Leading EDGEBefore You Play the Venture Capital Game

ADVICE & INFORMATION TO HElp YOu MANAgE YOuR busINEss

WINTER 2015

LEADING EDGE | 2

Leading EDGE

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Welcome to the winter issue of Leading Edge magazine. For some companies, recruiting venture capital makes sense. But the funding method is not right for everyone. Although there are countless VC firms looking to invest money in up-and-coming companies, that does not mean you should pursue VC funding at all costs.

So how can you determine if VC funding is right for your company? Our cover story provides an overview of the venture capital landscape and

takes a look at what life is like when a company brings in an outside investor. We also offer some thought-provoking questions to determine whether venture capital is the right path for your company. As Bob Lentz, entrepreneur-in-residence at Northeastern University’s Center for Entrepreneurship Education in Boston notes, “You need cash to grow your business. And there are many different ways to get that cash.”

Also in this issue, Kreischer Miller’s advisers provide:

• Fivekeystomoreaccurateforecasts• WaystoevaluatetheeffectivenessofyourITsystems• Alookatthetangiblepropertyregulations,akathe“repairregs”• Anupdateonthenewrevenuestandard

Thisissuealsofeaturesanarticleonsearchengineoptimization,orSEO.Onceviewedas just a marketing buzzword, it is rapidly becoming a business imperative. A recent study found that high-growth firms—those that grew five times faster than average—generated twice as many leads online and attributed that success to SEO. But what exactly is SEO? And how do you know whether you are doing it right? Our article answers those questions and offers eight tips for SEO success.

As you consider what is best for you and your business, please know we are here to help.

Kreischer Miller is committed to providing you with valuable information to assist you and your business. Please share any suggestions, comments and ideas for future articles with me at (215) 441-4600 or schristian@kmco.com. We appreciate your continued confidence in us and welcome any feedback on how we can better meet your needs.

Stephen W. Christian

3 | WINTER 2015

Leading EDGE contents

features _______________________

departments __________________

Volume 15, Issue 2, Winter 2015

4 Venturing in What you need to know about venture capital before you seek funding

14 searching for business Boosting your search engine rankings to drive

more leads

16 Doing business in France

8 5 keys to more accurate forecasts

9 How effective are your IT systems?

10 A look at the tangible property regulations, aka the “repair regs”

12 An update on the new revenue standard

18 bits & pieces

“You’re losing some control when you sell to a VC firm. You’re involving another entity in shaping your company. That’s why it’s imperative you find a firm that is a good cultural fit for your company.”

LEADING EDGE | 5

Venture capital is a viable form of funding, particularly for companies

in high-growth spaces such as technology, energy, and biotech. And

for some companies, recruiting venture capital makes sense.

But the funding method is not right for everyone. Although there are

countless VC firms looking to invest money in up-and-coming companies,

that does not mean you should pursue VC funding at all costs.

VENTURING INWhat you need to know about venture capital

before you seek funding

by Erik Cassano

continued on following page

How can you determine if VC funding is right for your company? You must first develop a crystal-clear picture of your company, where you want to take it, and the circumstances that surround it, and do so before seeking any funding.

“Themostessentialthingtounderstandiswhattype of capital you should be seeking,” says Jennifer Hill, who was a venture capital attorney before co-founding foreign language vocabulary tool Sixty Vocab. “Are you in a high-growth space? Are you willing to sell off part of your company in exchange for venture capital? Can you get funding from other sources? You should be able to answer all of those

questions before you go after venture capital.”Some venture capital firms fund startups, some

fund smaller companies that are past the startup phase, and some only play with the big kids, funding later-stage companies worth $30 million or more.

Inanycase,findingventurecapitalfundingcanbe difficult, with lots of dead ends staring you in thefacebeforeyoufindtherightmatch.Itcanbea lucrative path for companies positioned properly but a frustrating and fruitless road for companies that would have been better off taking another route. Determining which category defines your company

6 | WINTER 2015

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can have a profound effect on its long-term health and survival.

The essentialsBusinesses looking to the venture capital space for funding need to know one thing: When you bring a VC firm aboard, you are selling part of your company, and thus selling part of the control of your company.

Ifyourunasmallercompanythathas been primarily funded by family and friends who are willing to let you run the show, this is a critical thing to remember. Selling to a VC firm is not all that different from offering public stock, in that you are giving up part — or all — of your control in exchange for the security provided by a powerful new funding stream.

When you secure the funding of a VC firm, a representative of that firm will sit on your board and help direct high-level decision-making in a way that is in thebestinterestoftheVCfirm.Ifitsgoals are divergent from your goals for the company, it can create some serious problems that are not easy to resolve.

“Thatisprobablythebiggestdownsidethat can come out of courting venture capital funding,” Hill says. “You’re losing some control when you sell to a VC firm. You’re involving another entity in shaping yourcompany.That’swhyit’simperativeyou find a firm that is a good cultural fit for your company.”

