Businesses have had to grapple with unprecedented changes over the last couple years. Think of all the steps you’ve had to take to safeguard your employees from COVID-19, comply with government mandates, and adjust to the economic impact of the pandemic. Now look ahead to the future — what further changes lie in store for 2022 and beyond?
One hopes the transformations your company undergoes in the months ahead are positive and proactive, rather than reactive. Regardless, the process probably won’t be easy. This is where change management comes in. It involves creating a customized plan. This plan ensures that you communicate effectively and provide employees with the leadership, training and, coaching needed to change successfully.
Employees resist change in the workplace for many reasons. Some may see it as a disruption that will lead to loss of job security or status (whether real or perceived). Other staff members, particularly long-tenured ones, can have a hard time breaking out of the mindset that “the old way is better.”
Still others, in perhaps the most dangerous of perspectives, distrust their employer’s motives for change. They may be listening to — or spreading — gossip or misinformation about the state or strategic direction of the company’s future.
It doesn’t help the situation when certain initial changes appear to make employees’ jobs more difficult. For example, moving to a new location might enhance the image of the business or provide more productive facilities. But a move also may increase some employees’ commuting times or put them in a drastically different working environment. When their daily lives are affected in such ways, employees tend to question the decision and experience high levels of anxiety.
Often, when employees resist change, a company’s leadership can’t understand how ideas they’ve spent weeks, months or years carefully deliberating could be so quickly rejected. They overlook the fact that employees haven’t had this time to contemplate and get used to the new concepts and processes. Instead of helping to ease employee fears, leadership may double down on the change, more strictly enforcing new rules and showing little patience for disagreements or concerns.
It’s here that the implementation effort can break down and start costing the business real dollars and cents. Employees resist change in many counterproductive ways, from intentionally lengthening learning curves to calling in sick when they aren’t to filing formal complaints or lawsuits. Some might even quit — an increasingly common occurrence as of late.
By engaging in change management, you may be able to lessen the negative impact on productivity, morale and employee retention.
The content of a change-management plan will, of course, depend on the nature of the change in question as well as the size and mission of your company. For major changes, you may want to invest in a business consultant who can help you craft and execute the plan. Getting the details right matters — the future of your business may depend on it.
Businesses have had to grapple with many changes over the last couple years, with more likely in store for 2022. When a company implements change, the process is rarely easy. Some employees might think it compromises their job security or status. Others could distrust the motives behind the change, a particularly dangerous mindset. Meanwhile, you and your leadership team may quickly grow frustrated and tighten enforcement of new rules. But doing so often reduces productivity, worsens morale and increases turnover. To change successfully, learn about change management. It can help you communicate more effectively and provide employees with the support needed to change successfully.
In the year ahead, businesses will need to continue transforming in response to public health and economic developments. Change management can help your company handle the challenge. If you need help developing a management plan make sure to contact David Mills CPA!
It’s understandable to want to focus a marketing campaign on the strengths and benefits of the products or services in question. However, something that’s easy to overlook is how your business and its offerings differ from the competition. Competitive intelligence is the process of legally and ethically gathering and analyzing information on your competitors.
Making this distinction isn’t as simple as, “We’re better because we say so.” When you can present prospective customers with accurate data and solid reasoning behind why your products or services will fulfill their needs better than other options, you’ll stand a much better chance of turning those marketing dollars into revenue. This is where competitive intelligence comes into play.
Competitive Intelligence can help you collect valuable data on their:
This information enables you to not only recognize your competitors’ strengths and weaknesses but also better identify and anticipate market trends. As a result, your marketing campaign should emphasize what customers need, how you can deliver it, and where the competition falls short.
Gleaning intelligence is relatively simple. At the most basic human level, chatting with customers and prospects, bank reps, financial services providers, and other business contacts can help keep you in the know about what’s going on in the marketplace. You might encounter these individuals in the regular course of business or seek them out at trade shows, conferences, and networking events.
Relying on fortuitous conversations alone won’t get the job done, however. You (or an employee) will need to gather information regularly. Scan major news providers — as well as relevant business publications — for updates on your competition or industry in general. Your competitors’ brochures, catalogs, press releases, annual reports, and other collateral also contain valuable information. And, of course, don’t forget to regularly visit their websites and blog and their public social media accounts.
