Print Page   |   Your Cart   |   Sign In
Business
Group HomeGroup Home Blog Home Group Blogs

What You Need to Know About Overtime!

Posted By Kenyatta Turner, LegalShield Independent Associate, Monday, June 26, 2017
WHAT YOU NEED TO KNOW ABOUT OVERTIME

 

If your employees work more than 40 hours per 7-day workweek they may be entitled to overtime pay. New overtime rules were set to take effect late in 2016. These regulations would have expanded the number of employees eligible to receive overtime pay but they are currently tied up in federal court. It is vital that you observe the current regulations to avoid potential fines or litigation. If you have questions about state or federal overtime rules, contact your LegalShield provider law firm.

  • Current Rules - Federal overtime regulations are part of the Fair Labor Standards Act (FLSA). The FLSA entitles employees working more than 40 hours in a workweek to one and one-half times their regular pay rate. If your business has, “an annual gross volume of sales made or business done of $500,000 or more” you are required to pay overtime. All schools, hospitals, medical facilities and public agencies are required to pay overtime. Click here to determine whether FLSA applies to your business.
     
  • State Regulations - Many states set additional rules for overtime pay. California, for example, requires overtime for those who work more than 8 hours in a day and double pay for those who work more than 12 hours in a day. Other states set specific thresholds for businesses that must comply with overtime rules. Arkansas requires employers with more than 4 employees to pay overtime. Click here to view a map highlighting current state overtime laws. It is important to understand both the federal and states regulations where you do business.
     
  • Exempt Employees – There are exemptions for some executive, administrative, computer professionals and other professional service employees.

From the Department of Labor:

A. Currently, to qualify for exemption, a white-collar employee generally must:

  1. be salaried, meaning that they are paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed (the "salary basis test");
  2. be paid at least a specific salary threshold, which is $455 per week (the equivalent of $23,660 annually for a full-year employee) in existing regulations (the "salary level test"); and
  3. primarily perform executive, administrative, or professional duties, as provided in the Department's regulations (the "duties test").

Certain employees are not subject to either the salary basis or salary level tests (for example, doctors, teachers, and lawyers).

  • New Rules from 2016 – Overtime exemption thresholds were set to nearly double in December of 2016; however, the new rule is currently tied up in court. There is a great deal of speculation about the fate of the new rule with many expecting a change in direction from the new administration. The U.S. House of Representatives recently passed a bill that would allow certain employers to offer comp time instead of overtime pay. The bill still must pass the Senate but it is yet another sign that changes are coming. It is important for all businesses to follow these changes carefully.  If you have any questions, contact your LegalShield provider law firm or Kenyatta Turner at 602-367-1069 or kenyattaturner@legalshieldassociate.com.

Tags:  Accounting  business owners  business resources  business risk  business services  employees  Employers  Hiring  HR  human resources  labor  legal  legal services  management  small biz  small business  small business owner  startup  tax  wage hour lawsuits  women-owned business 

Share |
PermalinkComments (0)
 

Why Positivity Matters

Posted By Kim England, Fast Inc. Network, Thursday, May 25, 2017

 

3 Tips for Staying Positive as an Entrepreneur

You know those people that always seem SO happy? I am talking always peppy, always smiling, and always nice. If that is not your typical demeanor, you have probably found yourself wondering how they keep it up. Surely not everything is always going well for them, and we all know that bad times are inevitable. It is easy to tell others how helpful it is to be positive when everything is going well. Why wouldn’t it be easy to be positive when you are in a position of success? You are achieving your goals, so you can easily be positive about at least that. However, we know that you are not always going to be in a place where you can see the growth that is occurring.

So how can you stay positive during those times that feel more like a valley than a mountaintop? Let’s explore some practical ways to practice positivity in your everyday life.

