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Private Equity Reputation

John Dini of The Exit Planning Coach is a member of XPX San Antonio
John F Dini
The Exit Planning Coach
3 months ago

We began this series by saying that Private Equity reputation is as the Great Satan to some, and a savior to others, depending on the personal experience of the speakers. In fact, both reputations are well deserved, but neither can be universally applied. The “Great Satan” Private Equity Reputation PEGs buy companies for the express purpose of improving their performance. That often comes with considerable pain for employees. A Searchfunder I know said recently “I’m looking at this acquisition because the owner thinks he is running an efficient company, where I see at least ten points that could be dropping to the bottom line.” Efficiency is good, but too often it flies in the face of what made a company successful. In one example I recall, the PEG principals spoke to the assembled employees the day after closing on the business. They said “We bought this company for its culture and its people. Those are the most important assets to us.” The cuts started coming the following Monday. Thanksgiving turkeys were “outdated.” Gone. All bonuses would be performance-based, so extra bonuses at Christmas would be discontinued. Season seats for the local sports franchise – gone. (Most of those went to customers.) Weekend overtime – gone. Schedules would be rearranged so that weekend workers were now scheduled for Saturdays and Sundays and got fewer hours during the week to make up for it. Employee discounts on the company’s products – gone. Partial subsidies for family health insurance, well by now you are getting the gist. The flood of cuts was shocking and seemed unending. The flood of resignations started soon after. By the way, the PEG missed its planned flip date (when they were supposed to sell to a bigger PEG) because of poor results and eventually took the company into Chapter 11. I wish I could say that this type of result was unique, but it happens in far too many cases. The “Savior” Private Equity Reputation There is another reality. About 50% of all the privately held employers in the United States are Baby Boomers. The youngest of these are now turning 60. Many have built substantial enterprises whose value is far beyond what a younger entrepreneur can afford. Private Equity has morphed into a many-headed creature, capable of acquiring almost any size business with value. It will never be for the mom-and-pop businesses that merely earn a living for the owner. As Doug Tatum says in

Private Equity and Privately Held Businesses

John Dini of The Exit Planning Coach is a member of XPX San Antonio
John F Dini
The Exit Planning Coach
4 months ago

Depending on who you are talking to, Private Equity is either the Great Satan or the savior of small and mid-market companies in the United States. The stories depend a lot on the personal experience of the speakers. Once a vehicle for high-risk investment plays in corporate takeovers (see Bryan Burrough’s Barbarians at the Gate,) Private Equity has morphed into tranches where specialists seek opportunities in everything from a Main Street entrepreneurship to multi-billion-dollar entities. What is Private Equity? The term itself is relatively generic. According to Pitchbook, there are currently 17,000 Private Equity Groups (or PEGs) operating in the US. The accepted business model for our purposes is a limited partnership that raises money to invest in closely held companies. The purpose is plain. Well-run private businesses typically produce a better return on investment than publicly traded entities. The current Price to Earnings (or PE – just to be a little more confusing) ratio of the S&P 500 is about 27.5. This is after a long bull market has raised stock prices considerably. The ratio is up 11.5% in the last year. That means the average stock currently returns 3.6% profit on its price. Of course, the profits are not usually distributed to the shareholders in their entirety. Compare that to the 18% to 25% return many PEGs promise their investors. It’s easy to see why they are a favorite of high net worth individuals, hedge funds and family offices. As the Private Equity industry has matured and diversified, they have even drawn investment from the usually more conservative government and union pension funds. Private Equity Types Among those 17,000 PEGs the types range from those who have billions in “dry powder” (investable capital,) to some who claim to know of investors who would probably put money into a good deal if asked. Of course, which type of PEG you are dealing with is important information for an owner considering an offer. private equity moneyThe “typical” PEG as most people know it has a fund for acquisitions. It may be their first, or it may be the latest of many funds they’ve raised. This fund invests in privately held businesses. Traditionally PEGs in the middle market space would only consider companies with a free cash flow of $1,000,000 or greater. That left a plethora of smaller businesses out of the game. For a dozen years I’ve been writing about the pending flood of exiting Boomers faced with a lack of willing and able buyers. I should have known better. Business abhors a vacuum. Searchfunders Faced with an overabundance of sellers and a dearth of capable buyers, Private Equity spawned a new model to take advantage of the market, the Searchfunders. These are typically younger individuals, many of whom graduated from one of the “EBA” (Entrepreneurship By Acquisition) programs now offered by almost two dozen business schools. These programs teach would-be entrepreneurs how to seek out capital, structure deals, and conduct due diligence. Some Searchfunders are “funded”, meaning they have investors putting up a stipend for their expenses. Others are “self-funded.” They find a deal, and then negotiate with investment funds to back them financially. Both PEGs and Searchfunders seek “platform” companies, those that have experienced management or sufficiently strong operational systems to absorb “add-on” or “tuck-in” acquisitions. The costs of a transaction have bumped many seasoned PEGs into $2,000,000 and up as a cash flow requirement. Searchfunders have happily moved into the $500,000 to $2,000,000 market. In the next article we’ll discuss how PEGs can promise returns that are far beyond the profitability of the businesses they buy.