Ifyou’regoingtopursueVCfunding,it is essential to find a firm that is enthusiastic about the space you are in and that wants to advance the mission of your business, not just make money from it. Do not partner with a firm with a dissenting viewpoint on how you run your business,orevenaneutralone.Instead,partner with a firm that is active in guiding

your business to expansion and further profitability.

“Iflosingtotalcontrolisthebiggestdownside of VC for an entrepreneur, the guidance and partnership of an experienced, enthusiastic venture capitalist isthebiggestupside,”Hillsays.“Itneedsto be about more than just the investment dollars. You want a firm that’s jazzed about your business and about what your business could become. You want to partner with folks who can help guide you. Ifyoucanfindthatkindofalignment,thepartnership can become something really special.”

Andhowdoyoudothat?Throughlots of research and conversations. Meet representatives from various venture capital firms face to face and gain a thorough understanding of their goals and objectives as a firm. Learn about the firms’ portfolio of companies and why they’ve invested where they have.

Inaddition,talktoothercompaniesthat have partnered with the firms you are considering — and, if possible, companies that ultimately turned down investment opportunities from those firms.

“Entrepreneurs tend to be the most honestwitheachother,I’vefound,”Hillsays. “So if possible, seek out companies that have turned down investment from the firm you’re considering and see why. That’snottosayyoushouldturndownopportunities based simply on what they say, but the more people you talk to, the more realistic picture you’ll be able to paint.”

understand what you needA significant amount of prestige is attached to successfully recruiting venture capital funding.IfVCfirmsareinterestedinyourbusiness, that means you are an appealing target for big-time investors.

Thatallurecanmakeitextremelytempting for companies to pursue partnerships with VC firms, even if doing so is not necessarily the right path. But if you chase VC funding without really needing it, the negative consequences can outweigh the prestige many times over.

Many companies — particularly startups or those early in their life cycle — simply do not need the type of funding provided by the venture capital space. Inmostcases,thesimplestandmoststraightforward path to funding is the best one.

“Part of understanding your company is understanding the amount of funding youneed,”Hillsays.“It’soneofthefirstquestions you should answer, and be able to answer truthfully.”

Ifyouneed$25,000infundingtogeta business or project off the ground, you do not need the help of a venture capital firm.Therearemanyother,morereadilyavailable sources of funding for that amount of money.

“For $25,000, you can go to a bank,” Hill says. “You might be able to raise that amount through friends and family. Ifyou’relookingtoraise$20million,you’ll more than likely need professional investors. But if you honestly don’t need that type of money, you don’t need to involve that caliber of an investor that will take a portion of your company from you. Be honest and take the temperature of your company to see what you really need in terms of funding.”

Hill says entrepreneurs in start-up mode or early in their company’s life cycle should look inward first to determine if it is possible to self-fund via bootstrapping methods.Ifyouhavetolookoutsidethebusiness for additional funding, friends and family should be the next source. Beyond that, numerous government and private

LEADING EDGE | 7

programs offer grant money and loans, or you might be able to secure that amount via a bank loan.

“It’skindofascalingprocess,”Hillsays. “By the time you need to seek venture capital, you’re likely well established in your business, or at least well established as an entrepreneur with a number of successfulventuresunderyourbelt.That’swhen you start looking for the firms that have open checkbooks and expertise in the industry you’re in.”

It takes timeIfyoudecidethatventurecapitalistheway to go, don’t expect to have a stampede of would-be investors beating a path to yourdoor.Inmuchthesamewaythatyoushould be selective about who you partner with, VC firms are extremely selective about where their money goes. Even if you develop a positive initial relationship with a VC firm, it could take months or years before that relationship involves dollars and cents.

“Being totally honest, it takes lots and lots of meetings to make something like this happen,” says Bob Lentz, entrepreneur-in-residence at Northeastern University’s Center for Entrepreneurship Education in Boston. “You usually have to have hundreds of meetings with many different potential venture capital firms or angel investors before you find one that is interested in your product and niche, and that is ready to commit money to it.”

But if you can find the right venture-capital match for your business, the benefits can be significant and long-lasting. Ifyourventurecapitalpartnerbringsaset of skills and competencies to the table that you or your team do not possess, it can make the company much stronger, positioning it for levels of growth that it could not have attained otherwise.

“Entrepreneurs often get focused on the end goal and might not realize when a strategic shift is needed to stay on path toreachthatgoal,”Lentzsays.“Ifyoupartner with a good investor, they’re going to be able to see the signs that a strategy shiftisnecessary.Ifthey’reexperienced,and particularly experienced at dealing with companies in your industry, they’re going to be much more astute when it comes to identifying the signs that a strategic shift is needed.”

Even though it might be your idea, your company or your product, do not hesitate to bring people aboard who are more knowledgeable about your space than you are.