  1. Don’t let the little things slide by. When we fail to see the little things that are going our way, we can quickly fall into a state of negativity. Especially as an entrepreneur, those little tasks that you complete throughout the day snowball into significant, life-changing advances in your career. If you find yourself bored by the monotony of your daily agenda, do something to change it up that excites you. Not everything is going to be sunshine and roses. Nobody expects that. You do have the ability, however, to find the greater meaning and potential in the little things.
  2. Disassociate with negativity. Once you have reached adulthood, you don’t really hear anything about the power of peer pressure, but do not be fooled by thinking it no longer exists. Simply by nature, we tend to take on the characteristics of those we choose to associate with. This also applies to business. If the people you network with do not maintain the level of positivity that you need to thrive, it may be time to find new connections. Find business role models to look up to that produce an atmosphere of good energy and respect for others. Not only will this immediately raise your game, but it will also help you to model that same type of energy in your company.
  3. Gain the knowledge you need to succeed. Speaking of raising your game, there is nothing that will boost you up as an entrepreneur like accessing resources that provide you with applicable information for your company. Finding the right business coach to lead you in the right direction can certainly keep you from falling into a place of negativity. By having someone there to keep you focused or redirect your focus to a new area, you can train yourself to be more positive about your business. Another great way to increase your knowledge is by attending events that connect you with successful people. Fast Inc. Network’s Business Accelerators can provide you with instant connections with some of the most successful and positive entrepreneurs.

Sign Up Today for the Fast Inc. Network Business Accelerator this June 7-9 in Phoenix, Arizonawww.fastincnetwork.com/june2017

 Attached Thumbnails:

Tags:  arizona  ASBA  business  business owner  business owners  entrepreneur  small biz  small business  success 

Share |
PermalinkComments (0)
 

PET PLANET Offers Summer Safety Tip for Pets (and Kids)!

Posted By Kristen Cherry, Pet Planet, Wednesday, July 13, 2016

Take a look at the attached chart . . . our cars become extremely dangerous places for kids and pets left inside . . . even when it's relatively "cool" outside!

Please . . . never leave children or pets unattended in your car . . . never, not even for 1 minute!

 Attached Files:
Hot Car.pdf (1.29 MB)

Tags:  business owners  entrepreneurship  family-owned businesses  finding your passion  franchise  Franchising  puppy  small business 

Share |
PermalinkComments (0)
 

What's in Your Luggage?

Posted By Terri Sinclair, ATD Greater Tucson, Friday, June 24, 2016

Yesterday, I purchased a new hair styling brush. I threw out the one I had been using for 13 years. (Yes, I did wash it regularly.) I do think of myself as being frugal; yet, some might say this was the extreme. The old brush worked alright. I didn’t see the need until a screw came out, which made the brush dysfunctional. As I’ve bee reading Marshall Goldsmith’s latest book: Triggers, I started to wonder: where else am I accepting ‘alright’ when better technology is available? It reminded me of the book by Julia Morganstern who talked about ‘what’s in your luggage?’ Am I packed for my future, or for my past?

 

If you’re reaching for higher levels of success, It would make sense to pack what’s needed, and leave behind what doesn’t work. You probably wouldn't need a bikini if you were traveling to Alaska in the winter. I’ve been pretty good at getting rid of outdated objects as I’ve moved through the years. For me and my clients, the harder baggage to let go of is the intangible. 

 

Questions I often ask my clients to help  “Who were you known as when you were growing up?” Were you known as the responsible one, the smart one, the lazy one? Does that definition still fit? Does it fit all the time? I’m not opposed to being known as the curious one, and are there times when maybe I’d rather be something else. It’s not that the definition is bad, it’s just that it can be limiting at times. 

 

And what if the label is perceived as negative by you or others? I often think of the Stephen Covey phrase, “Argue for your weaknesses, and they’re yours.” Especially when I’m coaching people on presentation skills, I will often hear, “I’m not good speaking in front of people.” How is that belief going to help you on your journey to being who you want?

 

There are a few labels I’m going to ‘unpack from my luggage’: I’m controlling and I’m impatient. These are not needed on my travels. I’m replacing them with: I’m accepting and I’m improving my ability to be patient every day. My luggage feels a lot lighter.

Tags:  bad habits  breaking habits  business owners  creating new habits  entrepreneur  habits  small business  stress  stress management  success  time mastery 

Share |
PermalinkComments (0)
 

Franchising Facts

Posted By Louie Picazo, Link Staffing Services, Monday, December 14, 2015

Are you researching whether or not YOU want to own a franchise?

  • 55% of all Americans want to be their own boss.

  • 37% of all households are involved in small business.

  • 70% of all high schools students want to start a business.

  • 1 out of every 25 adults is currently starting a business.

    U.S. SALES:

  • More than $800 billion in annual sales

  • 40.9% of all retail

  • Total franchise sales over 2.3 Trillion to the economy

  • Franchise Businesses have $660.9 Billion of annual payrolls, or 12.5% of all private sector payrolls in the United States.