In addition, there are a variety of powerful search engines and online resources that can boost competitive intelligence efforts — though some do charge for a subscription. For example, Dun & Bradstreet offers industry, market, and company-specific intelligence for both public and private businesses. The Securities and Exchange Commission (sec.gov) provides free financial reports on public companies.
Be sure to fact-check and verify any information you find. Inaccurate data can skew your observations, negatively affect your business decisions and hurt your reputation in the marketplace.
To succeed at marketing today, you need to make a strong case based on accurate and timely data relevant to your company’s purpose or industry. Competitive intelligence can help you find this information and integrate it into marketing campaigns. Contact our firm for help evaluating your marketing efforts from a return-on-investment perspective.
A marketing campaign should focus on the strengths and benefits of the products or services in question. But don’t overlook pointing out how your offerings are superior to those of competitors. That’s where competitive intelligence comes in. Competitive intelligence is the process of legally and ethically gathering and analyzing information about competitors. This includes their financial positions, business practices, and products and services. To gather such data, you can actively network, scan news sources, visit competitors’ websites and social media pages, and collect collateral such as sales brochures and annual reports. The end result: a more fine-tuned marketing message.
Business owners, you can sharpen your marketing efforts through the effective use of competitive intelligence. If you have any questions be sure to contact us!
For many small businesses, the grand reopening is still on hold. The rapid spread of the Delta variant of COVID-19 has mired a variety of companies in diminished revenue and serious staffing shortages. In response, the Small Business Administration (SBA) has retooled its Economic Injury Disaster Loan (EIDL) program to offer targeted relief to eligible employers.
The EIDL program was in place well before 2020. However, the federal government has ramped up the initiative’s visibility while trying to help small businesses during the pandemic.
With the entire country essentially declared a disaster area, the CARES Act established an enhanced EIDL program for small businesses affected by COVID-19. It offered lower interest rates, longer repayment terms, and a streamlined application process.
The American Rescue Plan Act upped the ante, offering eligible companies targeted EIDL advances that are excluded from the gross income of the person who receives the funds. The law stipulates that no deduction or basis increase will be denied, and no tax attribute will be reduced, because of this gross income exclusion.
The SBA’s most recent enhancements to the EIDL program offer “a lifeline to millions of small businesses who are still being impacted by the pandemic,” according to SBA Administrator Isabella Casillas Guzman. (Eligible employers include not only small businesses but also qualifying nonprofits and agricultural companies in all U.S. states and territories.)
First and foremost, the loan cap has increased from $500,000 to $2 million. Eligible small businesses can use these funds for almost any operating expense, including payroll and equipment purchases. Funds can also be applied for certain debt payments. Specifically, the SBA has expanded the allowable use of EIDL funds to prepay commercial debt and pay down federal business debt.
In addition, the agency has implemented a new deferred payment period under which borrowers can wait until two years after loan origination to begin repaying their COVID-related EIDLs.
If you believe your business could qualify for these newly enhanced EIDLs, first identify how much money you need. The SBA is offering a 30-day “exclusivity window” to approve and disburse loans of $500,000 or less. Approval and disbursement of loans of more than $500,000 will begin after this 30-day period.
The agency has also rolled out a streamlined application process that establishes “more simplified affiliation requirements” modeled after those of the Restaurant Revitalization Fund. The deadline for applications remains December 31, 2021. As is the case with any government loan, it’s better to apply earlier rather than later.
For further details about the new and improved COVID-related EIDL program, go to sba.gov/eidl. And don’t hesitate to contact us. We can help you determine whether your small business qualifies for one of these loans. If you do qualify, they assist with completing the application process.