Navigating the M&A Landscape in 2024: Key Trends and Insights

Derek Zacarias of DAK is a member of XPX Chicago
Derek Zacarias
DAK
11 months ago

As we delve into 2024, the Mergers and Acquisitions (M&A) landscape continues to evolve, shaped by the echoes of the COVID-era and the dynamics of the present. In a recent “Deal-by-Deal” podcast by McGuireWoods, I sat down with host Greg Hawver to dig into the trends and expectations shaping the M&A sector, particularly in the middle to lower middle market. Here’s a closer look at the key trends we discussed in the podcast and see impacting M&A in 2024. 1. Reflecting on 2023: A Year of Caution and Decline The year 2023 marked a significant downturn in M&A activities, recording one of the lowest deal-making volumes in a decade. This decline was not isolated but part of a continuing trend from the previous years, influenced by economic uncertainties and a shift in market dynamics. The year set a cautious tone, with both buyers and sellers recalibrating their strategies in response to the evolving economic landscape. 2. The Ascendancy of Corporate Deal-making A notable shift in 2023, expected to influence trends in 2024, is the increased involvement of corporates in M&A activities. With substantial cash reserves, corporates have been capitalizing on their ability to deploy capital efficiently, making them significant players in the M&A arena. This trend underscores the strategic realignment of companies as they navigate the complexities of the current economic climate. 3. Bridging the Valuation Gap A persistent theme, and one that’s expected to continue into 2024, is the disconnect between seller expectations and market valuations. Many sellers, influenced by the peak valuations of yesteryears, find themselves at odds with the current market realities. This valuation gap poses challenges but also opens up dialogues for recalibration and realignment of expectations, paving the way for more realistic and sustainable deal-making. 4. Anticipating the Pulse of 2024 The outlook for 2024 is cautiously optimistic, with the first half of the year likely mirroring the trends of 2023. However, as interest rates stabilize and valuation expectations align more closely between buyers and sellers, the latter half of the year could witness an uptick in M&A activities. This period of adjustment is crucial for both buyers and sellers to strategize and position themselves advantageously in the market. 5. The Evolution of Deal Structures and Financing The M&A landscape in 2024 is witnessing an increasing complexity in deal structures. With more equity rollovers and structured deals, parties are seeking ways to de-risk transactions. The rise of private credit is reshaping the financing of deals, filling the void left by traditional lenders. This trend highlights the need for innovative financing solutions and flexible deal structures in the current market. 6. Industry-Specific Trends and the Role of Technology Certain industries are poised to navigate 2024 differently, influenced by their cyclical nature and economic exposure. Additionally, the integration of AI and technology, especially in sectors like healthcare, is expected to drive transformation and create new opportunities. Staying attuned to these industry-specific trends and technological advancements will be key for M&A success in 2024. 7. Strategic Advice for Sellers and Buyers In this evolving landscape, being well-prepared is paramount. Sellers are advised to align their expectations with market realities and ensure their businesses are primed for sale. Buyers, on the other hand, are encouraged to cultivate relationships and explore unique opportunities, especially before companies are already launched into broad auction processes. As we navigate through 2024, the M&A landscape is marked by cautious optimism, strategic realignment, and an innovative approach to deal-making. By understanding these trends and adapting strategies accordingly, stakeholders in the M&A sector can navigate the complexities of the market and capitalize on the emerging opportunities.