    FRANCHISE GROWTH:

  • 1 in 12 business establishments is a franchise

  • A new franchise opens every 8 minutes of every business day

  • There are approximately 3000 different Franchisors (Franchise Business Companies) operating in the U.S today.

  • Over 900,000 Franchised businesses.

  • Over 300 Franchise Business Categories

    EMPLOYMENT:

  • More than 21 Million people are employed by franchise businesses, or 15.3% of all U.S. jobs.

  • Franchised businesses create more than 170,000 new jobs each year.

    SUCCESS STUDIES:

  • According to the U.S. Commerce Department fewer than 5% of Franchises were terminated on an annual basis

  • In a study by Arthur Anderson & Company of 366 franchise companies, nearly 97% were still in business after 5 years.

  • In contrast, a study by the U.S. Small Business Administration revealed that 62.2% of all new businesses failed within their first 6 years of business.

     THE TRENDS:

  • Economic slowdown and skepticism about job security is driving franchising.

  • The franchise industry today is breaking away from the “Mom & Pop” industry of the past and is being replaced by corporate executives.

  • 87% of franchisors indicated that lead quality is up this year an average of 50% over the previous year.

  • A recent Gallup Poll of Franchisees found that more than 94 percent considered themselves successful and that more than 75 percent would buy their franchise again if they had it to do over again.

If you are interested in FRANCHISING and need additional information on a LINK STAFFING FRANCHISE, please contact LOUIE PICAZO 713.358.1094 visit us online at for more information www.linkfranchising.com  

Tags:  business owners  Franchising 

Share |
PermalinkComments (0)
 

Steps to Reduce Fraud in Your Small Business

Posted By Lance Martin, Ledger Solutions LLC, Friday, September 4, 2015

Fraud can cost a business more than money.  It can damage relationships with customers and vendors and at its worst it can lead to bankruptcy.  While there is no fool proof method for eliminating fraud completely there are some things a small business can do to help reduce the risk of fraud.

Employee Background Checks

Before hiring any new employee (especially employees that have access to cash and bank accounts) you should perform a background check.  A credit check is also recommended for employees that will handle the accounting functions of a business.  Employees that can’t handle their own personal finances won’t be good at handling the finances of your business so be careful in who you hire.

Have Someone Oversee or Review Their Work

Accountants and bookkeepers of small businesses should not have independence in their position.  Ideally, you will want to limit their roles when they have access to cash and/or check stock.  The person making the deposits should not be the one reconciling the bank account. The person entering the bills and cutting the checks should not be the one signing the checks. Business owners with a few employees who don’t have the time or expertise to oversee the accounting functions should hire an independent accountant to review their work and to reconcile the bank accounts.  When an employee is held accountable and knows someone is checking their work they will think twice about taking advantage of you.

Implement Best Practices

Deposits should be made daily and reconciled to customer invoices or daily sales receipts. Check stock should be locked in a safe place with limited access.  Never use a signature stamp on checks and never sign blank checks for use when you’re out of the office.  Always get a Form W-9 from your vendors before paying them.  Review invoices for accuracy and review your vendor list on a regular basis for new vendors.  Double check phone numbers and addresses of new customers and vendors.  Conduct an internet search to see if a new business customer or vendor is registered to do business in your state.

Do you need someone to review your accounting functions and to help with best practices? Ledger Solutions of Tucson is an accounting firm that specializes in accounting and bookkeeping for small businesses like yours. You can reach us by phone at (520) 618-5390 or by requesting information through our website.

Tags:  accountants  BOOKKEEPING  business owners  Small Business 

Share |
PermalinkComments (0)
 

A Better Business Than Buffett's?

Posted By Jason Trujillo, Woodbury Financial, Monday, March 9, 2015

A Better Business Than Buffett's by Steve Parrish

Article originally appeared on Forbes.com on March 9, 2015.

To read original article, click here.

I just finished reading Warren Buffett’s 50th Annual Letter to Berkshire Hathaway shareholders. His honesty and humility are nothing new to the business community. But these yearly missives remind us of the challenges we face. Buffett is not afraid to reveal mistakes and follies in his operations, and he admits to various missteps. For all his success, his advice is often cautious and conservative.

