CEO Success Report -
December 2003
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CEO Success Report
- December 2003
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Increasing the Effectiveness and Enhancing the Lives of CEOs
and business owners.
Contents of this issue...
.. Welcome - A few words from the publisher, Gary Lockwood
.. Thought-Starter - "Ten Resolutions to Improve
Performance"
.. Guest article - "Financing Options - Buying a
Building"
.. CEO Resources
.. Quotes to use in your staff meeting this month
.. Humor to lighten up the executive suite
.. Contact the publisher
.. Subscribe and unsubscribe instructions
See past issues of the CEO Success Report at:
http://www.CEOSuccess.com/archives
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WELCOME to this issue of the CEO Success Report!
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Hello again. I'm Gary Lockwood, President of CEO Success.
Welcome back once again to the CEO Success. I know you have
no shortage of material to read and I thank you for choosing to
read our newsletter.
We work hard to provide practical ideas, thought-provoking concepts
and useful information for you.
You (and over 1000 of your CEO peers), have honored me by
being a loyal subscriber. For that, I appreciate you.
For many of us, this is the time of year to look forward. Often, I
find myself examining my business and myself, looking for those
things I want to keep doing, start doing and stop doing.
My Thought-Starter for today outlines ten resolutions to improve
your firm's performance. Select a couple that you can get excited
about, and have a go at building them into your life.
May I ask a small favor? Please forward this issue to other CEOs
and company presidents who may be interested in receiving
these messages. Thank you.
And now for our guest article this month.
Quite a few of my clients are now considering buying an industrial
or commercial building. This month, I've asked a banker-friend of
mine, who is an expert on financing options for building purchases,
to provide an overview for us.
Our guest author this month, Gene Valdez, shows you the various
pros and cons (some little-known) of SBA and conventional loans.
Read more about Gene at the end of his article.
I hope you enjoy receiving these articles and ideas to
help you sharpen your thinking about being an effective CEO.
My wish is that you use the ideas in the CEO Success Report to
get the results you really want. If you want some help in putting
them into practice, or if you have questions, email or call.
As you know, our specialty is Increasing the Effectiveness
and Enhancing the Lives of CEOs and business owners.
Enjoy this issue with my compliments.
Sincerely,
Gary Lockwood
CEO Success
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This month's THOUGHT-STARTER
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Ten Resolutions to Improve Your Firm's Performance
As you launch into this new year, consider these resolutions.
Taking action on any of these could transform your enterprise
and your life.
** Resolve to delegate more
Business owners and professionals just don't delegate. Often you'll
say, "no one can do the job as well as I can". With today's vast
electronic networks, we now have the ability to link up with the best
people in the world. Some may be contractors for you, some could
be employees, some might be strategic alliances. Stop trying to do
everything.
Superb results come not from a single individual, but rather from
teams of individuals, all working within their own distinct areas of
expertise toward a shared goal or vision. You've heard of the 80-20
rule -- 80% of your meaningful results come from only 20% of your
activities. Each time you delegate some of your less productive
activities, you multiply your effectiveness.
** Resolve to expand your comfort zone
Each of us has our own personal comfort zone. Some would call
it "a rut". Staying in your comfort zone can be very limiting. The
world passes us by as we stagnate. If we are not learning, trying
new things and growing, our jobs and businesses may be
deteriorating. Make a list of 50 things that, if you really were
successful in doing them, you would be a better person or a better
company.
Things like give a speech (oh no!), write and publish an article,
start an exercise program, meditate daily, teach a class, feed a
homeless person, volunteer, climb a mountain, learn to play a
new musical instrument, sign up for a dance class, try for that
promotion, and so on.
Then, from your list, choose one or two that you are willing to do
within the next 90 days. Schedule those one or two new activities,
then go for it. Afterward, choose one or two more and do it again.
Make personal and professional growth a lifelong habit.
** Resolve to get better clients
Most businesses take on any client who steps up with the money.
Consider the cost to you for dealing with the people you serve.
Have you ever noticed that some people make you feel good just
to be around them? These are the people who give you energy
when they are near you. On the other hand, there are probably
others you can think of who drain all the life out of you. Which
clients would you rather have? You can surround yourself with
people who are pleasant, easy to deal with, interesting and, oh
yes, profitable. Get better clients. You deserve it.
** Resolve to get organized
Too much going on?.... Not enough time?.... Sound familiar?
How would you like to have more time for what YOU want to do?
Resolve this year to plan your days, reduce interruptions, clean
off your desk, say "No", make lists. The benefits of getting more
organized include being more effective at your work, having more
positive control of your workstyle, saving time and money, improving
your professional image with clients, bosses, etc. and taking control
the stress.
