No. 1: The importance of making their balance sheets healthy.
No. 2: How to access the extremely low cost of available capital.
No. 3: Recognizing the demand in our economy is rising at a healthy 3% growth.
All three of these realizations will help your company to maintain or expand market share.
Now is a good time to review, correct and forecast your financial strategies to better leverage your firm for growth. This year-end review and forecast is important, due in part, to the changes underway on Capitol Hill and new federal policies on finance and regulations. The federal changes will have impact on most all businesses, no matter the size.
Here are nine ideas that could help your 2018 get off to a roaring start.
Idea No. 1: Taxes. The Big Elephant in the room. Contact your accounting firm to ensure you are taking full advantage of all your options to reduce taxes based on the new federal tax laws currently underway in Congress. This also applies to your personal taxes.
Idea No. 2: Investments. For most, this has been a robust year in the investment arena. Review with your investment advisor your yearend picture to determine if there is a need to make any changes to better reflect your risk in the market on both the company and personal investment side. The deadline for your investment changes is Dec. 31.
Idea No. 3: Insurance. Look over all company and personal insurance policies to ensure your assets are fully covered. These policies could include:
- general liability insurance
- professional liability insurance
- business owner’s policy
- directors and officers insurance
- data breach
- property insurance
- commercial auto insurance
- worker’s compensation
- homeowner’s insurance
- renter’s insurance
- life insurance
- personal automobile insurance.
Idea No. 4: Debt consolidation. Interest rates have been at historically low rates. Look at all outstanding loans, consider consolidating outstanding notes for a better rate. Credit cards continue to offer great rates for as low as 0% until 2019 when you consolidate debt from other credit card companies. Make sure you understand the fine print. Analysts forecast the Fed rate will increase before year end, and again slightly in the new year, however, will remain low in 2018, following retiring Janet Yellen’s past performance.
Idea No. 5: New capital acquisition. Growing companies require more working capital for operations, inventory and equipment. It takes money to make money. While conventional banks have kept interest rates attractively low, overall 12-month business loan growth is at the lowest since 2013. But they are still lending. Consider reviewing alternative financial options including interviewing potential private equity or venture capital partners, joint ventures/alliances with compatible companies that compliments your business strategy, large corporate sponsorship or grant funding, public/private government sponsored funding. The beauty of preparing your 2018 business plan and forecast, is that you will be able to strategically see where and when you need funding. When you do sit down to negotiate new financing, most capital sources will ask to review many of the items listed here. Know where your realistic capital options are, including the requirements to secure the capital, before you need it.
Idea No. 6: Leases. Capital spending on equipment leasing in the first three quarters of this year has risen at 7.3% annual rate, fastest in the past three years. Instead of outright purchasing equipment—whether a $5,000 video-conference system or a $500,000 injection molding machine—seriously consider leasing rather than tying up this capital that could be better used elsewhere. Additional leasing benefits include $1 buyouts at the end of the lease and the ability to upgrade equipment during the term of the lease to take advantage of newer technology platforms. The trend today is for larger equipment to have built-in computer and artificial intelligence.
Idea No. 7: Owner draws and distributions. Review with your CPA how your firm is paying out draws and/or distributions and how this impacts your overall tax picture. The difference between a draw and a distribution is significant for tax reporting purposes. A sole proprietor or single-member LLC can draw money out of the business—this is called a draw. It is an accounting transaction, and it doesn't show up on the owner's tax return. A distribution or distributive share, on the other hand, must be recorded (using Schedule K-1) and it shows up on the owner's tax return. Further, depending on your tax bracket and forecasted 2018 compensation, determine if it would be better to take money out in 2017 or 2018.
Idea No. 8: Succession plan. Discuss and review any needed business succession planning updates. During the year were there retirement events, disability or death of an owner or other foreseeable events affecting the company? Review age of the owner(s) and family stage, business stage, size of the business, direction of the business and future leadership. Ensure that succession viability, retirement exit strategy, transition strategy in place. In the event of death or disability of an owner, take into consideration tax planning, family law considerations, shareholder’s agreements and determining the selection a successor and future management to liquidation of assets or sale of business.
Idea No. 9: Estate plan. Review and update your will to reflect current situation. Consider a trust if you have property and you don’t wish to have your survivors to go through the sometimes long and arduous task of going thru probate court. Review and update health care directives, financial powers of attorney, beneficiary forms, protect your children’s property, estate taxes, funeral arrangements and expenses. Store your documents with your attorney-in-fact and/or your executor, the person you choose in your will to administer your property after you die. You will sleep better knowing your wishes are in place.
Marsha L. Powers, a finance and strategic development professional, author, entrepreneur and investor is the founder of Powers Advisors and Shale Capital Resources. She has been a contributing writer on Finance for Crain’s Cleveland Business for nine years. Her management consulting areas of expertise includes finance – ranging from senior debt, government finance programs to private equity, market strategy, operations, marketing communications and economic development. She’s a recognized award-winning leader with proven strategic direction and leadership to over 1500 companies, from early stage to Fortune 50 companies. You can reach Marsha at (216)965-3633, firstname.lastname@example.org and www.powersadvisors.com to learn more about how she can help your company succeed.