Do we learn from his restrained approach, or do we sometimes act as if we do it better than the Oracle of Omaha does it? Let’s take a tongue-in-cheek look at some of Buffett’s “shortcomings” in business.

Warren Buffett doesn’t seem to focus. It’s hard to tell if Berkshire Hathaway is into insurance, jewelry, or carbonated drinks. You could call it diversification, but you could also call it distraction. Some business owners know to grab onto one idea, and run it hard.

And yet he won’t let go. Avoiding the wonderful opportunities of technical investing, Buffett seems to be enamored with the timeworn concept of buy-and-hold. Think how many business cycle profits he’s missed by holding onto the same companies.

How can you grow without staff? This year’s letter brags that his company “included no gain at headquarters (where 25 people work).” Where’s the growth potential in that?

He doesn’t embrace what’s modern. In his 2002 annual letter, Buffett stated, “I view derivatives as time bombs, both for the parties that deal in them, and the economic system.” Didn’t he understand how great CMOs, CDOs and CDSs were as financial tools? And fast forward to today. Warren Buffett has been out investing in something as archaic as railroads. What’s so important about hauling commodities from North Dakota? Wouldn’t it be better to invest in electric cars and rocket engines?

You wonder if he trusts his children. Warren Buffett famously wrote, “I want to give my kids just enough so that they would feel that they could do anything, but not so much that they would feel like doing nothing.” Some business owners feel perfectly comfortable leaving the family business by will to the kids. The kids can figure it out, just like Mom and Dad did.

He keeps changing his exit strategy. Buffett’s annual letters to shareholders often address his succession plans. But it seems like he’s always tinkering with his plan. Other business owners don’t get so distracted. They have their attorney write up a buy-sell agreement and be done with it.

What’s wrong with using corporate stock as an incentive?Last year, in commenting on the executive benefit package at the Coca-Cola Company, Buffett called stock options “free lottery tickets”. In this year’s letter, he advised, “Be careful handing out shares as deal capital.” What’s the problem with using corporate stock? It’s not like its real money … it’s just paper.

He’s missing the opportunity with private equity. In this year’s letter, Buffett is particularly harsh on private equity financing. He states, “In truth, ‘equity’ is a dirty word for many private-equity buyers; what they love is debt.” Doesn’t he understand that debt is the fuel that drives a business’s growth?

OK, I’m just having some fun with the aura that surrounds Warren Buffett. His wit and wisdom is so compelling that we almost ignore it because of its counterintuitive brilliance. Considering all the cautions he has taken in his career, it is a reminder that we, too, can benefit from humility and challenge some of our deepest held assumptions.

Tags:  Berkshire Hathaway  business owners  buy-and-hold  buy-sell agreement  Coca-Cola Company  commodities  derivatives  executive benefit package  exit strategy  Oracle of Omaha  Principal Financial Group  private equity  shareholders  Steve Parrish  stock options  succession plans  Warren Buffett 

Share |
PermalinkComments (0)
 

How To Get More Money Out Of Your Business

Posted By Jason Trujillo, Woodbury Financial, Thursday, January 29, 2015

How To Get More Money Out Of Your Business

Article originally appeared on Forbes.com on January 26, 2015.

Click here to read original post.  

Last week, I spoke at the Arizona Institute, a longstanding academic conference for top financial service professionals – the best of the best.

That’s why I was surprised when they were surprised about my contention that there are many ways a business owner can get liquidity out of a company without sacrificing control. Many of these advisors thought liquidity in a privately held business is simply something an owner can’t unlock until the business is sold.

Let me suggest just a few popular methods available for business owners to free up wealth from their businesses. Put them under the four-word banner headline:

    CASH NOW, EXIT LATER

To make these techniques more understandable, I’ve put some realistic numbers together and given a name to our theoretical client.

Charles Goodwin* is a 100% owner of Goodwin Industries. He’s 52 and has a daughter who is active in the business. The business is worth $15 million, is growing and profitable. There is a $2 million loan outstanding for which Charles is a personal guarantor. Charles is at a stage in life where he would like to unlock a large amount of the company’s wealth and have the proceeds available for various personal projects. And though he has no interest in exiting the business currently, he wants his daughter to eventually own and run the business.