** Resolve to be a rainmaker
I've seen many people who sat around waiting for rain. They would
wait by the phone, hoping a prospective client would call or come
to the business. Others, including some of the most successful,
took positive action to "make it rain". These are the ones who made
calls, ran ads, got out of the office to make their own contacts.
Through their activity, these business professionals created oppor-
tunities for new business. More clients, more revenue, better client
relationships and happier employees are just a few of the advantages
you'll realize when you take business-building action for your
enterprise.
** Resolve to cleanup loose ends
We all have messes in our lives. Messes are incomplete tasks,
disorder, disarray, or conflicts that distract you and cause you to
lose energy, break your concentration and reduce self-esteem.
Messes can include cluttered desks, relationships gone awry,
physical well-being, finances, incomplete agreements and legal
issues. Every time you eliminate a loose end, you boost your
confidence, increase concentration, and feel a surge in energy.
For the coming year, target a mess a month.
** Resolve to focus on your strengths
Conventional wisdom says we should work on improving our
weaknesses. What a terrible waste of time, talent and opportunity!
Highly successful entrepreneurs, as well as top scientists, artists,
athletes and entertainers throughout history have achieved great-
ness by focusing on their areas of strength. Everybody has a natural
aptitude in some areas. No matter how hard you try, it is unlikely
you will ever be more than average in areas where you do not have
an aptitude.
Working on your weaknesses undermines your self-esteem since
you will focus mostly on your deficiencies. Developing your natural
talents is rewarding and motivating, allowing you to continually
realize higher and higher levels of ability, achievement and success.
This year, experience the immense satisfaction that comes with
being superb at something.
** Resolve to take more free time
Free time isn't a reward for working hard; it's necessary for optimum
performance and productivity. We need free time, away from the
business, to rejuvenate ourselves. When you are aggressive about
getting rest and relaxation, regularly and frequently, you'll see
increased creativity and productivity. The more free time you take,
the more creativity and productivity you will experience. To make
breakthroughs in income, productivity and creativity, significantly
increase the amount of free time away from your business.
** Resolve to develop stronger business relationships
Your economic future is dependent on other people's future. Your
success in your enterprise is based on the extent that you help
other people to succeed in their lives. Ask every person you
encounter what he or she wants to have accomplished three years
from now. Focus on finding ways to help others in achieving their
goals. By adding value to their preferred future, you not only deepen
your relationship; you also create huge opportunities for yourself.
** Resolve to get in better shape
Take a hike. Or a jog, swim, or bike ride. With few exceptions, those
who are consistently successful have lots of energy. They have the
stamina and the energy to be creative, to tirelessly serve their
clients, to put in the extra effort when necessary and to go the extra
mile for their employees.
The bottom line is that regular, strenuous exercise is good for
business, because it's good for you. You can increase your well-
being, jump-start your days, boost your confidence, turbocharge
your creativity, and knock down stress by exercising consistently.
And that's not all. Think of exercise as your gift to yourself and to
your loved ones. A gift of longer life, more energy, happier
disposition, increased creativity and reduced pain. You can
increase your well-being, jump-start your days, boost your
confidence, turbocharge your creativity, and knock down stress
by exercising consistently.
Start by exercising your free will. Commit to any of these ten
Resolutions and make this a great year!
C Copyright 2001-2003 BizSuccess All rights reserved. No duplication
About the Author...
Gary Lockwood is Increasing the Effectiveness and Enhancing the
Lives of CEOs, business owners and professionals.
Email: mailto:Gary@CEOSuccess.com
Web: http://www.CEOSuccess.com
==================================
Guest Article
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Financing Options For Owner-Occupied
Industrial Building Purchase Transactions
by Eugene E. Valdez
For medium sized industrial building purchases (range of $500,000 to
$2 million) where the majority of the space will be occupied by the
purchaser's business, the most common financing options are a SBA 7A
loan, a SBA 504 loan or a conventional bank mortgage. (financing,
featuring a seller note carry back was not considered for this
article but obviously that is very attractive financing if it can be
obtained). Most business owners, CPA's, commercial real estate agents
and other professionals that I meet with are generally familiar with
the three options but not necessarily of the specific pros and cons
of each loan program.