The Small Business Administration recently retooled its Economic Injury Disaster Loan (EIDL) program. The program offers relief to eligible companies and certain other employers still struggling during the COVID-19 pandemic. The loan cap has increased from $500,000 to $2 million. Funds can be used for almost any operating expense. This can include payroll, equipment purchases, and certain debt payments (now including federal business debt and prepayments of commercial debt). There’s also a new deferred payment period under which borrowers can wait until two years after the loan to begin repayment. For further details, go to sba.gov/eidl. And don’t hesitate to contact us for help applying
The U.S. economy has been nothing short of a roller-coaster ride for the past year and a half. Some industries have had to overcome seemingly insurmountable challenges, while others have seen remarkable growth opportunities arise.
If your business is doing well enough for you to consider adding a location, both congratulations and caution are in order. “Fortune favors the bold,” goes the old saying. However, strained cash flow and staffing issues can severely disfavor the underprepared.
Ask the Right Questions
Among the most fundamental questions to ask is: Will we be able to duplicate the success of our current location? If your first location is doing well, it’s likely because you’ve put in place the people and processes that keep the business running smoothly. It’s also because you’ve developed a culture that resonates with your customers. You need to feel confident you can do the same at subsequent locations.
Another important question is: How might expansion affect business at both locations? Opening a second location prompts a consideration that didn’t exist with your first: how the two establishments will interact. Placing the two operations near each other can make it easier to manage both, but it also can lead to one operation cannibalizing the other. Ideally, the two locations will have strong, independent markets.
Run the Numbers
You’ll need to consider the financial aspects carefully. Look at how you’re going to fund the expansion. Ideally, the first location will generate enough revenue so that it can both sustain itself and help fund the second. But you may still need to take on debt, and it’s not uncommon for construction costs and timelines to exceed initial projections.
You might want to include some extra dollars in your budget for delays or surprises. If you must starve your first location of capital to fund the second, you’ll risk the success of both.
Account for the tax ramifications as well. If you own the real estate, property taxes on two locations will affect your cash flow and bottom line. You may be able to cut your tax bill with various tax incentives, such as by locating the second location in an Enterprise Zone. But the location will first and foremost need to make sense from a business perspective. There may be other tax issues as well — particularly if you’re crossing state lines.
Assess the Risk
For some businesses, expanding to a new location may be the single most impactful way to drive growth and build the bottom line. However, it’s also among the riskiest endeavors any company can take on. We’d be happy to help you assess the feasibility of opening a new location, including creating financial projections that will provide insights into whether the move is a reasonable risk.
Is your business doing well enough for you to consider adding another location? “Fortune favors the bold,” goes the old saying. However, strained cash flow and staffing issues can severely disfavor the underprepared. Ask yourself fundamental questions such as: “Will we be able to duplicate the success of our current location?”, “How might expansion affect business in both locations?”, “How are we going to fund the endeavor?”. Ideally, the first location will generate enough revenue to cover some of the costs, but you may need to take on substantial debt. Consider the tax ramifications as well, such as paying property taxes on two locations. We can help you assess the feasibility of the idea. Contact us for more information!
Commercial loans, particularly small business loans, have been in the news over the past year or so. The federal government’s Paycheck Protection Program has been helpful to many companies, though fraught with administrative challenges.
As your business pushes forward, you may find yourself in need of cash in the months ahead. If so, more traditional commercial loan options are still out there. Before you apply, however, think like a lender to be as prepared as possible and know for sure that the loan is a good idea.
4 Basic Questions
At the most basic level, a lender has four questions in mind:
Pose these questions to yourself and your leadership team. Be sure you’re crystal clear on the answers. You’ll need to explain your business objectives in detail and provide a history of previous lender financing as well as other capital contributions.
Lenders will also look at your company’s track record with creditors. This includes business credit reports and your company’s credit score.
Consider the Three C’s
Lenders want to minimize risk. So, while you’re role-playing as one, consider the three C’s of your company:
1. Character. The strength of the management team — its skills, reputation, training, and experience — is a key indicator of whether a business loan will be repaid. Strive to work through natural biases that can arise when reviewing your own performance. What areas of your business could be viewed as weaknesses, and how can you assure a lender that you’re improving them?
2. Capacity. Lenders want to know how you’ll use the loan proceeds to increase cash flow enough to make payments by the maturity date. Work up reasonable cash flow and profitability projections that demonstrate the feasibility of your strategic objectives. Convince yourself before you try to convince the bank!