Contribution Margin: Why Profit Planning Matters for Manufacturers

David P DeMuth
CFO Consulting Partners LLC
1 year ago

By Jeffrey Appleman Manufacturers are focused on sales—not cost or profit. If they were keen on net income, manufacturers would know one key data point: contribution margin. Once you know it, the possibilities are endless for growth, sustainability and efficiency. In effect, a contribution margin is the percentage of revenue that remains after you pay for your variable costs, which include the materials and labor to make your products. If the remaining revenue covers your fixed costs—the top item tends to be salaries—then you have a profit. For manufacturers, a contribution margin should be in the neighborhood of 30%-40% so everyone gets paid including the business owners. Contribution margin helps a manufacturer figure out its breakeven point. Let’s say your fixed costs equal $1.2 million a year and your variable unit cost per unit is $10, while the sales price unit is $15. Because you know the variable cost, you can determine the contribution margin, which is the remaining $5 from the average sales price. So how many units would you have to sell to break even this year? Divide the fixed costs by the contribution margin ($1.2/$5) and you will need to sell 240,000 units. So, why don’t more manufacturers know their contribution margin? It’s because they don’t make time for profit planning, which is a financial plan for your business. The process aligns operations with financial objectives by projecting revenue and expenses. It views profit as a crown jewel, not as a byproduct, making everything else revolve around it through transparency. At first, the light may seem blinding. Here are several critical items that manufacturers will be able to see more clearly: Manufacturing Insight: We Need To Raise Prices Most manufacturers are not eager to test price elasticity with their stable of products, but your company could be living on borrowed time. Invest the time to find your true costs. Don’t take shortcuts with estimates unless it’s necessary. When I consulted with a manufacturer that made printed boxes, we broke down every operation in the process. For example, when making a printed carton, you need employees in many areas to make the final product. Every station in the process is a profit center that needs to be covered in the final sales price. So, every printed box started with a paper-sheeting operation, then the printing, the die-cut operation, the waste-product operation, the cellophane operation, the gluing operation and shipping. That’s six operations, each with one to three employees. If you don’t take the time to add it up, there’s a good chance your pricing will be too low. And then, you will pay the price. Manufacturing Insight: We Have Too Many Loss-Leaders If a squeaky wheel gets the grease, then manufacturers will undoubtedly end up with stains on their financial statements. Over time, manufacturers have a tendency to listen to the wrong people when it comes to their lineup of products. A contribution margin is a formula that brings one of the Laws of Business to life: 80% of outputs come from 20% of inputs. This general truth, which has withstood the test of time across any industry, is called the Pareto Principle. Does 80% of the company’s turnover come from 20% of the product line? Put another way: Is 80% of your product sitting there in the warehouse, typing up resources for an inordinate amount of time. Instead of listening to random customers about suspect marketplace needs, the C-suite at manufacturing facilities need to listen to the data, which should come from profit planning at the beginning of every year. Manufacturing Insight: We Pay Too Much Whether it’s your customer or your suppliers, most manufacturers are probably paying too much. Now that the company has a contribution margin and a 12-month profit plan, you actually know how much you can afford from both stakeholders. If you don’t make a reduction, something else will have to be reduced. Creating terms for your customer is the best way to reduce the cost of accounts receivable. If they have 45 days to pay, you will need to enforce it if the obligation is not met. Most manufacturers don’t have the discipline and persistence to protect the bottom line. In the end, 90 days can be too costly. Your suppliers are another area to scrutinize. Do you know the quickest way a manufacturer can get a discount from one of their suppliers? They can ask. (In the real word, this often works.) (This story originally appeared in

How CFOs Upgrade Finance Team to Prep for Private Equity Resell

David P DeMuth
CFO Consulting Partners LLC
1 year ago

By Tim Jung A private equity firm just bought your promising firm with high hopes. You estimate that the company will be sold again for a much higher margin within 60 months. But your finance team has trouble closing the books in a timely manner. So, what does the company’s financial picture look like? You can’t analyze results or establish a timely baseline. You don’t have true control over the bank account because you don’t know what is flowing in or out. Are there missing transactions or cash? How can you mitigate liquidity problems? Too many companies believe the finance and accounting arm just somehow works like gravity, but without an upgrade to the next level, everything will eventually come crashing down. As the CFO, you know promises need to be kept and old habits need to be broken. The acquisition closed last week, and you now live on Jump Street. You have three to six months to turn your band of silos into a well-oiled machine. Here is a checklist that will allow you to upgrade your Finance Department so they can hit their own numbers: People To begin the process of upgrading your team, start with stabilizing your current situation. That’s where your finance team members enter the picture. Assess their work based on timeliness, accuracy and completeness. Can they work independently at tasks, as well as collaborate with others to complete group projects? Now, look for skill gaps. Most of the workforce (58%) need new skills to do their jobs, according to research from