“Every person running a business needs people on board who bring different strengthstothetable,”Lentzsays.“Itdoesn’t mean they’re smarter than you, it means they have more experience and can serve as an extra set of eyes to help you watch for certain situations that could develop.Ifyoufindtherightinvestormatch, it can benefit your company in many different ways, and you should embrace that.”

But you cannot force-feed that type of relationship into existence. Lentz echoesHill’swords:Ifyoudonothavethetime to invest in finding and developing a strong relationship with the right kind of VC firm, or you don’t have the capital investment needs to warrant the involvement of a VC firm, look at other options first.

“Bottom line, you need cash to grow your business,” Lentz says. “And there are often many different ways to get that cash.Ifyoudon’twanttogiveupaportionof control in your business, or you don’t need the type of capital that a professional investor normally provides, don’t look at venturecapital.It’snotgoingtobeworthit, for you or them.”

Ultimately, you should pursue venture capital investment because it is practical, not prestigious. Always follow the path of least resistance first.

“It’sveryhardtoraisemoneyintheworldofbusiness,”Lentzsays.“Ittakesalot of time, no matter the route you go.”

Things to rememberVenture capital firms are usually attracted to businesses in high-growth sectors, such as technology and biotech.

Different VC firms will fund at different levels, from startups to tens and hundreds of millions of dollars.

Inordertofindtherightmatch,youwill need to do extensive research on many firms.

Developing investor relationships can be a long and difficult process. You might wait months or years before finding an investment firm that believes in your company enough to invest money in it.

Thesimplestresolutionisoftenthebest, so if you can more readily solicit investment dollars from friends and family, or via a traditional bank loan, consider that before pursuing venture capital investment.

When you bring a VC firm aboard, you are selling a portion of your company in exchangeforfinancialbacking.Thatmeansthe firm will have a seat on your board of directors and be able to exert influence on the direction of your company, which makes finding a philosophically aligned VC firm of critical importance. lE

8 | WINTER 2015

Richard snyder Director Audit & Accounting

Forecasting drives supply, production, inventory, and capital expenditure

planning as well as financial forecasting.Itisoftencriticalto an organization’s production or operations department and key to ordering materials, establishing production schedules, meeting hiring demands, training the labor force, and managing logistics.Companies with a strong expertise in forecasting often need to carry less inventory on hand and have a better ability to meet their customers’ demand.Thisleadstoimproved cash flow, a higher level of customer satisfaction, and in many instances, a higher profit margin than competitors.

However, forecasting can be a time consuming and thankless job. And when done poorly, it is often inaccurate. Here are five steps you can take to improve your forecasting process and deliver more accurate results.

1Forecast For Customer Demand, Not sales

Companies need to forecast based on their customers’ demands and not their own ability to supply products or services. How much and when a customer needs your goods and services should be the driving factor in creating your company’sforecast.Thiswilldrive production, raw material needs, inventory levels, and laborrequirements.Identifykey sources of information and have systems in place to capture it.

2 Identify and Remove Distorted Information

Identifyandremoveone-time exceptions that can skew forecasts. Distortions can include promotional events, unusual competitor activities, heavily discounted sales to move inventory, and new product entry into a market. Itisalsoimportanttomanagerecords with a limited history. Theseshouldbecontinuallymonitored and results updated so the forecast can be adjusted accordingly.

3 Recognize that Communication is Key

As with any process within a company, communication is always a key element of success. Effective forecasts require input from individuals in different functional areas who can contribute relevant information and insights to improve accuracy and the process.Individualsgenerallyneed to communicate across functions and this takes cooperation and collaboration.

4 Make Forecasting a Clear business step

Forecasting must be a regular process that is performed efficiently and in an effective, productive manner. Performed correctly, it should add significant value to a company’s businessprocesses.Tobeeffective, responsibilities must be clearly assigned to individuals within an organization and they must beheldaccountable.Tofacilitate the process, make sure users and developers are familiar with the entire process. Organizations that emphasize the importance of forecasting and reward team members often have a higher commitment to the process and see more accurate results.

5 Measure and publish performance Results

Develop systems for measuring your performance. Without the ability to effectively measure and track performance, it is difficult to identify issues and inaccuracies and understand what went wrong in order

5 Keys to More Accurate Forecasts

to develop and deliver better forecasts in the upcoming periods. Consider publishing forecast accuracy results to ensure that all team members understand how well the forecast was developed and determine the necessary steps to improve the process.

Good, accurate forecasting takes a lot of time and effort. Tobesuccessful,youneedto have appropriate systems in place, a well-developed process, and a commitment to providing the necessary resources. Once established, you should see improved customer and employee satisfaction, more efficient and effective inventory and production management, and the ability to better plan and manage the entire operations of your company. LE

LEADING EDGE | 9

How Effective Are Your IT Systems?sassan s. Hejazi, ph.D., Director, Technology solutions

In order for companies to ensure they are leveraging thelatestITcapabilities

to achieve a competitive advantage in the marketplace, managementneedstoviewITas an investment that is aligned with the company’s business objectives.CreatinganITinvestment roadmap can be a valuable way to assess your current situation and identify future needs.