3. Collateral. These are the assets pledged if you don’t generate enough incremental cash flow to repay the loan. Collateral is a lender’s backup plan in case your financial projections fall short. Examples include real estate, savings, stock, inventory, and equipment.
As part of your effort to think like a lender, use your financial statements to create a thorough inventory of assets that could end up as collateral. Doing so will help you clearly see what’s at stake with the loan. You may need to put personal assets on the line as well.
Gain Some Insight
Applying for a business loan can be a stressful and even frustrating experience. By taking on the lender’s mindset, you’ll be better prepared for the process. What’s more, you could gain insights into how to better develop strategic initiatives. Contact our firm for help.
As your business pushes forward, you may find yourself in need of cash. Before applying for a commercial loan, think like a lender to be as prepared as possible and know for sure that the loan is a good idea. Basically, a lender wants to know four things: 1) how much money you need, 2) what you’ll use it for, 3) when you need it by, and 4) when you’ll be able to pay it back. Discuss these questions thoroughly with your leadership team. Also consider the three C’s of your company: character (strength and reputation of management), capacity (soundness of your finances and financial plan) and collateral (viable assets to back the loan). Contact us for help with the loan process.
For many small to midsize businesses, spending money on marketing calls for a leap of faith that the benefits will outweigh the costs. Much of the planning process tends to focus on the initial expenses incurred rather than how to measure return on investment.
Here are five questions to ask yourself and your leadership team to put a finer point on whether your marketing efforts are likely to pay off:
Determine as specifically as possible what marketing success looks like. If the goal is to increase sales, what metric(s) are you using to calculate whether you’ve achieved adequate sales growth? Put differently, how will you know that your money was well spent?
Decide how much of your marketing will be based on recurring activity versus “one-off” or ad-hoc initiatives.
For example, do you plan to buy six months of advertising on certain websites, social media platforms, or in a magazine or newspaper? Have you decided to set up a booth at an annual trade show?
Fine-tune your efforts going forward by comparing inflows to outflows from various types of marketing spends. Will you be able to create a revenue inflow from sales that at least matches, if not exceeds, the outflow of marketing dollars?
It’s critical to ask new customers how they heard about your company. This one simple question can provide invaluable information about which aspects of your marketing plan are generating the most leads.
Further, once you have discovered a lead or new customer, ensure that you maintain contact with the person or business. Letting leads and customers fall through the cracks will undermine your marketing efforts. If you haven’t already, explore customer relationship management software to help you track and analyze key data points.
In addition to generating leads, marketing can help improve brand awareness. Although an increase in brand awareness may not immediately translate to increased sales, it tends to do so over time. Identify ways to measure the impact of marketing efforts on brand awareness. Possibilities include customer surveys, website traffic data, and social media interaction metrics.
It may sound like a nice problem to have, but sometimes a company’s marketing efforts are so successful that a sudden upswing in orders occurs. If the business is ill-prepared, cash flow can be strained and customers are left disappointed and frustrated.
Make sure you have the staff, technology, and inventory in place to meet an increase in demand that effective marketing often produces. We can help you assess the efficacy of your marketing efforts, including calculating informative metrics and suggest ideas for improvement.
For many businesses, marketing requires a leap of faith that the benefits will outweigh the costs. Here are five questions that can help determine whether you’re on the right track: 1) What do we hope to accomplish? Identify what success looks like. 2) Where and how often will we spend the money? Choose which avenues you’ll traverse and the mix of recurring activity versus “one-off” initiatives. 3) Can we track sources of new business, leads, and customers? The right software can help. 4) Can we gauge brand awareness? Find ways to measure the impact of marketing efforts. 5) Are we prepared for an increase in demand? You might “suffer from success” if you can’t satisfy all your new customers! Contact us for more information!
Most of us are taught from a young age never to assume anything. Why? Well, because when you assume, you make an … you probably know how the rest of the expression goes.
A dangerous assumption that many business owners make is that, if their companies are profitable, their cash flow must also be strong. But this isn’t always the case. Taking a closer look at the accounting involved can provide an explanation.