USI Insurance – Data Driven Benefits and Risk Consulting

Adam Brier of CBIZ is a member of XPX Long Island
Adam Brier
CBIZ
3 years ago

USI is one of the largest insurance brokerage and consulting firms in the world, delivering property and casualty, employee benefits, personal risk, program and retirement solutions to large risk management clients, middle market companies, smaller firms and individuals. Headquartered in Valhalla, New York, USI connects together over 8,000 industry leading professionals across approximately 200 offices to serve clients’ local, national and international needs. USI has become a premier insurance brokerage and consulting firm by leveraging the 

Trivest Private Equity Helps Solar Business Grow Revenue More than 15X: Inc. Magazine – 11/26/2021

Tim Templeton of Trivest Partners - Private Equity is a member of XPX Atlanta
Tim Templeton
Trivest Partners - Private Equity
3 years ago

When Jayson Waller says he’s fully invested in his solar company, Powerhome, he means it. In 2017, when the business was running low on capital, he downsized to a smaller home and invested the profits into the company.  A few months later, Waller partnered with Trivest Partners, which bought a 25% stake in Powerhome for $15 million.  Trivest got to work implementing a series of improvements, in collaboration with Waller. Fast forward five years and Powerhome has grown annual revenue more than 15 times over, from $40M to $700M, while expanding its business from four states to 15 . Family-run businesses tend to have the most opportunities to create new efficiencies, says Trivest partner Jamie Elias. “The founder has done an unbelievable job of creating a unique business model, but there is that next level they want to get to,” he says. “We assist them in getting there.” Trivest has more than 40 companies in its portfolio, many of which were family-owned businesses when the firm invested. Click the link below to read the full article of the Powerhome story.

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How to Post a Photo and Company Logo to Your Member Profile: A Step-by-Step Guide

Cheryl Centeno of XPX Global is a member of XPX
Cheryl Centeno
XPX Global
1 day ago

Enhance your member profile by adding a photo and your company logo! It’s a great way to personalize your presence and showcase your organization. Follow these simple steps to update your profile: 1. Log In to Your Account First, make sure you’re logged in to your member account by going to www.exitplanningexchange.com and clicking on the Log In button on the top right-hand corner of the page. Remember to use the email address associated with your member profile as your username. 2. Go to Your Profile Once logged in, navigate to your member profile. You can usually find this by clicking on your profile picture or your name at the top of the page. 3. Select “Edit Photo” Look for the “Edit Photo” button—typically located near the top of your member profile’s dropdown menu (photo below). Click on it to upload or update your high-res photo.

New Years Resolutions: Why They Miss the Mark, and What to Do Instead

Maria Forbes of FIREPOWER Business Catalyst, LLC. is a member of XPX Atlanta
Maria C Forbes
FIREPOWER Business Catalyst, LLC.
5 days ago

Entrepreneurial business owners, is it time to consider a new approach to setting goals in the New Year? We’ve all been there. January 1 rolls around, and we set resolutions with the best intentions. “This will be the year I double my business,” we say. An article in Forbes 1 states by mid-February, 80% of people have made their resolutions a distant memory. Why? Because we have high ambitions hinging on mostly unrealistic and unsustainable methods, setting broad, lofty goals without a roadmap is like trying to sail a ship without a compass—directionless and daunting. There is a simple fix for this problem.  Start the road map with some pre-work. The root issue? New Year’s goals should always start with who you are, how you want to serve, and what you want to enjoy. If you start a New Year’s Resolution with what is trending in the world, in business, or in society, you will leave some or all your resolutions behind as you realize there is a misalignment between who you are and what is trending. It’s all one path! As business owners, we are bombarded with tasks that can be exhausting and lack enjoyment. Goals should be derived from envisioning a picture of your personal world: God, business, family, your unique personal desire to share creatively, and the core of who you are, so your business and your world are synced within a set of goals. What should your world look like in the New Year? Don’t compartmentalize! Your business cannot be separated from all the rest; successful business owners know who they are and how they intend to serve.  Get reacquainted with who you are, your personal talents to serve (clients, friends, family), and how you can get back to enjoying your life. Now we can talk about Business Resolutions You know what you want to achieve for your business. Now, make it a team effort. Go beyond your own efforts to engage your team in goals that are well aligned with their strengths and do it in a doable fashion that engages the spirit of growth together. The Problem with Most Resolutions Resolutions lack specificity, accountability, and, most importantly, our teams’ collective firepower. Transformative change doesn’t come from wishful thinking but from actionable, measurable steps involving everyone on deck. So, what’s the game plan? Shift from solo resolutions to team-powered actions. Set Specific Goals: Break down that big vision into smaller, achievable milestones. “Increase sales by 10% in Q1” beats “Double my business” for clear targets. Harness Team Strengths: Every member has unique skills. Use them to your advantage by assigning roles that match their strengths and watch motivation soar. Perform Regular Check-Ins: Make accountability a team effort. Frequent updates keep everyone on the same page and moving forward together. Celebrate Wins: Whether you hit a small target or make significant progress, celebrate as a team. This will help you feel more united and keep the momentum going. Making Sustainable Resolutions Remember, a sustainable resolution starts with the core of who you are as an owner, how you want to serve, and what is enjoyable to you.  Once you know what you want to achieve for your business your team can help you get there. With some pre-work, a New Year resolution might spark the fire, and then your team’s day-to-day actions will keep it blazing.