In my opinion, knowledge of these pros and cons and the financial
profile of the potential purchaser would aid these professionals in
making a more prudent decision in which loan option to pursue. As the
old saying goes, "one size does not fit all". Businesses today are
different in terms of years in business, quality and depth of the
management team, amount of competition, amount of working capital,
amount of cash, amount of debt, profitability and credit history both
personal and business. All of these variables should be evaluated
before a final loan option decision is made
All of the three loan options are "good" they are just different. For
comparative purposes lets assume a business owner in need of
additional space decides he or she needs a building that will cost
about $1,000,000. For this example let's also assume that the
purchaser's business will occupy 100% of the building thus assuming
100% of the payment risk. (SBA rules require that the borrower's
business occupy at least 51% of the leasable space at the outset).
Before we proceed with this example a brief over view of each loan
program.
The SBA 7A loan program will allow a business owner to purchase a
building with a loan as high as 90% of the purchase price. The bank
makes the 90% loan and the SBA guarantees a certain portion of it.
The loans are always priced at a spread over prime and are always
floating, i.e. the rate changes when prime moves. There is no fixed
rate financing available under their program. Generally the
amortization schedules are 20 to 25 years but they can vary depending
on the condition, ("economic life") of the subject building. Loan
fees are high, usually around 3.50% of 75% of the loan amount which
is paid to the SBA. Banks generally do not charge loan fees on the 7A
program. Even though the rate on the loan is floating there is
generally a prepayment penalty for the first three years of the loan,
(5.00% in year 1, 3.00% in year 2, 1.00% in year 3 and none
thereafter.) In the majority of the 7A loans I have seen the SBA
will require that the business owner pledge their personal residence
as additional collateral even thought the bank and the SBA are
securing their loan with a first deed of trust on the subject industrial
building. (Maximum use of leverage has its price.) Processing time
for 7A's is generally in the range of 45 to 60 days. Negotiations are
between you and the bank's underwriters.
The SBA 504 loan program will also provide you with 90% financing but
in a different form. In the 504 the Bank makes a first trust deed
loan equal to 50% of the purchase price and the SBA makes a direct
second trust deed loan equal to 40% of the purchase price. The direct
SBA loan is always a fixed rate loan either for 10 or 20 years. The
underwriting for an SBA 504 loan involves a bank and a Certified
Development Company, (CDC) which is licensed by the SBA to do so.
Negotiations are thus between you, the bank's underwriters and the
CDC's underwriters.
The SBA/CDC loan funds are raised by the selling of a debenture in
the secondary market for a term of 10 or 20 years. The bank's
underlying first trust deed can be either be a fixed or floating
rate loan depending on the bank's aggressiveness and creativity.
Banks usually amortize the first deed of trust over 20 to 25 years
with a 10 year maturity. If it is a fixed rate loan generally it will
have a short review period (3 to 5 years) where the bank has the
right to reprice the loan based on a benchmark they have
selected. (examples could include libor, treasury note rate, 11th
District Cost of Funds to name a few). Processing time for 504 is
always slower than 7A's as there are two parties involved in the
underwriting, and it also takes the SBA a certain amount of time to
sell the debenture. 504 loans can take anywhere from 75 days to 120
days to close. Loan fees are generally 1.00% of the bank's portion
and 2.75% on the SBA's portion. Expect heavy prepayment penalties and
a lack of flexibility from the SBA under their loan and most banks
will charge prepayment penalties on their first trust deed loan if
it was priced at a fixed rate.
A conventional industrial mortgage is straight bank loan without the
guarantee of the federal government, (SBA) for credit enhancement.
Since there is no federal guarantee most Banks will offer loans in
the 75% to 80% loan value. The increased equity contribution of the
borrower is required to offset the risk of the lack of a third party
guarantor. On the conventional side pricing options are numerous.
Again, depending on a banks' aggressiveness and the strength of the
borrower, pricing scenarios could involve variable rate or fixed rate.
Loans could be fully amortized over 25 years or feature short
maturities, (5 or 10 years) with a balloon payment. Fixed rate loans
are usually a spread over prime, libor or treasury notes rates and
are repriced in 5 or 10 years. Loan fees are usually modest in the .
50% to 1.50% range. Most conventional loans have prepayment penalties
if you elect the fixed rate option while most floating rate options
do not. Out of pocket costs, (loan fees, appraisal fees,
environmental audits, title polices etc.) generally are least
expensive for conventional loans. With a strong borrower and a quick
appraisal I have seen conventional loans close in as soon as 28 days.
Generally they take 28 to 45 days to close.
For purposes of the comparison of the three loan options it was
necessary that I generalize. Information on loan programs used was
based on my own experience, discussion with other banks, the SBA,
CDCs and my own banks' loan programs. I recognized there will always
be exceptions with regards to underwriting criteria from bank to bank.