What are profits, really? In accounting terms, they’re closely related to taxable income. Reported at the bottom of your company’s income statement, profits are essentially the result of revenue less the cost of goods sold and other operating expenses incurred in the accounting period.
Generally Accepted Accounting Principles (GAAP) require companies to “match” costs and expenses to the period in which revenue is recognized. Under accrual-basis accounting, it doesn’t necessarily matter when you receive payments from customers or when you pay expenses.
For example, inventory sitting in a warehouse or retail store can’t be deducted — even though it may have been long paid for (or financed). The expense hits your income statement only when an item is sold or used. Your inventory account contains many cash outflows that are waiting to be expensed.
Other working capital accounts — such as accounts receivable, accrued expenses and trade payables — also represent a difference between the timing of cash flows. As your business grows and strives to increase future sales, you invest more in working capital, which temporarily depletes cash.
However, the reverse also may be true. That is, a mature business may be a “cash cow” that generates ample dollars, despite reporting lackluster profits.
The difference between profits and cash flow doesn’t begin and end with working capital. Your income statement also includes depreciation and amortization, which are non-cash expenses. And it excludes changes in fixed assets, bank financing, and owners’ capital accounts, which affect cash on hand.
Suppose your company uses tax depreciation schedules for book purposes. Let say, in 2020, you bought new equipment to take advantage of the expanded Section 179 and bonus depreciation allowances. Then you deducted the purchase price of these items from profits in 2020. However, because these purchases were financed with debt, the actual cash outflows from the investments in 2020 were minimal.
In 2021, your business will make loan payments that will reduce the amount of cash in your checking account. But your profits will be hit with only the interest expense (not the amount of principal that’s being repaid). Plus, there will be no “basis” left in the 2020 purchases to depreciate in 2021. These circumstances will artificially boost profits in 2021, without a proportionate increase in cash.
It’s dangerous to assume that, just because you’re turning a profit, your cash position is strong. Cash flow warrants careful monitoring. At David Mills CPA, LLC, our team can help you generate accurate financial statements and glean the most important insights from them. Contact us today or call (309) 266-5700.
For many business owners, putting together a succession plan may seem like an overwhelming task. It might even seem unnecessary for those who are relatively young and have no intention of giving up ownership anytime soon.
But if the past year or so have taught us anything, it’s that anything can happen. Owners who’ve built up considerable “sweat equity” in their companies shouldn’t risk liquidation or seeing the business end up in someone else’s hands only because there’s no succession plan in place.
To help you get your arms around the concept of succession planning, you can look at it from three different perspectives:
If you have many years to work with, use this gift of time to identify one or more talented individuals who share your values and have the aptitude to successfully run the company. This is especially important for keeping a family-owned business in the family.
As soon as you’ve identified a successor, and he or she is ready, you can begin mentoring the incoming leader to competently run the company and preserve your legacy. Meanwhile, you can carefully identify how to best fund your retirement and structure your estate plan.
Many business owners wake up one day and realize that they’re almost ready to retire, or move on to another professional endeavor, but they’ve spent little or no time putting together a succession plan. In such a case, you may still be able to choose and train a successor. However, you’ll likely also want to explore alternatives such as selling the company to a competitor or other buyer. Sometimes even liquidation is the optimal move financially.
In any case, the objective here is less about maintaining the strategic direction of the company and more about ensuring you receive an equitable payout for your ownership share. If you’re a co-owner, a buy-sell agreement is highly advisable. It’s also critical to set a firm departure date and work with a qualified team of advisors.
The COVID-19 pandemic has brought renewed attention to emergency succession planning. True to its name, this approach emphasizes enabling the business to maintain operations immediately after an unforeseen event causes the owner’s death or disability.
If your company doesn’t yet have an emergency succession plan, you should probably create one before you move on to a longer-term plan. Name someone who can take on a credible leadership role if you become seriously ill or injured. Formulate a plan for communicating and delegating duties during a crisis. Make sure everyone knows about the emergency succession plan and how it will affect day-to-day operations, if executed.
As with any important task, the more time you give yourself to create a succession plan, the fewer mistakes or oversights you’re likely to make. At David Mills, CPA, LLC, we can help you create or refine a plan that suits your financial needs, personal wishes, and vision for the future of your company.