Quantum Computing Investments: Key Players, Risks, and Opportunities for 2025

Billy Amberg of Bloomwood is a member of XPX Atlanta
Billy Amberg
Bloomwood
6 days ago

Listen to this post as a podcast: www.adviserinfo.sec.gov). Please read the disclosure statement carefully before you engage our firm for advisory services. The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor.   The views expressed in this commentary are subject to change based on the market and other conditions. These documents may contain certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.    All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed.  There is no representation or warranty as to the current accuracy, reliability, or completeness of, nor liability for, decisions based on such information and it should not be relied on as such. Bloomwood is a registered investment advisor. Advisory services are only offered to clients or prospective clients where Bloomwood and its representatives are properly licensed or exempt from licensure. 730 Starlight Lane, Atlanta, GA 30342.

What to Expect in 2025: Changes to the Three Branches of Government

Robert Brody of Brody and Associates, LLC is a member of XPX Tri-State
Robert G. Brody
Brody and Associates, LLC
2 weeks ago

As we enter 2025, businesses face a rapidly evolving employment law landscape shaped by dynamic shifts across all three branches of government. With a new president set to take office, significant developments at the Supreme Court, and the Republicans securing control of Congress, 2025 is shaping up to be a year defined by upheaval. Each branch of government will be different than any of us have seen in decades. The Executive Branch First and foremost, Donald Trump’s second presidential term is set to begin on January 20. Over the last four years, the Biden administration, known for their pro-employee policies, ushered in a wave of regulations aimed at expanding worker protections. Conversely, the Trump administration is expected to continue their pro-employer, laissez-faire approach that prioritized deregulation and employer flexibility during his first term. (Interestingly, the Trump Administration has started supporting more union issues and no one knows how that will impact his second term.) Significantly, labor and employment law developments often arise from action on behalf of various agencies such as the National Labor Relations Board (“NLRB”) and the Department of Labor (“DOL”). Because these agencies are part of the Executive branch, the president is effectively charged with overseeing them, and therefore plays a significant role in the implementation of their policies. Employers should expect Trump to utilize these agencies to implement his pro-business agenda. It is worth noting, however, that a 2024 Supreme Court decision (Loper Bright Enterprises v. Raimondo) overturned the long-standing Chevron doctrine, a legal principle that directed courts to defer to federal agency’s interpretations of law that agency is empowered to enforce. As a result of this decision, the Executive branch was effectively weakened, shifting greater interpretative authority to the Judicial branch. It will be interesting to see how much impact this change will have on the balance of power among our branches of government. The Judicial Branch Loper was not the only Supreme Court decision in 2024 that contributed to the shift in power in favor of the Judicial branch. The Supreme Court’s decision in Dobbs v. Jackson Women’s Health Organization, overturned the landmark abortion decision Roe v. Wade. Historically, courts, including the Supreme Court, follow precedent created by earlier decisions. But now the Supreme Court showed its willingness to overturn longstanding precedent based on a difference in their opinion of what is right or wrong. This shift away from strict adherence to precedent allows the Supreme Court greater latitude to reinterpret past decisions. With more flexibility to pursue a wider range of cases, as well as greater interpretive authority, the Judicial branch is shaping up to be much more powerful than it has been in the past. The Legislative Branch Lastly, in the 2024 election, the Republicans secured a majority in both the House of Representatives and the Senate. This means that the Legislative branch will have broad authority to enact their agenda over the next two years. Additionally, with Donald Trump in the White House, the likelihood of presidential vetoes decreases significantly.  This alignment will increase the likelihood that Congress will pass more new laws than is typically seen under a divided legislature. As a result, employers should closely monitor what new laws Congress enacts. Employer Takeaways Overall, the three branches of government are all undergoing significant changes. Donald Trump is likely to resume his pro-employer agenda, albeit with a slightly weakened Executive branch in the wake of the Loper decision. The Judicial branch is as powerful as ever, exemplified by the Supreme Court’s willingness to overturn longstanding precedent. Lastly, with Republicans in control of both the Senate and the House, the Legislative branch is primed for significant activity through 2026. With all these changes taking place, it is crucial for businesses to keep abreast of developments in labor and employment laws to ensure compliance and minimize legal risk in the new year. Brody and Associates regularly advises management on complying with the latest local, state, and federal employment laws. If we can be of assistance in this area, please contact us at info@brodyandassociates.com or 203.454.0560.