Here are several ways that properly designed and implementedITsystemscan improve your overall organizational effectiveness.

lower Costs – Properly applied,ITcanhelporganizations achieve more with less, thereby reducing operational costs. By providing workers with information management capabilities to enable them to be more productive, you can reduce the labor cost of production or service delivery.

Improved Process Efficiencies – Many organizations have created procedures to handle specific situational requirements. When viewed individually,

these procedures generally do not seem like much. But when you put them all together, you often realize how time consuming and labor intensive they can be. Properly designed ITsolutionscanovercomeorganizational boundaries, resulting in more streamlined processes.Thisinturnallowsyou to break down artificial functional barriers and increase productivity levels through tightly synchronized operations among your departments.

Increased Quality –Mundane tasks such as manual data entry can result in operator errors, leadingtoqualityproblems.ITcan help overcome this issue by capturing, manipulating, and presenting information in a more systematic way, which will result in improved quality and decision-making practices.

Better Customer Service – Intoday’shighlycompetitiveeconomy, customers have numerous choices and the commoditization of many products and services has lowered the switching cost. Customers are increasingly demanding more from their businesspartners.Theywant

the products or services they need when they need them and they demand pre- and post-sales information on a 24x7basis.Well-designedITsolutions play a key role in delivering this information, empowering customers to feel more in control of their destiny.

greater Market share – When a company runs a lean, efficient operation and delivers world-class quality and customer service, it will automatically attract more customers.Intoday’seraofbenchmarks and scorecards availableontheInternet,customers are savvier and more educated about their options. Itisnownearlyimpossibletoincrease market share without making sure the underlying elements of operational excellence are well in place.

Mitigated Risks – With the increasedutilizationofIT,companies face greater risks of system crashes and security breaches. However, with proper contingency planning, you can create innovative and cost effective disaster recovery and business continuity

plans that can be utilized in the event of an unforeseen disaster. Recent developments in cloud-based systems have been a key enabler in this area.ITsecurity,however,continues to be a concern for most businesses. Although there are no 100 percent secure systems, it is imperative to take reasonable precautions such as periodic security reviews to ensure systems are not highly vulnerable to security breaches.

As you continue your journey toward operational effectiveness, consider creating anITinvestmentroadmap.And, ask yourself a few simple questions: • Arethereareasofyour

organization that can be improvedbyIT?

• Doyouhaveinstancesofmore than one individual handling the same information in multiple places or systems?

• Aretherecapabilitiesyoucurrently do not have that your customers or suppliers would like to have or will expect in the very near future?

• AreyourITsystemshighlyreliable and secure? LE

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Lawrence G. Silver Director Tax strategies

Historically, the InternalRevenueService(IRS)and

taxpayers have been at odds over whether expenditures on tangible or real property are currently deductible or must be capitalized and recovered through depreciation deductions. After a decade, the IRShasissuedfinalrulesonhow to treat these expenditures. Theserulesarecalledthetangible property regulations, or as they are more commonly known, the “repair regs.”

Some of the changes are viewed as a departure from how taxpayers have treated these expenditures on prior taxreturns.Taxpayersarenow required, or have the opportunity on their 2014

A Look at the Tangible Property Regulations, aka the ‘Repair Regs’

tax returns, to make any necessary corrections by filing accounting method changes or to make various first time elections. Failure to make some of these changes may result in permanently losing the benefit of deducting these expenditures currently and in the future.

Many of the new rules are taxpayer friendly and provide opportunities to deduct expenditures that may have been considered to be capitalundertheoldrules.Toquantify these opportunities, taxpayers will need to spend more time reviewing their prior year depreciation schedules and tax accounting policies to determine how these expenditures were treated in the past and their current impact.

Here are some of these potential tax accounting method changes and elections:• Thenewrulesprovide

taxpayers another opportunity to review their prior year depreciation schedules and correct improper methods by filing a method change request to ensure depreciation deductions are not lost.

• A very favorable potential method change is the adoption of the routine maintenance safe harbor. Any expenditure that is required to be performed to a building more than once within a 10 year period or more than once within the

LEADING EDGE | 11

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class life for machinery and equipment can now be expensed immediately under this safeharbor.Thereisnodollar limitation, so this provides an opportunity to potentially expense more than what may have been allowed in the past. By not adopting these changes, these expenditures could be subject to capitalization.

• For buildings, taxpayers now have the opportunity to write off a portion of the old cost from a partial disposition. An example is the replacement of an old roof with a new roof for a building already placed in service. Let’s say a taxpayer purchases a building for $1 million and 10 years laterreplacestheroof.Theundepreciated cost of the old roof imbedded in the $1 million original cost can nowbewrittenoff.Thiscanbe applied retroactively, if desired, but there is a limited amount of time to do so.

