brian Stein was recognized nationally for his advocacy efforts. NSBA named Stein of S&S Intersource as the winner of the 2014 Lewis Shattuck Small Business Advocate of the Year Award for his exemplary work in advocating for small businesses. As chair-elect, he has been involved in many initiatives including:

NEW ADDRESS

SMC Business Councils & Affiliates 600 Cranberry Woods Drive Suite 190 Cranberry Township, PA 16066 To better serve you as the voice of manufacturing and small business, we’re re-locating to Cranberry Business Park as of Monday, November 3.

600 Cranberry Woods Dr. Suite 190 Cranberry Twp., PA 16066

• Chairs SMC’s Tax Working Group. • Testified before the Pennsylvania House of Representatives Policy Committee. • Regularly attends lobbying days in Harrisburg and Washington, D.C. • Maintains relationships with his elected officials. Congratulations to Brian, and to all of you for the success of your grassroots lobbying activities. WP

Our new offices are convenient to I-79 and the Pennsylvania Turnpike, and we welcome the opportunity to show you our space. To schedule a visit, call Shannon at 412.371.1500, ext. 1607 or e-mail shannon@smc.org

Pulse WHAT’S HAPPENING NOW

INSURANCE

usinesses Where PA B

Eileen Anderson, SMC’s Director of Government Relations, wrote this open letter to remind the Pennsylvania Congressional of the impact that the Affordable Care Act is having on premiums, deductibles, co-pays and co-insurance of the selfemployed, and employees of small and mid-sized employers.

SMC.ORG

Go to Grow

our elegation, y of you during Congressional D We visited man ia . an ils lv ts of nc sy ec ou nn eff C e s Pe r th es Dea C Busin ample of d support of SM sits I cited an ex ue vi e in os nt th co g ur n. in yo ur tio r D ne. clarifica Thank you fo ngton, D.C.in Ju must add some ng trip to Washi e premiums and nc ra su in th al grassroots lobbyi he are Act (ACA) on the Affordable C e markete health insuranc th in , an pl nt ia A-compl June 2014 0.00 and $90.00 and copays of $5 a bronze level, AC g, d in se ar ha sh rc st pu I co d 0 ve 60:4 If my husband an in premiums, ha y nearly $8,000 pa 000 deductible. ld 1, eou $1 w e an w D e, plac need for improv specialists AN d an ns ia ic ically shows the ys at ph em ch hi w for primary ph half of that story clude the second I neglected to in A. ments to the AC ctible of pays, and a dedu st sharing, no co co 0 :1 90 June 2013 ith w ve us a plan in premiums ga 8 percent! The same $8,000 increased by 45 le m small busiib ct du de at th 14 mber one proble 20 nu e In . th 00 at ,4 th s $2 er ONLY wmak deral and state la edly stated to fe sts too much. co y pl e resim it SMC has repeat ans; and they ar rance is that su in th al he gh-deductible pl ith hi sts and ve co ha ls w ro nt no s nesses have w y employee odified so it co an m m e be t us us ca m be A d ntrolle The AC ken: edical services. Costs must be co g steps can be ta bs. The followin e cost of many m jo th t of os k m 0% e 10 th r te fo of work per wee s that crea sponsible erages 30 hours e small businesse av th to ho d l w an fu e n on rm io ha sit om is less ee” fr the tran ull-time employ ill help smooth sense fix that w definition of a “f on e m th m ify co a od . is M m is • Th bor syste ages 40 hours. the traditional la to one who aver 3:1 age-rating ss disruptive to le te da an m er nds. The ACA’s oy ba pl g em tin e ra th ee ag ak m anged to 5:1 restrictive nd should be ch to establish less ba es e at Th st s. e m th iu r fo ns prem g up insurance • Create optio y factor in drivin r years. fo ry st , but du in e band is a primar nc n and job growth the insura by ed us en be s edical innovatio m to l ta which ha en im tr de ers. x. Not only is it ed on to consum edical device ta timately be pass ul e ar rs all busire • Repeal the m tu ac nce costs for sm device manuf increases insura x rtionately higher costs for ta e po Th ro ). sp di IT it mpanies so surance tax (H co in d re th iums al su in he s lft se ou er ions and the highes prem • Repeal the on not levied on un ady pay among is re al It s. ho ee w s oy al pl du nesses and em nies and indivi red small compa falls on fully insu uing this rward to contin w, SMC looks fo no e for coverage. ad m be n provements ca rstood that no im While it is unde . ns er the fall electio conversation aft Sincerely,