Back to our example of a business owner considering buying a
commercial building at a price of 1,000,000. Under both SBA programs
you will only need a cash down of $100,000. Is there any way you can
come up with an additional $100,000 to $150,000 to meet the cash
requirements of a conventional loan? If the answer is absolutely not,
then your options are strictly SBA. Does the seller want a fast
escrow? If yes, the 504 program will probably not work. Processing
time is too slow. However, if you can negotiate a longer escrow and
the thought of a 20 or 10 year fixed rate loan is very appealing and
you do not want to pledge your residence as extra collateral, the 504
is definitely the way to go. However, if you decide a short escrow
closing is critical and you opt for the 7A, you'll lose the fixed
rate option and the SBA will probably put a lien on your residence
and your loan fees will be highest of the three options. You will
have to pick your poison.
In my opinion, if you can afford to come up with the extra cash for a
20% to 25% down payment as opposed to a 10% down payment, a
conventional loan is always superior to either of the SBA options.
Loan fees are substantially less, processing time is always quicker,
rates can be fixed or floating and are comparable if not less, than
the SBA programs, out of pocket costs are cheaper and prepayment
penalties are less punitive and more flexible. Another benefit is
psychological. Putting more cash down translates into a smaller loan
and consequently a smaller monthly payment. A smaller monthly payment
means your monthly sales have some "wiggle room for potential
downturns" as opposed to if you had the maximum loan and maximum loan
payment that was available. It is easier to sleep at night with a
lower fixed monthly commitment.
In summary the answer as to what is the best loan choice depends on
the nature of your individual circumstances at the time. What is the
hottest of your hot buttons at the time?
Hopefully this brief article has helped you think about some of those
hot buttons that maybe you were not aware of. May your future
decisions all be prudent. Good luck.!
Eugene E. Valdez, is a Vice President and Senior Relationship Manager
for Community Bank headquartered out of Pasadena. Mr. Valdez operates
out of the Bank's Corona Business Banking Center. Contact him at
909-808-8944 or valdeze@partnershipbanking.com
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RESOURCES for CEOs
===========================================
The BizSuccess Strategy Book
http://www.StrategyBook.com
** Are you doing the RIGHT THINGS at the RIGHT
TIME? **
Why are some people successful in their business AND they don't
work all the hours you work? How do they do it?
---> The BizSuccess Strategy Book reveals the secrets
The BizSuccess Strategy Book will help YOU grow your business,
make more money and have more fun.
Click to http://www.StrategyBook.com
for details
==========================================
QUOTES to use in your staff meeting this month
==========================================
"The trouble with the world is that the stupid are cocksure and the
intelligent are full of doubt."
Bertrand Russell
"The years teach much which the days never knew."
Ralph Waldo Emerson
"Experience is not what happens to you; it's what you do with what
happens to you."
Aldous Huxley
"People take different roads seeking fulfillment and happiness.
Just because they're not on your road doesn't mean they've gotten lost."
H. Jackson Brown, Jr.
"Whether you believe you can do a thing or not, you are right."
Henry Ford
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HUMOR to lighten up
the executive suite
============================================
"New Year's Resolutions for you, our Internet Junkies"
1. I will try to figure out why I "really" need 12 e-mail
addresses.
2. I will stop sending e-mail to my wife (husband). A phone call every
now and then would be appreciated
3. I resolve to work with neglected children -- my own.
4. I will answer my snail mail with the same enthusiasm with which
I answer my e-mail.
5. I will stop sending e-mail, ICQ, Instant Messages and be on the
phone at the same time with the same person.
6. I resolve to back up my 12 GB hard drive daily...well, once a
week...okay, monthly then...or maybe... at least once a year
7. I will spend less than one hour a day on the Internet. This, of
course, will be hard to estimate since I'm not a clock
watcher.
8. I will stop checking my e-mail at 3:00 in the morning... 4:30 is
much more practical since my friends overseas already had
time
to answer me by then
9. When I hear a funny joke I will not reply, "LOL... LOL!"
10. I will read the manual... just as soon as I can find it.
11. I will think of a password other than "password."
12. I resolve... I resolve to... I resolve to, uh... I resolve to,
uh, get my, er... I resolve to, uh, get my, er,
off-line work
done, too!
***excerpts from: http://www.joker.org/ ***
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CONTACT CEO Success
=================================
Gary Lockwood is the publisher of the CEO Success Report.
Email: mailto:Gary@CEOSuccess.com
Office: (800) 272-1575 (USA) * (909) 739-7444
Fax: (909) 494-4314
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Your Comments, please?
========================================
I appreciate feedback, corrections, and comments about the
CEO Success Report. Please send your thoughts to:
Gary@CEOSuccess.com mailto:Gary@CEOSuccess.com
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