• Theannualelectionforde minimis safe harbor capitalization policy allows taxpayers to establish a policy to expense up to

$5,000 per item per invoice for taxpayers that have an applicable financial statement (“AFS”) prepared, which includes audited financial statements. Taxpayersthatdonothavean AFS (i.e., reviewed and compiled financial statements) are limited to $500.Thiselectionmayprovide opportunities to expense more items in 2014 regardless of the current limitation on Section 179 expense election. Procedures must be in writing and in place at the beginning of the year and the election is made each year by filing an overt statement with the tax return.

• Ifmaterialsandsuppliesarecurrently being capitalized for book purposes, an accounting method change may need to be made to currently expense those items.

• Therulesprovideforanew definition of a “unit of property,” which is the basis for examining whether an expenditure needs to be capitalized.Theregulationsprovide dozens of examples that describe whether an expenditure needs to be capitalized as an adaptation, betterment or restoration, or can be deducted as an expense.Thisisanotherexample of when a method change may be required.

• Inadditiontotheroutinemaintenance safe harbor, there is a similar provision for small taxpayers for theirbuildings.Iftheamount expended during the year does not exceed the lesser of 2 percent of the unadjusted basis of the building ($1,000,000 or less) or $10,000, then those expenditures may be deducted regardless of

whether the expenditure could be considered an improvement.

• A taxpayer can also elect to follow their book accounting method and otherwise not currently deduct repair and maintenance costs if the book policy is to capitalize these costs.Therearenumerous

potential accounting method changes and elections that could be made with taxpayers’ returns for the taxable years beginning on or after January 1,2014.Inmanycases,actionsnot taken during this year may result in unfavorable consequences. We encourage all taxpayers to pay serious attention to these new rules and ensure that they are being addressed. Please contact your Kreischer Miller adviser to discuss these new rules and how they affect your business. LE

12 | WINTER 2015

David SongManagerAudit & Accounting

In May 2014, the Financial Accounting Standards Board

(FASB) issued Revenue from Contracts with Customers (Topic606)underAccountingStandards Update (ASU) 2014-09.Topic606wastheresult of a collaborative effort between the FASB and the InternationalAccountingStandardsBoard(IASB)to merge, consolidate, and standardize revenue recognition guidance between theFASBandtheIASBandacross numerous accounting standards and other implementation guidance.

Topic606supersedesthecurrent revenue recognition guidanceunderTopic605,Revenue Recognition, as well as other industry-specific guidance throughout the IndustryTopicoftheFASBCodification.

Thenewstandardiseffective for public companies for annual periods beginning after December 15, 2016 and interim periods within

those annual periods. Early adoption is not permitted for publiccompanies.Itiseffectivefor nonpublic companies for annual periods beginning after December 15, 2017 and interim periods within annual periods beginning in the following year. Early adoption is permitted at the public company effective date.

Thenewguidancewillaffect entities that enter into contracts with customers to transfergoodsorservices.Themain objective is to standardize the revenue recognition guidance so that economically similar transactions are not recorded differently in financial statements which are in accordance U.S. Generally Accepted Accounting Principles (US GAAP).

Themainprovisionsoftheguidance are driven by the core principle to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for

thosegoodsorservices.Theguidance outlines the following steps an entity should follow when applying the new revenue recognition guidance under this topic.

step 1: Identify the contract(s) with customer.Thenewstandarddefineswhatconstitutes a contract and also addresses how to account for modifications of contracts. Contracts under this guidance meet the following criteria:• Approvalandcommitment

of the parties• Identificationoftherightsof

the parties• Identificationofpayment

terms• Contracthascommercial

substance• Itisprobablethattheentity

will collect the consideration which is to be exchanged for goods or services transferred

step 2: Identify the performance obligations in the contract.Thestandardstatesthattheentity should account for each promised good or service as a performance obligation if it is distinct or a series of distinct goods or services that are substantially the same and have the same pattern of transfer. A good or service is distinct if the customer can benefit from the good or service on its own or with resources that are readily available to the customer and if the promise to transfer the good or service is separately identifiable from other promises in the contract.

step 3: Determine the transaction price.Thetransactionpriceistheamount of consideration an entity expects to be entitled to in exchange for promised goods or services. An entity should consider variable

An Update on the New Revenue Standard

LEADING EDGE | 13

consideration, estimates of variable consideration, existence of a significant financing component, non cash consideration, or consideration payabletothecustomer.Theguidance provides specific examples and descriptions of types of consideration to be evaluated.Thetimevalueofmoney should be considered when a significant financing component exists.

step 4: Allocate the transaction price to the performance obligation of the contract.Now that a contract, performance obligation, and transaction price have been identified, an entity must allocate the transaction price to each distinct performance obligation of the contract. Theguidanceprovidesseveraloptions in executing this allocation.Theallocationmay be further complicated when considering variable consideration, noncash consideration, etc.

step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.As each distinct performance obligation is met, the allocated transaction price should be recognizedasrevenue.Theguidance offers different approaches to recognize revenue if a performance obligation is satisfied over time or at a point in time. For example:• Ifthecustomer

simultaneously receives and consumes the benefits provided by the entity’s performance as the entity performs,

• Oriftheentity’sperformance creates or enhances an asset that the customer controls as the asset is created or enhanced,

• Oriftheentity’sperformance does not create an asset with an alternative use to the entity and the entity has an enforceable right to payment for performance completed to date,

Thenrevenuemayberecognized over time using the percent complete method, milestone method, or another

method that represents the progress toward complete satisfaction of that performance obligation.