Developing Leadership Depth for Business Exit Readiness

Marci Caudle of Tagro Solutions is a member of XPX Philadelphia
Marci Caudle
Tagro Solutions
2 weeks ago

A robust leadership pipeline is crucial for any business, but it becomes particularly vital when preparing for a business exit. Whether you’re planning a sale, merger, or leadership transition, ensuring that your leadership depth is strong can significantly enhance the attractiveness and value of your business. This HR Insight explores how strategic human resources management can cultivate leadership depth to support a smooth business transition. The Importance of Leadership Depth in Exit Planning Leadership depth refers to a company’s ability to fill key leadership roles from within, ensuring business continuity and operational stability. For businesses considering an exit, strong leadership depth reassures potential buyers and investors of the company’s resilience and future performance potential. A well-prepared leadership team can effectively manage transitions, uphold company values, and drive growth, even during periods of change. Strategies for Developing Leadership Depth Leadership Development Programs: Implement comprehensive leadership development programs tailored to your company’s needs. These programs should focus on nurturing high-potential employees with critical skills such as strategic thinking, decision-making, and change management. Methods might include formal training sessions, mentorship programs, and leadership retreats that emphasize real-world business challenges and leadership responsibilities. Succession Planning: Effective succession planning is essential for ensuring that key positions can be filled quickly and competently. HR should work with current leaders to identify potential successors for each critical role. This process includes assessing the skills and readiness of potential leaders and providing targeted development opportunities to prepare them for future roles. Talent Identification and Management: Use talent management tools and assessments to identify employees who have the potential to become future leaders. Once identified, provide these individuals with customized development plans that align with their career aspirations and the company’s strategic goals. This approach not only prepares them for leadership roles but also helps retain top talent by actively investing in their career growth. Performance Management: Align performance management systems to leadership development goals. Regular performance reviews and feedback sessions help potential leaders understand their strengths and areas for improvement, ensuring they are on the right track to taking on more significant roles within the company. Cultivating a Leadership Culture: Foster a culture that promotes leadership from every level of the organization. Encourage employees to take initiative, lead projects, or mentor others. This environment supports leadership development organically and can identify and elevate hidden talents within the organization. The Impact of Leadership Depth on Business Valuation A strong leadership team can significantly enhance a company’s valuation during an exit. It demonstrates to potential buyers and investors that the company is well-managed, has a clear direction, and is capable of sustaining growth without the original owner or current leadership team. Additionally, companies with effective leadership transitions are more likely to maintain performance levels during and after the exit process, reducing risks associated with the transition. Developing leadership depth is not just about filling positions but about creating a sustainable framework that supports the company’s long-term goals and ensures a legacy of success. As businesses prepare for exit, the role of HR in cultivating this environment becomes a cornerstone of strategic exit planning. By investing in leadership development, companies not only enhance their marketability and potential sale value but also secure a stable and prosperous future for all stakeholders. At Tagro Solutions, we bring our deep expertise in Human Resources consulting to the table, aligning HR strategies with business objectives to enhance company performance and prepare for successful transitions. Our approach integrates seamlessly with the philosophy of the Exit Planning Exchange, which fosters collaborative exchanges of information and experiences among its members. Together, we aim to empower business owners through strategic insights and actionable solutions, making the journey from business operation to exit as profitable and smooth as possible.

