Jeff Patackis

With a difficult year almost over, and another one on the horizon, now may be a good time to assess the size of your sales force. Maybe the economic changes triggered by the COVID-19 pandemic led you to downsize earlier in the year. Or perhaps you’ve added to your sales team to seize opportunities. In either case, every business owner should know whether his or her sales team is the right size.

Various KPIs

To determine your optimal sales staffing level, there are several steps you can take. A good place to start is with various key performance indicators (KPIs) that enable you to quantify performance in dollars and cents.

The KPIs you choose to calculate and evaluate need to be specific to your industry and appropriate to the size of your company and the state of the market in which you operate. If you’re comparing your sales numbers to those of other businesses, make sure it’s an apples-to-apples comparison.

In addition, you’ll need to pick KPIs that are appropriate to whether you’re assessing the performance of a sales manager or that of a sales representative. For a sales manager, you could look at average annual sales volume to determine whether his or her team is contributing adequately to your target revenue goals. Ideal KPIs for sales reps are generally more granular; examples include sales by rep and lead-to-sale percentage.

More than math

Rightsizing your sales staff, however, isn’t only a mathematical equation. To customize your approach, think about the specific needs of your company.

Consider, for example, how you handle staffing when sales employees take vacations or call in sick. If you frequently find yourself coming up short on revenue projections because of a lack of boots on the ground, you may want to expand your sales staff to cover territories and serve customers more consistently.

Then again, financial problems that arise from carrying too many sales employees can creep up on you. Be careful not to hire at a rate faster than your sales and gross profits are increasing. If you’re looking to make aggressive moves in your market, be sure you’ve done the due diligence to ensure that the hiring and training costs will likely pay off.

Last, but not least, think about your customers. Are they largely satisfied? If so, the size of your sales force might be just fine. However, salespeople saying that they’re overworked or customers complaining about a lack of responsiveness could mean your staff is too small. Conversely, if you have market segments that just aren’t yielding revenue or salespeople who are continually underperforming, it might be time to downsize.

Reasonable objectives

By regularly monitoring the headcount of your sales staff with an eye on fulfilling reasonable revenue goals, you’ll stand a better chance of maximizing profitability during good times and maintaining it during more challenging periods. Contact us for help choosing the right KPIs and cost-effectively managing your business.

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The COVID-19 pandemic and resulting economic impact have hurt many companies, especially small businesses. However, for others, the jarring challenges this year have created opportunities and accelerated changes that were probably going to occur all along.

One particular area of speedy transformation is technology. It’s never been more important for businesses to wield their internal IT effectively, enable customers and vendors to easily interact with those systems, and make the most of artificial intelligence and “big data” to spot trends.

Accomplishing all this is a tall order for even the most energetic business owner or CEO. That’s why many companies end up creating one or more tech-specific executive positions. Assuming you don’t already employ such an individual, should you consider adding an IT exec? Perhaps so.

3 common positions

There are three widely used position titles for technology executives:

1. Chief Information Officer (CIO). This person is typically responsible for managing a company’s internal IT infrastructure and operations. In fact, an easy way to remember the purpose of this position is to replace the word “Information” with “Internal.” A CIO’s job is to oversee the purchase, implementation and proper use of technological systems and products that will maximize the efficiency and productivity of the business.

2. Chief Technology Officer (CTO). In contrast to a CIO, a CTO focuses on external processes — specifically, with customers and vendors. This person usually oversees the development and eventual production of technological products or services that will meet customer needs and increase revenue. The position demands the ability to live on the cutting edge by doing constant research into tech trends while also being highly collaborative with employees and vendors.

3. Chief Digital Officer (CDO). For some companies, the CIO and/or CTO are so busy with their respective job duties that they’re unable to look very far ahead. This is where a CDO typically comes into play. His or her primary objective is to spot new markets, channels or even business models that the company can target, explore and perhaps eventually profit from. So, while a CIO looks internally and a CTO looks externally, a CDO’s gaze is set on a more distant horizon.

Costs vs. benefits

As mentioned, these are three of the most common IT executive positions. Their specific objectives and job duties may vary depending on the business in question. And they are by no means the only examples of such positions. There are many variations, including Chief Marketing Technologist and Chief Information Security Officer.

So, getting back to our original question: is this a good time to add one or more of these execs to your staff? The answer very much depends on the financial strength and projected direction of your company. These positions will call for major expenditures in hiring, payroll and benefits. Our firm can help you weigh the costs vs. benefits.

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It’s been estimated that there are roughly 5 million family-owned businesses in the United States. Annually, these companies make substantial contributions to both employment figures and the gross domestic product. If you own a family business, one important issue to address is how to best weave together your succession plan with your estate plan.

Rise to the challenge

Transferring ownership of a family business is often difficult because of the distinction between ownership and management succession. From an estate planning perspective, transferring assets to the younger generation as early as possible allows you to remove future appreciation from your estate, minimizing any estate taxes. However, you may not be ready to hand over control of your business or you may feel that your children aren’t yet ready to run the company.