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Pulse WHAT’S HAPPENING NOW

HUMAN RESOURCES

Health Savings Accounts:

Gaining Popularity by Alicia Linsenbigler Director, SMC Insurance Agency

Why continue to pay insurance carriers high premiums for coverage you may not be using? A Health Savings Account (HSA) is a way to take control over your healthcare budget and experience tax advantages along the way. An HSA is a savings account that can be set up by anyone enrolled in a qualified high deductible health plan. The HSA allows you to set-aside funds on a tax-free basis to pay for qualified medical expenses the health plan does not cover, such as deductibles and coinsurance. Immediate and Long-term Benefits of an HSA: Lower Insurance Premiums You must be enrolled in a qualified high deductible health plan to set up an HSA. In order to be considered a qualified high deductible health plan, the annual deductible must be at least $1,250 for individual coverage or $2,500 for family coverage. Out-ofpocket expenses (not including premiums) cannot exceed $6,350 for individuals or $12,700 for a family. Premium savings are often realized with a qualified high deductible plan when switching from a plan with a lower deductible and copays. Tax Advantages The funds deposited into a health savings account are not subject to taxation and can be used for any eligible medical expense incurred while enrolled on a qualified high deductible health plan. Qualified Medical Expenses Some vision, dental and orthodontic expenses are considered qualified medical expenses and can be covered with HSA funds.

Qualified medical expenses are explained in Publication 502 and can be found at irs.gov/publications/p502 . Withdrawing HSA funds for purposes other than an eligible expense could result in a 20 percent tax penalty. Funds Rollover There is no “use-it or lose-it” rule for HSA funds. Unused funds deposited into an HSA roll over year after year and can gain interest. Investment HSA funds can be invested. Earnings from HSA investments are not taxed as long as the funds remain in the HSA. Contributions/Ownership Funds can be contributed by an individual, an employer or both. The individual owns the funds and can take the HSA with them if they change jobs, change medical coverage or become unemployed.

Retirement Any remaining funds at retirement can be used for long-term care, Medicare expenses, or can be withdrawn without penalty if you are over age 65. HSAs are also compatible with many plans offered on public and private exchanges. However, if you qualify for reduced cost sharing on the Federal Marketplace (healthcare.gov), you may not be eligible to make contributions to an HSA. HSA’s offer employers a way to save on insurance premiums and empower employees to become wiser consumers and control their healthcare spending. For these reasons, they are gaining more and more popularity. WP

Contribution and Out-of-Pocket Limits for HSAs 2014 Limits Single Plan

Family Plan

Maximum Contribution Limit

$3,300

$6,550

Minimum Deductible

$1,250

$2,500

Maximum Out-of-Pocket

$6,350

$12,700

Catch-up Contribution (55+)

$1,000

2015 Limits Single Plan

Family Plan

Maximum Contribution Limit

$3,350

$6,650

Minimum Deductible

$1,300

$2,600

Maximum Out-of-Pocket

$6,450

$12,900

Catch-up Contribution (55+)

$1,000

$1,000 SMC.ORG

Pulse WHAT’S HAPPENING NOW

HUMAN RESOURCES

Whistleblowing

Made Easier

Pennsylvania Extends the Protections of Whistleblower Law to Private Employers that Receive Money from a Public Body

protections will be extended to employees of any business or nonprofit organization that receives public contracts or funding from the Commonwealth of Pennsylvania or its subdivisions. These protections were also extended to employees of the Pennsylvania legislature and its agencies. The bills specifically prohibit such employers from discriminating or retaliating against employees who make a good faith report to the employer of wrongdoing or waste by a public body or covered employer. However, the revisions also allow employers to take disciplinary action against employees who submit a whistleblower complaint in bad faith. The new law also increases monetary and administrative penalties for parties who violate the provisions of the PWL. In its previous version, the maximum civil fine an employer could face for wrongful retaliation against a whistleblower was $500, and, for public employees who are not elected officials, a suspension of up to six months. In the new version, employers will face a maximum civil fine of up to $10,000 for wrongful retaliation, while public employees who acted with the intent to discourage the disclosure of criminal activity could be suspended from public employment for up to seven years.

by Clark Hill PLC’s

Labor & Employment Law Group

On July 2, 2014, Pennsylvania Governor Tom Corbett signed into law two bills that significantly expand the scope and enforcement provisions of the Pennsylvania Whistleblower Law (PWL). The PWL provides that a public employer cannot discharge, threaten, or otherwise discriminate or retaliate against an employee because the employee or a person acting on behalf of the employee either:

(1) makes a good-faith report to the employer or an appropriate authority of an instance of wrongdoing or waste, or (2) is asked by an appropriate authority to participate in an investigation, hearing, or court action. In the previous version of the PWL, only employees of “public bodies” were covered by the law’s protections; however, beginning on August 31, 2014, whistleblower

The new whistleblower law increases monetary and administrative penalties for parties who violate provisions of the law. 28

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Finally, the revisions strip courts of their discretion in deciding whether or not to award costs and attorney’s fees. The new law now states that a court “shall...award the complainant all or a portion of the costs of litigation, including reasonable attorney fees...if the complainant prevails in the civil action.” Given the broad expansion of both the scope and the enforcement provisions of the revised PWL, covered employers who receive public funds from the state or local government should be cognizant of the PWL’s antiretaliation provisions. Prior to the August 31 effective date, covered employers should review their policies and practices to ensure that they are in compliance, and should also consider providing training or informational materials to management and supervisors regarding the new provisions of the PWL. WP

HOMEBASE NEWS AND EVENTS

SMC Welcomes Its New Members This list includes new members through 8/31/2014

Bloom Engineering Company, Inc. www.bloomeng.com

Allegheny County Economic Development www.alleghenycounty.us/economic

Perfection Services, Inc. www.Psipc.com

Baum Consulting Group/ UBS Financial Services financialservicesinc.ubs.com/team/bcg

Center for Women’s Entrepreneurship at Chatham University www.chatham.edu/cwe

Ridge Insurance Agency, Inc. www.RidgeAgency.com

Cadnetics www.cadnetics.com

Corporate Energy Advisors LLC www.corporateenergyadvisors.com

Community Development Corp. of Butler County www.butlercountycdc.com

Golden Girl Pet Grooming clnassif@yahoo.com

C-leveled www.c-leveled.com

IGS Industries www.IGSIND.com

Strassburger McKenna Gutnick & Gefsky www.smgglaw.com TMG Electronics www.1tmg.com WSI – We Simplify the Internet www.wsiebranding.com

Manns Home Medical Products www.mymanns.com

SMC.ORG

PARTING SHOT THOUGHT LEADERS

Zak’s L aw s

Striving for Simplicity

necessary.” My bumbling answer eventually evolved into what I call Zak’s Laws, a set of principles that, through repeated observations and experiences seem to hold true for any kind of start-up. Here are just a few: Build to Sip, Not to Gulp During the go-go “dot com” boom (and subsequent bust) of the late 1990s, I saw a lot of start-ups with “necessary amenities” like oxygen bars and in-house masseurs. These ventures were essentially conceived and driven like supercars with a gallon of gas — capable of an exhilarating, albeit very short, ride. Great entrepreneurs relentlessly cut “fluff ” – think battered furniture, used equipment and quick payment terms – creating ventures that sip money rather than gulp. They spend money today like they’re going to run out tomorrow. Have you applied enough creativity to building a venture that can run on fumes, even if it doesn’t have to? The Future Is Only As Far As Your Next Experiment

Starting up anything is a daunting task. A new venture is a bold statement to the world that the status quo unacceptable and that a new future, with all of its uncertainties and complexities, is about to unfold. But I’ve recently observed a troubling trend — growing number of entrepreneurs who assume that all complex problems need to be met with complex solutions — and that those solutions can only be implemented with complex products supported by complex business models. Their ventures, already inherently fragile, strain under the weight of complexity. But the answer is not merely to default to simplicity in all things. Instead, it is developing a philosophy, culture and discipline within the venture to seek out the underlying causes of problems, and to come up with, as Steve Jobs put it, “beautiful, elegant solutions that work.” At a recent presentation to executives in Latin America, I was challenged to name some things that entrepreneurs can do to craft ventures that are as “simple as

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Great entrepreneurs use their ventures as “discovery engines.” One local start-up