  1. Private equity – One approach would be to seek out a private equity company interested in making a non-control investment in Goodwin Industries. Contrary to popular press characterizations, not all private equity companies are corporate raiders bent on firing staff and taking assets off-shore. Many private equity companies are seeking out profitable companies who have owners who want to free up capital without giving up control. The private equity firm provides liquidity. The owners continue to provide expertise and profit. In Charles’ case, he might sell a non-controlling interest in his company to the private equity firm (something less than a $7.5 million stake), using the after tax proceeds of the sale for his personal projects. This liquidity might also help relieve Charles of his personal guarantee on the $2 million business loan.
  2. Employee Stock Ownership Plan (ESOP) – Although an ESOP is structurally a qualified retirement plan, functionally it can be a great way to generate liquidity for a business owner. Because of its significant tax advantages, an ESOP is a corporate finance vehicle that can help both the owner and the employees. The owner frees up cash, and the employees gain an equity stake in the business. Charles could create an ESOP for the benefit of the employees and sell a non-controlling interest in the business to the ESOP. Goodwin Industries would borrow the money needed to fund the ESOP, and the ESOP would then use these contributions to buy a stock interest from Charles. This transaction would not defeat his hope to eventually have his daughter take over the business. She can still buy or inherit the controlling interest in the business from her father.
  3. Recapitalization – Now that business lending has returned to some degree of normalcy, recaps are once again popular in business liquidity strategies. A recap can come in many forms, but when the goal is to get business liquidity to an owner, there are two basic strategies. In one case, commonly referred to as a “leveraged stock buy-back,” the business would generate liquidity by borrowing money against the value of the business and distributing that cash to the owner through redemption of the owner’s stock. So, in Charles’ case, Goodwin Industries would borrow several million dollars and use those proceeds to redeem an appropriate amount of his stock. Charles would remain in control of his business, but now, he would have several million dollars of liquidity in his pocket. The other form of recap, known as a leveraged dividend recap, is what Charles actually did with his business. Time to break this transaction into more detail.

What I’d recommend in this case

I’d recommend Option No. 3 in this case. Charles engages an investment back to obtain $8 million in senior and subordinated debt from a bank and private investor.

He uses the opportunity to remove the personal guarantee on the existing loan, and he begins discussions with his daughter about an eventual sale of the business to her. After netting out the costs of the transaction, Goodwin Industries pays out a special cash dividend to Charles.

Here is how the numbers work out:

  • $8 million in loans
  • Less $500,000 expenses for investment bank and related costs
  • Equals $7.5 million available for a special dividend to Charles

After, the value of the firm for purposes of negotiating a sale of the business would be $7 million ($15 million original valuation less expenses and loans).

Charles should be pleased with the transaction. He both frees up capital for personal use and lowers the value of the business to make it easier to affect an eventual transfer of the business to his daughter.

This strategy is not without challenges:

  • High transaction costs
  • A hefty one-time tax to Charles
  • Significant debt service for the company

In a case like this, however, the positives would outweigh the negatives.

* All information in the case study is fictitious and is used to illustrate business liquidity options. Any resemblance to real persons, living or dead, is purely coincidental.


 

Tags:  Arizona Institute  business lending  business owners  cash dividend  employee stock ownership plan  ESOP  investment  leveraged stock buy-back  liquidity  personal guarantor  Principal Financial Group  private equity  privately held business  recapitalization  small business owner  Steve Parrish 

Share |
PermalinkComments (0)
 

Dodge The Unknowns In Your Business

Posted By Jason Trujillo, Woodbury Financial, Monday, January 12, 2015

Dodge The Unknowns In Your Business by Steve Parrish

Article originally appeared on Forbes.com on January 12, 2015.

Click here to read original post.

The New Year is a great time to challenge our assumptions concerning what we know about our businesses. A fresh look includes questioning whether business givens are all that accurate. You may be aware of Donald Rumsfeld’s famous comment about the dangers of the unknown:

"But there are also unknown unknowns…the ones we don’t know we don’t know…it is the latter category that tend to be the difficult ones."

In the business world, the point of this idea is that we need to keep an eye out for those things we don’t know – but think we do. Bad assumptions lead to bad business judgments.

5 assumptions that can lead to bad outcomes

Paraphrasing to protect the innocent, these comments I heard in 2014 demonstrate the business risk of bad assumptions you can avoid in 2015.