For obligations that are satisfied at a point in time, an entity should consider when control over the asset is transferred in a contract. Factors include whether:• Theentityhasapresent

right to payment for the asset,

• Thecustomerhaslegaltitleto the asset,

• Anentityhastransferredphysical possession of the asset,

• Thecustomerhasthesignificant risks and rewards of ownership of the asset, or

• Thecustomerhasacceptedthe asset.

Thestatementalsoprovidesguidance on additional financial statement disclosures which allow financial statement users to understand the nature, amount, timing, and uncertainty of revenue and cash flows from contracts with customers. Additional qualitative and quantitative disclosures may be required under the new standard.

Therearetwomethodsofadopting the provisions of this statement:

• Retrospectivelytoeachpriorreporting period, or

• Retrospectivelywiththecumulative effect of initially applying the standard recognized at the date of initial application.

Under option one, the entity must be able to track, record, and report revenue under the provisions of this statement for up to two years prior to the implementationdate.Thismayrequire a significant amount of planning and implementation of new processes and controls related to revenue recognition. Under option two, the entity should disclose each financial line item which is affected by the change in the current period and an explanation of reasons for specific changes.

Theobjectiveofthenewstandard is a more unified and consistent method of applying revenue recognition principles to US GAAP financial statements. Overall, ASU 2014-09 Revenue from Contracts with Customers is a substantial standard update which requires a detailed review of its provisions. LE

“The objective of the new standard is a more unified and consistent method of applying revenue recognition principles to US GAAP financial statements. Overall, ASU 2014-09 Revenue from Contracts with Customers is a substantial standard update which requires a detailed review of its provisions.”

14 | WINTER 2015

In a recent study of professional

services firms, Hinge Marketing

found that high-growth firms

— those that grew five times faster

than the average — shared one

thing.Theygeneratedtwiceas

many leads online, and attributed

that success to search engine

optimization. However, many

companies remain skeptical

about SEO.

Boosting your search engine rankings to drive more leads

continued on following page

Searching for Business

“Theybelieveiftheyhaven’tbeenalready getting clients online, that means people don’t look for firms online,” says Lee Frederiksen, Ph.D., managing partner atHinge.“ButpeopleareontheInternetallthetimelookingforsolutions.Theydolook for companies that way; it’s just that you’re not optimized for those things.”

Inanincreasinglydigitalworld,itiscritical for businesses to build, maintain, and promote their websites to be found and to find new business online. However, ranking for your prospects’ specific searchesisnoteasyorinstantaneous.Itmay take months of committed effort to see results, which is why most SEO firms require at least six months of service.

“A website is not meant to be a static brochure; the set-it-and-forget-it mentality won’t get you anywhere,” says Brian Swanson, principal of Flashpoint Marketing.“Itdoestaketimetorefine,and the more you refine, the higher quality leads you’ll get. But you have to give the search engine something to visit for.”

What search engines wantSearch engines such as Google — which owns 68 percent of the market share with nearly 13 billion monthly searches — send “spiders”tocrawltheweb.Thosespidersexamine pages to answer two burning questions.

What is this page about? Spiders encipher topics by looking at on-page keywords and metadata on the back end of a website, which includes title tags, page descriptions, and headings.

How much authority does this page have? By looking off-page, spiders analyze who visits, shares, and links to a page. Thesebacklinksindicatehowmuchotherwebsites trust the quality of this content.

“Inotherwords,they’retryingtogive searchers the best quality experience and the most relevant content for their searches,” Frederiksen says.

Toscourtheentirewebanddeliversearch results ranked by relevance, Google

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reliesoncomplicatedalgorithms.Itworks hard to guard the secrecy of these algorithms, rolling out more than 600 updates annually to improve the quality of search results and prevent cheating.

“SEO is not a game of tricking or outsmarting Google,” Frederiksen says, noting that the updates aim to deter scams andshortcuts.“ThesimpleanswertogoodSEO is, No. 1, create content on your website that’s very useful and compelling to the user. No. 2 is making sure that content is very accessible by labeling and promoting the pages correctly.”

Some content is standard across business websites, with content about the firm, its services, and the industries it serves.

“Theseareallfinepiecesofcopy,no doubt,” Swanson says. “But the type of content you want to develop isn’t necessarily the content that’s inward facing about your organization. You want to talk about the issues and challenges your prospects are facing. You have to think like the shopper.”

By developing issue-based content that educates potential customers, companies can build expertise through SEO.

