Monthly Archives: April 2018

Your not-for-profit is likely governed by a core group of board members. But the addition of an informal advisory board can bring complementary — and valuable — skills and resources to this group.

Review representation

Look at your general board members’ demographics and collective profile. Does it lack representation from certain groups — particularly relative to the communities that your organization serves? An advisory board offers an opportunity to add diversity to your leadership. Also consider the skills current board members bring to the table. If your board lacks extensive fundraising or grant writing experience, for example, an advisory board can help fill gaps.

Adding advisory board members can also open the door to funding opportunities. If, for example, your nonprofit is considering expanding its geographic presence, it makes sense to find an advisory board member from outside your current area. That person might be connected with business leaders and be able to introduce board members to appropriate people in his or her community.

Waive commitment

The advisory role is a great way to get people involved who can’t necessarily make the time commitment that a regular board position would require. The advisory role also may appeal to recently retired individuals or stay-at-home parents wanting to get involved with a nonprofit on a limited basis.

This also can be an ideal way to “test out” potential board members. If a spot opens on your current board and some of your advisory board members are interested in making a bigger commitment, you’ll have a ready pool of informed individuals from which to choose.

Be candid

Advisory board members likely will be present at board meetings, so it’s important to explain to them the role they’ll play. Advisory board members aren’t involved in the governance of your organization and can’t introduce motions or vote on them.

How you use your advisory board members is up to you. Use them as much, or as little, as you need; just make sure they understand limits to their authority. Contact Langdon & Company LLP for more information.

© 2018

If your organization offers a 401(k) plan, you’re probably aware that you can lay down some rules regarding when participants may enroll. Many plan sponsors strive for a happy medium between immediate enrollment and highly restricted or delayed enrollment.

As you seek to attain the right balance, bear in mind that the Employee Retirement Income Security Act restricts your ability to limit eligibility in multiple ways. Here are a few rules to bear in mind:

Age restriction. You don’t have to enroll employees below the age of 21, but you cannot have an age restriction over such age. This may or may not have an impact, depending on your workforce demographics. Many plans either have no age requirement or use age 18 as the minimum age.

Delayed gratification. You can require employees to wait up to only 18 months to enter the plan. This is accomplished by requiring employees to work at least 1,000 hours over the course of a 12-month period to gain eligibility. The plan then provides that, once eligibility is met, entry into the plan is the next semiannual entry date.

For example, suppose your plan operates on a calendar year. You hire Jane on July 2, 2018, and she completes one year of service and the 1,000-hour requirement by July 2, 2019. She would enter the plan as of January 1, 2020.

Category-based standard. Plan sponsors can assign different standards for exempt vs. nonexempt employees. For example, you could set more generous eligibility rules for exempt employees. You might want to do so if the labor market is tight for the types of jobs your exempt employees hold, but not your nonexempt employees.

However, your ability to establish these job classification distinctions is limited by your need to satisfy IRS coverage tests. These tests are designed to prevent discrimination against lower-paid workers.

For example, the percentage of participating nonhighly compensated employees (NHCEs) cannot be less than 70% of the participation rate of highly compensated employees (HCEs). In addition, the average benefits received by NHCEs must equal at least 70% of benefits received by HCEs. The average benefits test also features a more subjective nondiscriminatory classification component. You can also create different eligibility rules for union and nonunion jobs, and those distinctions, like the delayed eligibility timing tactic, aren’t subject to the minimum coverage tests.

Restricting 401(k) plan participation eligibility isn’t for everyone. But it may help you better control administration costs. Feel free to reach out to our firm for more information.

© 2018

Contact Langdon & Company LLP today for help in valuing your business!

For some business owners, succession planning is a complex and delicate matter involving family members and a long, gradual transition out of the company. Others simply sell the business and move on. There are many variations in between, of course, but if you’re leaning toward a business sale, here are seven ways to prepare:

1. Develop or renew your business plan. Identify the challenges and opportunities of your company and explain how and why it’s ready for a sale. Address what distinguishes your business from the competition, and include a viable strategy that speaks to sustainable growth.

2. Ensure you have a solid management team. You should have a management team in place that’s, essentially, a redundancy of you. Your leaders should have the vision and know-how to keep the company moving forward without disruption during and after a sale.

3. Upgrade your technology. Buyers will look much more favorably on a business with up-to-date, reliable and cost-effective IT systems. This may mean investing in upgrades that make your company a “plug and play” proposition for a new owner.

4. Estimate the true value of your business. Obtaining a realistic, carefully calculated business appraisal will lessen the likelihood that you’ll leave money on the table. A professional valuator can calculate a defensible, marketable value estimate.

5. Optimize balance sheet structure. Value can be added by removing nonoperating assets that aren’t part of normal operations, minimizing inventory levels, and evaluating the condition of capital equipment and debt-financing levels.

6. Minimize tax liability. Seek tax advice early in the sale process — before you make any major changes or investments. Recent tax law changes may significantly affect a business owner’s tax position.

7. Assemble all applicable paperwork. Gather and update all account statements and agreements such as contracts, leases, insurance policies, customer/supplier lists and tax filings. Prospective buyers will request these documents as part of their due diligence.

Succession planning should play a role in every business owner’s long-term goals. Selling the business may be the simplest option, though there are many other ways to transition ownership. Please contact our firm for further ideas and information.

© 2018

Successful not-for-profits typically proceed along a standard life cycle. Their early stage precedes a growth period that runs several years, followed by maturity. At this stage, the nonprofit has built its core programs and achieved a reputation in the community. But no organization can afford to rest on its laurels.

Where you are

Mature organizations generally are adept at maintaining adequate operating reserves and sufficient cash on hand to support daily operations. Your nonprofit also may already have initiated a planned giving program and endowment.

Many mature organizations experience greater program and operational coordination and more formal planning and communications. But they’re also more vulnerable to “mission drift.” This happens when a nonprofit begins to make compromises to generate funds rather than stick to its founding objectives and values.

Alliances with other organizations are common at this stage. Such affiliations can extend your impact and increase your financial stability. Alliances also can help reinforce your mission focus and prevent your nonprofit from getting too bogged down by policy and procedures. If you lead a mature nonprofit, you should set your sights toward sustainability.

Your board’s role

Another way to increase fiscal strength is to add members to your board. A mature nonprofit’s brand identity may enable it to attract wealthier and more prestigious board members. Ideally, these members will have more to offer than simply money, such as valuable connections or expertise in a certain area.

As your executive director and staff concentrate on operations, your board should take an even greater leadership role by setting direction and strategic policy. The board may become more conservative, though. (Younger nonprofits tend to have more entrepreneurial, risk-taking board members.)

Program considerations

When it comes to programming, your mature nonprofit needs to be wary of complacency. Regularly review your programming for relevance and effectiveness and make sure your strategic plan both focuses on the long term and outlines new opportunities. Surveys can help ensure that you’re meeting your constituents’ needs and interests, which often change over time.

For more ideas about maintaining your mature nonprofit’s financial health, contact us.

© 2018