Some might say the end of one calendar year and the beginning of another is a formality. The linear nature of time doesn’t change, merely the numbers we use to mark it.
Others would say that a fresh 12 months — particularly after the arduous, anxiety-inducing nature of 2020 — creates the perfect opportunity for business owners to gather their strength and push ahead with greater vigor. One way to do so is to ring in the new year with a systematic approach to renewing everyone’s focus on profitability.
Without a system to discover ideas that originate from the day-in, day-out activities of your business, you’ll likely miss opportunities to truly maximize the bottom line. What you want to do is act in ways that inspire and allow you to gather profit-generating concepts. Then you can pick out the most actionable ones and turn them into bottom-line-boosting results. Here are some ways to create such a system:
All too often, managers become trapped in their own information silos and areas of focus. Consider asking everyone in a leadership position to submit ideas for growing the bottom line.
Leaving your employees out of the conversation is a mistake. Ask workers on the front lines how they think your business could make more money.
As suggestions come in, use robust discussions and careful calculations to determine which ones are truly worth pursuing.
When you’ve picked one or more concepts to pursue in real life, identify which metrics will accurately inform you that you’re on the right track. Track these metrics regularly from start to finish.
Every business needs its champions! Be sure each profit-building initiative has a defined leader and team members.
Ideas that ultimately do build the bottom line in a meaningful way generally take time to identify, implement and execute. Don’t look for quick-fix measures; seek out business transformations that will lead to long-term success.
A carefully constructed and strong-performing profitability idea system can not only grow the bottom line but also upskill employees and improve morale as strategies come to fruition. Our firm can help you identify profit-building opportunities, choose the right metrics to evaluate and measure them, and track the pertinent data over time.
Contact David Mills, CPA, LLC for more information. Also, check out our Facebook page
With a difficult year almost over, and another one on the horizon, now may be a good time to assess the size of your sales force. Maybe the economic changes triggered by the COVID-19 pandemic led you to downsize earlier in the year. Or perhaps you’ve added to your sales team to seize opportunities. In either case, every business owner should know whether his or her sales team is the right size.
To determine your optimal sales staffing level, there are several steps you can take. A good place to start is with various key performance indicators (KPIs) that enable you to quantify performance in dollars and cents.
The KPIs you choose to calculate and evaluate need to be specific to your industry and appropriate to the size of your company and the state of the market in which you operate. If you’re comparing your sales numbers to those of other businesses, make sure it’s an apples-to-apples comparison.
In addition, you’ll need to pick KPIs that are appropriate to whether you’re assessing the performance of a sales manager or that of a sales representative. For a sales manager, you could look at average annual sales volume to determine whether his or her team is contributing adequately to your target revenue goals. Ideal KPIs for sales reps are generally more granular; examples include sales by rep and lead-to-sale percentage.
Rightsizing your sales staff, however, isn’t only a mathematical equation. To customize your approach, think about the specific needs of your company.
Consider, for example, how you handle staffing when sales employees take vacations or call in sick. If you frequently find yourself coming up short on revenue projections because of a lack of boots on the ground, you may want to expand your sales staff to cover territories and serve customers more consistently.
Then again, financial problems that arise from carrying too many sales employees can creep up on you. Be careful not to hire at a rate faster than your sales and gross profits are increasing. If you’re looking to make aggressive moves in your market, be sure you’ve done the due diligence to ensure that the hiring and training costs will likely pay off.
Last, but not least, think about your customers. Are they largely satisfied? If so, the size of your sales force might be just fine. However, salespeople saying that they’re overworked or customers complaining about a lack of responsiveness could mean your staff is too small. Conversely, if you have market segments that just aren’t yielding revenue or salespeople who are continually underperforming, it might be time to downsize.
By regularly monitoring the headcount of your sales staff with an eye on fulfilling reasonable revenue goals, you’ll stand a better chance of maximizing profitability during good times and maintaining it during more challenging periods. Contact David Mills, CPA, LLC, for help choosing the right KPIs and cost-effectively managing your business.