Keyword focusUnderstanding which keywords will drive the most qualified leads is a specialized science.Thedifferencesbetween“Utahtax” and “Utah taxes,” for example, might be greater than you think.

Keyword tools like those from Google and Moz can help analyze keyword variations, but generally, the narrower a keyword phrase, the better.

For example, if an insurance firm is going to focus on tax-related keywords, do not use phrases such as “car insurance” or“insuringabusiness.”Thosearesuchbroad terms that every firm in the world wouldberankingfor.Instead,termssuchas “insuring a business in Chesterfield County, Virginia,’ are more achievable, because they are more specific.

While geographic words can narrow down broad searches, Frederiksen warns against going too local and shutting out a world of SEO possibilities. Potential clients and customers tend to search for things that are relevant across their industries.

“While localization of SEO is important, getting the industry-wide terms right is as valuable as the location,” he says.

A number of industries are changing from something that used to be exclusively local to being about which industries you have visibility and credibility with, and that tends to drive a lot more decisions than people realize.

sEO done rightTherearenoshortcutstothetopofGoogle; SEO requires time, commitment, and content. Some companies have skills in-house to manage SEO, but many find it easier to hire specialists and SEO copywriters.

But those specialists do not have any magic shortcuts,either.Ifsomethingsoundstoogood to be true, it likely is. Frederiksen suggests three steps for vetting reliable SEO partners.

• Findfirmsthatspecializeinyourindustry. A firm may do SEO wonderfully for a local plumber, but unless you are a plumber, you probably wanttofindadifferentfirm.“Theyneed to understand your profession,” Frederiksen says.

• Checktheirrecord.Askforreferencestosee how successful they have been with similar clients.

• Googlethem.Howwelldotheyoptimize their own website for search engines?

Getting it right is important, as falling for SEO scams can be detrimental.

“It’snotbenign,”Frederiksensays.“Ifyou use ‘black hat’ techniques, like buying links or trying to trick the search engines, your site can actually be penalized, and it will be harder for you to rank.”

On the other hand, doing SEO right can yield huge opportunities.

“Inanareawheresomanypeopledoit poorly, doing some of it correctly really gives you an advantage,” he says. “We’ve seen firms grow very quickly by mastering SEO, so it’s a big opportunity — but only if you seize it and do it correctly.” LE

Be original. Many companies subscribe to content services and repost shared articles, which Google views as duplicatecontent.“Ifmanysitespostthesame content, search engines will only attribute it to one — and that’s generally the site with the highest authority,” says Lee Frederiksen, Ph.D., managing partner at Hinge. Write your own content, if possible.

Write to the topic, not the keyword. “Keyword volume and frequency have been overplayed,” says Brian Swanson, principal of Flashpoint Marketing.“Ifyouhavegoodcontenton a topic, it will naturally occur. But if you’re trying to jam keywords into an article that’s not about that, it’s going to be clumsy.”

Stay focused. A common error is packing multiple topics onto a single page. “Google only reads the first paragraph, so if you’re talking about multiple subjects, whatever is in paragraph eight gets ignored,” Swanson says.

Post often. Frederiksen recommends new content every week for smaller firms and a post per week per practice for larger firms.

Don’t skimp. “Longer posts — around 800 to 1,500 words — tend to rank higher,” Frederiksen says.

Organize content for easy skimming, using bullet points, list formats, and step-by-step how-tos.

Avoid jargon. Professionals tend to write for other professionals in their industry, which can turn off the audience you are actually trying to reach.“Technicalspeakisthedeathofsearchengine marketing,” Frederiksen says “Trytowriteforanexecutivewhodoesn’t understand it, and make hard-to-understand topics sensible and understandable.”

Check the architecture. “Search engines judge the value of content based on how many clicks away it is from the homepage,” Swanson says. Organize your website like you would a newspaper, with the juiciest info on the front page and peripheral features further back.

8 tips for SEO success

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8 things to know about doing business in France

Thinking about doing business in France?Herearesome tips to keep in mind.

France can be one of the most challenging Western countries in

which to do business, from both a cultural and customs standpoint.

ThelongstandingstereotypeheldbyAmericansandother

Westerners is that the French people are standoffish. But the

characteristics that those from other countries might interpret as icy, or

even rude, are normal conduct for those born and raised in France.

Thatiswhy,inordertomakeasuccessfulbusinessventureintoFrance,

you must first overcome cultural roadblocks and break stereotypes. Here

are some things to keep in mind when doing business in France.

Speak the language. Many in the French business world have an extensive grasp of English — some

even speak it fluently. But the French take great pride in their language, to the point of viewing it as a national symbol. Although you might be able to get away with speaking only English, if you do not master at least some basic French, it will be taken as an insensitive act, as if you did not have the time or inclination to familiarize yourself with the language.