New York City Mayor Signs Legislation Regulating Hotel Safety: What Employers Need to Know

Robert Brody of Brody and Associates, LLC is a member of XPX Tri-State
Robert G. Brody
Brody and Associates, LLC
1 month ago

On November 4, 2024, NYC Mayor Eric Adams signed into law the Safe Hotels Act (Int. No. 991-C) aiming to promote hotel safety and boost tourism. The Act, taking effect May 3, 2025, requires hotel licenses, restructuring of employment agreements, and a number of new staffing requirements. Hotel License Requirements Hotel operators defined as persons who own, lease, or manage a hotel, and control day-to-day operations, must obtain a hotel license from the Department of Consumer and Worker Protection (DWCP) to legally operate a hotel. Hotel operators must file an application with the Commissioner of the DWCP to obtain a license. The application must contain contact information as well as details of safeguards and procedures which show the hotel is in compliance with the Act’s staffing, safety, employment, and cleanliness requirements. The application will differ if the operator has a collective bargaining agreement (CBA) with a union. If the operator has a CBA which contains the required information and references the CBA in their application this may satisfy the Acts notification rules. The notification requirement will be satisfied for the term of the CBA or 10 years from the date of the application (whichever is longer). The commissioner must be notified if there are changes to the CBA which remove references to the Act’s requirements. The hotel license may be denied or revoked if operators fail to comply with the Act, however there are a number of notice requirements for the Commissioner prior to revoking a license. The Commissioner must notify the licensee of a potential revocation in writing. The licensee must be given 30 days from the notification to remedy the violation and this notice must be in writing. A license will not be revoked if it can be demonstrated that the condition has been resolved in the 30-day period. Evidence of this correction can be delivered electronically or in person. Upon the Commissioner’s decision, the licensee has 15 days to request a review of the decision. A license will not be revoked in the following situations: service disruptions such as construction work noise; conditions that the hotel is aware of and treats within 24 hours such as bed bugs, rodents, etc.; unavailability of hotel amenities for a period of 48 hours; unavailability of utilities for a period of 24 hours; and importantly any strike, picketing, lockout, or demonstration at or by the hotel. Hotel operators must display their license in a public area.   Employment Agreement Requirements The Act requires hotel owners, with 100 or more guest rooms, “directly employ” all “core employees”, except a single hotel operator to manage operations on the owner’s behalf. This rule effectively eliminates intermediaries such as staffing agencies or management companies. Core employees include those whose work relates to housekeeping, front desk, or front service. Valets, maintenance workers, parking security, and employees mostly working with food and beverages are not considered core employees. This provision greatly impacts employers who utilize subcontractors; however some contracting agreements may be grandfathered in if they are entered into prior to the effective date and have a specific termination date. Violating this provision may serve as the basis of license revocation. Staffing Requirements In order to maintain safe conditions for guests and hotel workers, the Act implements a number of new staffing requirements. One employee must provide front desk coverage at all times (during night shifts a security guard who has received human trafficking training may take this employee’s place). Hotels with more than 400 guest rooms must have a minimum of one security guard providing continuous coverage while any room is occupied. Hotels must maintain cleanliness and not impose fees for daily room cleaning. Core employes must receive training on how to identify human trafficking within 60 days of employment. Hotels must not accept reservations for less than 4 hours. Penalties and What Else Employers Need to Know Hotel operators are strictly prohibited from retaliating against any employee who discloses a potential violation or assists in an investigation. Hotel operators are also prohibited from retaliating against employees who refuse to partake in a dangerous activity that is not part of their job. As previously discussed, noncompliance can result in a hotel operator’s license being revoked, but that is not all. Anyone alleging a violation can seek a civil action within 6 months of the alleged violation. Furthermore, the Act provides for civil penalties which vary based on the number of violations: $500 for a first violation, $1,000 for a second, $2,500 for a third, and $5,000 for subsequent violations. The Commissioner is expected to issue rules by which this law will be enforced. A timetable for their issuance has yet to be set. Brody and Associates regularly advises management on complying with the latest local, state and federal employment laws.  If we can be of assistance in this area, please contact us at info@brodyandassociates.com or 203.454.0560  

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