All posts by Rachel Owens

7 ways to prepare your business for sale

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

Mature nonprofits face changing priorities

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

How nonprofits can successfully execute a capital campaign

When your not-for-profit desperately needs a new facility, costly equipment or an endowment, a capital campaign can be the best way to raise funds. But to be successful, a campaign requires strong leadership, extensive planning and dedicated participants.

Leading the troops

Capital campaigns generally are long-term projects — often lasting three or more years. To carry out yours, you need a champion with vision and stamina. Consider board members or look to leaders in the greater community with such qualifications as:

  • A fundraising track record,
  • Knowledge of your community and local issues,
  • The ability to motivate others, and
  • Time to attend planning sessions and fundraising activities.

Most capital campaigns require a small army to raise funds through direct mail, email solicitations, direct solicitations and special events. In addition to staff and board members, reach out to current volunteers, like-minded community groups and clients who’ve benefited from your services.

Approaching donors

Identify a large group — say 1,000 individuals — to solicit for donations. Draw your list from past donors, area business owners, board members, volunteers and other likely prospects. Then narrow that list to the 100 largest potential donors and talk to them first. Secure large gifts before pursuing anything under $1,000.

Be sure to train team members on how to solicit funds and provide them with sample scripts. To help volunteers make effective phone solicitations, record a few calls and play them back for the group to critique.

Focus on execution

It’s important to ensure that key constituents share your fundraising vision and strategies for reaching the campaign’s goals. Break down your overall goal into smaller objectives and celebrate when you reach each one. Also regularly report gifts, track your progress toward reaching your ultimate goal and measure the effectiveness of your activities.

Also pay attention to how you craft your message. Potential donors must see your organization as capable and strong, but also as the same group they’ve championed for years. Instead of focusing on what donations will do for your nonprofit, show potential donors the impact on their community.

Many measures of success

You’ll know you’ve reached your goal when you’ve raised a certain dollar amount. But don’t forget about other measures of success, such as return on investment or percentage of past donors contributing. We can help you identify the most valuable metrics to make your capital campaign a success. Contact Langdon & Company today!

© 2018

Now may be a good time to start a paid family and medical leave program

 

Does your organization have a formalized program under which it offers employees paid time off for an illness or family emergency? If not, there’s now an excellent reason to consider establishing one: The Tax Cuts and Jobs Act, passed late last year, created a tax credit for qualifying employers that begin providing paid family and medical leave to their employees.

Qualifications and percentages

The credit is available only in 2018 and 2019. To qualify, employers must grant full-time employees at least two weeks of annual family and medical leave during which they receive at least half of their normal wages. In addition, all less-than-full-time qualifying employees must receive a commensurate amount of paid leave on a pro rata basis.

Ordinary paid leave that employees are already entitled to doesn’t qualify for the tax incentive. For example, if you already provide full-time employees with, say, five days of paid sick time per year, you can’t claim the credit for that paid time off. Similarly, if you’re already subject to mandatory paid sick leave requirements by your state or local government, you won’t be able to claim the new tax credit for leave paid under those requirements.

Employees whose paid family and medical leave is covered by this provision must have worked for the employer for at least one year, and not had pay in the preceding year exceeding 60% of the highly compensated employee threshold.

The credit is equal to a minimum of 12.5% of the employee’s wages paid during that leave. That credit amount increases to the extent that employees are paid more than the minimum 50% of their normal compensation, to a maximum of 25% of wages paid. The maximum amount of paid family and medical leave that can be eligible for the tax credit is 12 weeks per year.

Competitive advantage

Establishing a paid family and medical leave program can boost morale and serve as a point in your favor when competing for job candidates. But additional rules and limits may apply beyond the points discussed here. Please contact us for further details and assistance.

© 2018