In the wake of the U.S. Presidential Inauguration this week, it’s a good time to consider the potential legislative impacts to our businesses. Considering these impacts early in the year allows you time and resource allocation (or perhaps reallocation) to optimize the positive impacts to your business and reduce the negative ones. Whether you have a large or small business, it’s time well-spent to evaluate how the legislative changes will impact your business. Small business owners are especially vulnerable to the potential changes that may heavily burden their ability to be profitable. One such example, is the legislative change being considered for corporate tax law going from 21% to 28%; a definite impact on the bottom-line should it be approved. Another similar administrative change being considered is a shift to higher Medicare taxes that will definitely impact business operations and profitability. There is also a chance that the excise tax of 3.75% may be resurfacing for another run. The financial impact to businesses could be as significant as losing 14% in tax savings from the previous administration. Before these tax changes create a barrier to profitability or force your hand to take extreme action such as furloughs, layoffs, compensation restructuring, take time early in the year to consult with business specialists to be proactive rather than reactive to the circumstances that may be outside of your control but within your ability to impact a more positive outcome.
You also have the opportunity to change your operational metrics and adjust and position them in a more proactive manner. I am often surprised by businesses that draft the corporate and individual goals in January and don’t refresh or revisit them to be in alignment with the business reality. If leaders hadn’t done that in the wake of the recent pandemic, many more would have closed their doors. By reframing the business reality, you can implement performance factors to increase productivity, reduce waste and errors like Lean or Continuous Process Improvement methodologies. Employees are often an invaluable resource in these initiatives as they are closest to the work and most familiar with the operations that they are an integral part of in the production of goods and services. Don’t underestimate their ability to provide process improvement suggestions that can dramatically reduce expenses. By implementing initiatives to preserve your bottom-line, you are not falling victim to the legislative changes that are out of your influential reach.
Experts in the field of business strategies help you to step back and examine a variety of opportunities to take control of your business in a meaningful way. Some proactive strategies for business owners may be to reallocate corporate funds or optimize corporate contributions to funds that reduce your tax base like retirement plans. This reduces your taxable income as well as improving the employee experience and enhancing the value proposition to promote the attraction and retention of talented individuals to your firm. While we’re on the subject of employee engagement, don’t forget the option of implementing or enhancing Deferred Compensation plans (i.e., profit sharing, cash balance plans, executive and employee bonuses, etc.) for key contributors. Make sure that your key talent feel that they are valued and rewarded commensurate with their performance.
I have had the pleasure of working with incredibly talented experts that have terrific business acumen and agility; the latter, a competence that is essential in these dynamic times. These professionals are adept at guiding business owners to pivot and reset their financial goals – both personal and professional. As a business owner, there is still a great deal of latitude that you have to maneuver to create a healthy financial plan for your organization. I’m happy to provide you with referrals if it would be helpful. Give me a call or set up some time to discuss how your business can benefit from these strategies, I enjoy helping businesses navigate these changing tides!