It is how you say it. French communication awards style points. Hand in hand with the expressive

qualities of the French language comes an expectation of eloquence. Whether you speak French or not, the expectation in French business is that you will

communicate in a logical, intellectual, and direct way. Direct questioning and reasoning are held in high regard, while ambiguity and opaque phrasing are frowned upon.

It is more than just lunch. Perhaps the only thing that elicits more French pride than the French

language is French food. Business lunches often last several hours, and talking shop might take a backseat to building relationships. Lunches often consist of multiple courses, with wine as the beverage of choice. When being served, remember that adding seasoning to the food at the table is considered in poor taste, as doing so implies the food is bland.

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Do not get too familiar too soon. Thereasonthatrelationship-building is so important

to doing business is France is the strictly enforced division between personal and public life. French people closely guard their personal lives and do not immediately open up to strangers about their lives away fromwork.Ifyoutrytoprobesomeoneyou have just met with personal questions, it could be seen as intrusive. Keep it friendly but formal for starters.

Watch your behavior and gestures. Avoid chewing gum and snapping your fingers, which

are considered vulgar, especially in more formal settings such as business meetings. Inaddition,theAmerican“OK”sign—the index finger and thumb forming a circle with the other three fingers extended upward – means “zero” in France. A thumbs-up is the accepted way to show approval.

It is about time. Dropping in unannounced is considered extremely rude, in both business

and in life. However, once you have made the appointment, punctuality is valued onaselectivebasis.Inaformalorfirst-impression setting, strive to arrive on time. When relationships are more established and casual, do not take offense if your French colleague arrives late — sometimes quite late. Punctuality is considered a prerogative,notamandate.Thefurthersouth you travel in France, generally the more relaxed the attitude becomes toward time and punctuality.

Title usage differs. When using French courtesy titles, do not place the last name after “monsieur,”

“madame,” or “mademoiselle,” as you would “Mr.,” “Mrs.,” or “Ms.” in English. French courtesy titles are meant for use when addressing someone directly. Address all adult women as “madame,” except for waitresses, who are still commonly referredtoas“mademoiselle.”Thelatterfemale title — which used to be reserved for younger, unmarried women in much

the same way “Miss” is used in American English — is now largely considered condescending throughout France.

Be sure of names. Insomecases, French name usage places the surname before the given name,

which can be confusing when someone has a last name that is also commonly used as a first name, such as “Jacques Pierre.” Verify first names and last names in advance if possible.

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TIPS FOR GETTING A BUSINESS LOANWhile credit remains tight, there are things you can do to increase your chances of getting a loan, according to the Small Business Association.• Researchpotentiallendinginstitutions

to find one that is familiar with your industry and target market.

• Gatheralldocumentationaboutyouandyour business.

• Prepareyourloanapplicationandinclude evidence of strong management, significant experience, and an understanding of the marketplace. Also include relevant financial information and information about suppliers, distributors, employees, and manufacturing relationships.

• Prepareforyourloanapplicationinterview to present a positive, professional demeanor.

• GetexpertadvicefromyourlocalSBAoffice or Small Business Development Center, at no cost.

WELLNESS PROGRAmS mAY NOT HAVE POSITIVE ROI

Do wellness programs provide savings on overall health care costs? According to a recent study by RAND and PepsiCo, the answer may be no.

Researchers analyzed data produced from Pepsi’s wellness efforts over a seven-year period, dividing programs into those targeting employees with any of 10 chronic conditions and programs focused on health risks identified through health risk assessments.

While Pepsi’s employer-sponsored low-tech home monitoring of patients with chronic diseases produced a positive return on investment, the lifestyle management component did not, according to the study, published in the policy journal Health Affairs.

For every $1 invested in chronic disease management, the return in health care costs saved was $3.78. However, the return on health care costs for every dollar invested in lifestyle management programs was just 48 cents, producing a net loss of 52 cents for every dollar put into those programs.

More than 90 percent of employers with more than 5,000 employees offer employee wellness programs, while about 50 percent of those with at least 50 employees do. But that may not be warranted, the study’s authors conclude. While lifestyle-management programs produced a “small decrease in absenteeism, they have no statistically significant effect on health care costs,” the authors said, noting that “these findings cast doubt on the widely held belief in a strong business case for lifestyle management” and that “the blanket claims of ‘wellness saves money’ are not warranted.”

CEO-TO-WORkER COmPENSATION RATIO FALLSTheaverageCEOcompensationin2013at the top 350 U.S. firms was $15.2 million, including the value of stock options exercised, up 2.8 percent since 2012 and 21.7 percent since 2010, according to the EconomicPolicyInstitute.

From 1978 to 2013, CEO compensation, adjusted for inflation, increased 937 percent, more than double the growth of the stock market and substantially more than the 10.2 percent growth in a typical worker’s compensation over the same period.

TheCEO-to-workercompensationratiowas20to1in1965,risingto29.9to1in 1978, 122.6 to 1 in 1995 and peaking at 383.4 to 1 in 2000. By 2013, that number had fallen to 295.9 to 1.

LEADING EDGE | 19

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