The First Test to Pass is the “Mom Test” Entrepreneurs are familiar with elevator pitches, carefully crafted statements of 30- seconds or less that state their venture’s concept (“problem and solution”), its market potential (“why now?”) and viability (“I already have my first customer!”). These pitches can be thought of as “micro presentations” to potential investors, customers, and employees. But entrepreneurs who want to more deeply understand the essence of their venture raise the bar on the standard elevator pitch and aspire to pass what I call the “Mom Test.” That is, within no more than 30 seconds of an entrepreneur explaining the venture to Mom (or another suitably smart person who is completely unfamiliar with any aspect of the venture), she totally “gets it.” This bar is especially high for ventures like high-tech start-ups where there’s lots of “insider” jargon, acronyms, and phrases. When was the last time you explained your venture to your mom? There has never been an easier time in history to start a company. Innovations like cloud computing, crowdfunding, social media, and 3D printing continue to put capabil-

“Making the simple complicated is commonplace; making the complicated simple, awesomely simple, that’s creativity.” Charles Mingus, legendary American jazz bassist founder that I know recently identified three key questions that could, with some creativity, be cheaply answered in the first 30 days of his venture’s first customer installation. By the end of the trial, his prior assumptions about the venture’s fundamental business model, including what products customers liked best, were shaken to the core. But by purposefully experimenting rather than committing, his venture lived to see another day. What experiment could you cheaply create right now that will give you big insights to the future you want to create?

ities in the hands of individuals that only the largest corporations had a generation ago. But all of those capabilities and resources also have the potential to create unnecessary complexity. Strive for a level of simplicity that gives your venture, as DaVinci said, “the ultimate sophistication.” WP ABOUT THE AUTHOR Tim Zak is a professor at Carnegie Mellon University (CMU), director of CMU’s Institute for Social Innovation, and a venture mentor at AlphaLab Gear, a Pittsburgh incubator for hardware and robotics start-ups.

SMC Annual Legislative Reception Thank You for Your Support SMC and our members would like to extend a sincere thank you to the lawmakers, dignitaries and sponsors who attended our Legislative Reception Roxanne Buckles

Rep. Joseph Markosek

Executive Specialist Governor’s Southwest Regional Office

Pennsylvania House of Representatives

Sen. Robert Casey, Jr.

Allegheny County Council

U.S. Senate Represented by Elizabeth Fischback

Rep. Dom Costa

Pennsylvania House of Representatives

Rep. Michael Doyle

U.S. House of Representatives Represented by Jeffrey Schaffer

Rep. George Dunbar

Pennsylvania House of Representatives Represented by Brian Rasel

Mary Ann Eisenreich

Director Governor’s Southwest Regional Office

Rep. Hal English

Pennsylvania House of Representatives

Councilwoman Sue Means Rep. Daryl Metcalfe

Pennsylvania House of Representatives

Rep. Erin Molchany

Pennsylvania House of Representatives

Rep. Tim Murphy

Natalia Olson-Urtecho

Regional Director U.S. Small Business Administration (SBA)

Mike O’Rourke

Mayor William Peduto

County Executive Rich Fitzgerald

Pennsylvania House of Representatives

Sen. Wayne Fontana Senate of Pennsylvania

U.S. House of Representatives Represented by Jon Raso

Rep. Dan Frankel

Councilwoman Natalia Rudiak

Pennsylvania House of Representatives

Kelly Hunt

Rep. Harry Readshaw Rep. Keith Rothus

Pittsburgh City Council

Michelle Staton

District Director U.S. Small Business Administration (SBA)

Deputy Secretary, Workforce Development PA Dept. of Labor & Industry

Steve Kratz

Sen. Patrick Toomey

Office of Secretary Alan Walker PA Dept. of Community & Economic Development

U.S. Senate Represented by Matt Blackburn

Councilman Edward Kress

Rep. Mike Turzai

Allegheny County Council

Councilman Robert Macey Allegheny County Council

— SILVER SPONSORS —

Office of Secretary Alan Walker PA Dept. of Community & Economic Development City of Pittsburgh Represented by Henry Pyatt

Allegheny County

— GOLD SPONSOR —

U.S. House of Representatives Represented by Nate Nevala

Councilman Michael Finnerty Allegheny County Council

— PLATINUM SPONSOR —

Pennsylvania House of Representatives Represented by Chris Soult

Alan Walker

Secretary PA Dept. of Community & Economic Development

Kevin White

Deputy District Director U.S. Small Business Administration (SBA)

— BRONZE SPONSORS — Guy Chemical Company, Inc. Leech Tishman Fuscaldo & Lampl

— PROMOTIONAL PARTNERS — Pittsburgh Chapter — National Tooling and Machining Association (NTMA) Beaver County Chamber of Commerce Pittsburgh North Regional Chamber

Where PA Businesses Go to Grow

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