  1. I start tax planning late in the year, after I have an idea how the business is doing.” This sounds good on paper, but unfortunately, your options are limited late in the year. Sure, you can make some last-minute equipment purchases, harvest some losses and possibly prepay a mortgage. But the really significant tax opportunities require planning. For example, if you want to capture deductions with a qualified plan or save executive taxes with a nonqualified plan, you need time to research, create and fund these plans. It’s more than just writing a check late in December.
  2. I know the law on this topic because I researched it recently.” I’m preparing to teach a graduate school class on business law and wanted to update my knowledge, so I attended a university lecture on insider trading in December. The professor did a great job. But a week after his lecture many of his points were rendered moot when a federal appeals court in New York overturned two insider-trading convictions. As another example, the Affordable Care Act has already had more than 42 changes from all three branches of the federal government. It’s not the same law it was even six months ago.
  3. Exit planning begins when I’m ready to exit.” Would you want your employees to say they’re not going to worry about retirement planning until they retire? Business exit planning rarely entails just packaging the company financials and walking over to a business broker’s office. Because of some S Corp tax rules, I tell business owners they should start exit planning as early as 10 years before actually selling or leaving their business.
  4. My business will sell for what it’s worth.” This common misconception assumes a perfect marketplace where the seller’s and buyer’s assessment of the business are identical. Unfortunately, no market is perfect. From the buyer’s perspective, the value of a business is dependent on what their objectives are for that business. The offer could be based on the company’s liquidation value, earnings values or strategic value. For the seller, there is the opportunity to proactively take steps that increase the market value of the business. Just as a $4,000 investment in updating a house’s kitchen can increase sale value by $20,000, so too can a business be prepared and staged for sale. Sometimes it is a simple as making capital improvements, finding the right intermediary and timing the market to maximize price.
  5. It’s best to keep my wealth in the business so I can keep control of it.” This is a classic “unknown unknown” for owners of privately held businesses, particularly family businesses. It is assumed that, as wealth builds in the business, it should remain in the business, where it can stay under the watchful eye of the owner. In reality, a family business is almost never a good place to park family wealth. It subjects these assets to additional creditors, generates additional taxes and can create long-term liquidity issues for the owner and family.

5 ways to avoid bad assumptions

No business owner wants to rely on erroneous assumptions. There are ways to maintain a healthy, ongoing review process of business judgments.

  1. Stay current – Busy owners sometimes see knowledge as an item for the to-do list. Learn a topic, and move on. A better approach is to dedicate a certain amount of time to ongoing education. Commit to a set time each week to read relevant magazines, blogs and business journals. Look at knowledge as an ongoing business process rather than a single transaction.
  2. Learn from others – Involvement in breakfast clubs, study groups and online chat rooms is more than just a diversion. It’s a way to test assumptions, identify unknown unknowns and maintain a healthy check on egos.
  3. Use an advisory board – Particularly for single-owner businesses, an advisor board is one of the most effective ways to get a big picture perspective on the business. Trusted advisors can help challenge assumptions and question business judgments.
  4. Use advisors, not transactors – A common complaint I hear from owners who have fast-growing businesses is that they’re outgrowing their advisors. This does indeed happen, and the owner must make sure the advisor team has the competence to advise. Attorneys should do more than draft, accountants more than report and financial advisors more than execute. Again, your advisor team should be able to test your business assumptions.
  5. Work ON your business, not just IN your business – Often the source of bad business assumptions is simple inaction. What worked in the past is the model for the future. A good way to avoid this potentially fatal mistake is to dedicate the time and resources to work on your business as an actual asset. If, on a structured basis, you step away from the day-to-day to treat the business as your key asset, you may expose the assumptions that need to be challenged and reworked. You can be your own best judge, but you have to take on that role.

 

Tags:  accountants  advisors  attorneys  business knowledge  business owners  Donald Rumsfeld  exit planning  family wealth  financial advisors  long-term liquidity  New Year  ongoing education  Principal Financial Group  retirement planning  small business  stay current  Steve Parrish  tax planning 

Share |
PermalinkComments (0)
 

6 Questions To Test Your Liquidity Before It Evaporates

Posted By Jason Trujillo, Woodbury Financial, Tuesday, January 6, 2015

6 Questions To Test Your Liquidity Before It Evaporates by Steve Parrish

Article originally appeared on Forbes.com on January 5, 2015.

Click here to read original post.

“My business is highly liquid. Most months our cash flow is thousands of dollars ahead, and even in the worst years, we generate a healthy owner dividend.”

This is how many successful business owners view the liquidity of their businesses. Their firms generate positive cash flow as a going concern. But what if the owner leaves? How liquid is the business then?

With so many privately owned businesses, the fortunes of the operation are dependent on the owner. He or she is not only the financier of the business but also the chief executive officer. The challenge is that when the owner leaves the company’s liquidity can dry up quickly.

To determine how liquid your business would be post-you, ask yourself the following six questions. Then, review your risk management and exit strategies.

1. What would happen to revenues if you were to leave?

Are you the primary rainmaker for sales and billings? If you were suddenly disabled or otherwise out of the picture, your company may experience a sudden drop in revenue.

2. Would your accounts receivable suffer with your departure?

Customer loyalty often leaves when the owner leaves. Without you there to apply subtle pressure, business borrowers may reprioritize their debt and move your firm to the bottom of their monthly payment list.

3. How good is your goodwill without you?

Goodwill can be sticky and strong or fickle and fading. If you are planning to cash in on your company’s goodwill when you retire, is that goodwill the kind that stays with the firm? A potential buyer who expects the goodwill to exit when you do may not be willing to pay for much other than the company’s assets. Or the offer may come with conditions such as an earn-out clause.

4. How strong will the company’s credit be after your exit?

A bank may pull a credit line when an owner leaves, particularly if the owner’s exit is sudden. Likewise, suppliers and manufacturers may withdraw floor financing. Even if the company’s cash flow is strong, an unknown successor owner can lead suppliers to withhold credit.

5. When you leave, will your key talent stay?

You may no longer be the primary source of profit for your firm, but upon your exit, what happens to those who are? Your top people may jump ship without you at the helm, leaving the company rudderless. The revenues, receivables, credit and goodwill discussed above may leave when your management team leaves.

6. Can your business be monetized, or does its value dissipate with your parting?

A healthy surplus is a mere indicator of possible business liquidity. It doesn’t necessarily follow that this accounting entry can be converted into cash. If you exit the business, can your company’s wealth be transformed and transitioned into personal savings?

Now’s the time to revisit your plans

These six questions may lead to dozens more. That’s a good thing if it helps generate thinking about risk management and exit planning.

The simple fact is that for most owner-run businesses, the biggest risk to the company is when the owner leaves. The exit may be a planned retirement or an unexpected death or disability. Whatever the circumstances, the firm’s liquidity is on the line when the owner leaves.

This hazard can be mitigated or even extinguished with planning. It’s a New Year. A great time to start.

 

Tags:  business owners  credit line  customer loyalty  death  disability  exit planning  exit strategy  floor financing  key talent  New Year  owner-run businesses  planned retirement  positive cash flow  potential buyer  Principal Financial Group  rainmaker  risk management  small business  Steve Parrish 

Share |
PermalinkComments (0)
 
Page 1 of 2
1  |  2

Affordable Dental Plans for ASBA Members

Delta Dental of Arizona

2 employees? No problem! We’ve got a dental plan to meet your needs & budget. Click to learn more!

LEARN MORE

Join ASBA

ASBA

ASBA is the most powerful resource for your business in Arizona. We ensure the tools we offer are valuable and support the growth, education and connections necessary for today’s top business minds.

LEARN MORE

Enterprise Bank & Trust

ASBA

Enterprise was founded on the idea of serving the lifetime financial needs of privately held businesses.Today, we continue to empower privately held businesses and also help families to secure their financial futures.

LEARN MORE

RSVP

Coffee Connect with ASBA

REGISTER

Date: Held monthly
Time: Click for times based on location

RSVP

ASBA Speed Networking

REGISTER

Date: Held monthly
Time: Click for times based on location

Have Questions on Health Insurance?

Health Insurance

Do you have questions on plans for Individual, sole proprietor, or group? We can get the answers needed to make sure you find the right plan for you and your employees.

LEARN MORE

Partner Program

CopperPoint

ASBA’s Partner Program delivers your brand throughout Arizona. Share insights, connect with small business and highlight your company’s involvement with the association. Contact Jodi Towns to get started.

LEARN MORE

Upcoming Event

Health+Plus

ASBA is bringing you Health+Plus, an all-inclusive healthcare experience for business owners! We’re getting you in front of healthcare providers, insurance carriers, health and wellness experts, HR, software solutions, telemedicine, and more.

REGISTER

Association Management Software Powered by YourMembership  ::  Legal