There are various ways to address this quandary. You could set up a family limited partnership, transfer nonvoting stock to heirs or establish an employee stock ownership plan.

Another reason to separate ownership and management succession is to deal with family members who aren’t involved in the business. Providing such heirs with nonvoting stock or other equity interests that don’t confer control can be an effective way to share the wealth with them while allowing those who work in the business to take over management.

Consider an installment sale

An additional challenge to family businesses is that older and younger generations may have conflicting financial needs. Fortunately, strategies are available to generate cash flow for the owner while minimizing the burden on the next generation.

For example, consider an installment sale. These transactions provide liquidity for the owner while improving the chances that the younger generation’s purchase can be funded by cash flows from the business. Plus, so long as the price and terms are comparable to arm’s-length transactions between unrelated parties, the sale shouldn’t trigger gift or estate taxes.

Explore trust types

Or, you might want to create a trust. By transferring business interests to a grantor retained annuity trust (GRAT), for instance, the owner obtains a variety of gift and estate tax benefits (provided he or she survives the trust term) while enjoying a fixed income stream for a period of years. At the end of the term, the business is transferred to the owner’s children or other beneficiaries. GRATs are typically designed to be gift-tax-free.

There are other options as well, such as an installment sale to an intentionally defective grantor trust (IDGT). Essentially a properly structured IDGT allows an owner to sell the business on a tax-advantaged basis while enjoying an income stream and retaining control during the trust term. Once the installment payments are complete, the business passes to the owner’s beneficiaries free of gift taxes.

Protect your legacy

Family-owned businesses play an important role in the U.S. economy. We can help you integrate your succession plan with your estate plan to protect both the company itself and your financial legacy.

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The year 2020 has taught businesses many lessons. The sudden onset of the COVID-19 pandemic followed by drastic changes to the economy have forced companies to alter the size of their workforces, restructure work environments and revise sales models — just to name a few challenges. And what this has all meant for employees is change.

Even before this year’s public health crisis, many businesses were looking into and setting forth policies regarding change management. In short, this is a formalized approach to providing employees the information, training and ongoing coaching needed to successfully adapt to any modification to their day-to-day jobs.

There’s little doubt that one of the enduring lessons of 2020 is that businesses must be able to shepherd employees through difficult transitions, even (or especially) when the company itself didn’t bring about the change in question.

Why change is hard

Most employees resist change for many reasons. There’s often a perceived loss of, or threat to, job security or status. Inconvenience and unfamiliarity provoke apprehension. In some cases, perhaps because of misinformation, employees may distrust their employers’ motives for a change. And some workers will always simply believe the “old way is better.”

What’s worse, some changes might make employees’ jobs more difficult. For example, moving to a new location might enhance an organization’s image or provide safer or more productive facilities. But doing so also may increase some employees’ commuting times or put employees in a drastically different working environment. When their daily lives are affected in such ways, employees tend to question the decision and experience high levels of anxiety.

What you shouldn’t do

Often, when employees resist change, a company’s decision-makers can’t understand how ideas they’ve spent weeks, months or years deliberating could be so quickly rejected. (Of course, in the case of the COVID-19 pandemic, tough choices had to be made in a matter of days.) Some leadership teams forget that employees haven’t had time to adjust to a new idea. Instead of working to ease employee fears, executives or supervisors may double down on the change, more strictly enforcing new rules and showing little patience for disagreements or concerns.

And it’s here the implementation effort can break down and start costing the business real dollars and cents. Employees may resist change in many destructive ways, from taking very slow learning curves to calling in sick to filing formal complaints or lawsuits. Some might even quit.

The bottom line: by not engaging in some form of change management, you’re more likely to experience reduced productivity, bad morale and increased turnover.

How to cope

“Life comes at ya fast,” goes the popular saying. Given the events of this year, it’s safe to say that most business owners would agree. Identify ways you’ve been able to help employees deal with this year’s changes and document them so they can be of use to your company in the future. Contact us for help cost-effectively managing your business.

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By now, some businesses have completed their 2021 budgets while others are still crunching numbers and scrutinizing line items. As you put the finishing touches on your company’s spending plan for next year, be sure to cover the finer points of the process.

This means not just creating a budget for the sake of doing so but ensuring that it’s a useful and well-understood plan for everyone.

Obtain buy-in

Management teams are often frustrated by the budgeting process. There are so many details and so much uncertainty. All too often, the stated objective is to create a budget with or without everyone’s buy-in for how to get there.

To put a budget in the best position for success, every member of the leadership team needs to agree on common forecasting goals. Ideally, before sitting down to review a budget in process, much less view a presentation on a completed budget, you and your managers should’ve established some basic ground rules and reasonable expectations.

If you’re already down the road in creating a budget, it may not be too late. Call a meeting and get everyone on the same page before you issue the final product.

Account for variances

Many budgets fail because they rely on purely accounting-driven, historically minded budgeting techniques. To increase the likelihood of success, you need to actively anticipate “variances.” These are major risks that could leave your business vulnerable to high-impact financial hits if the threats materialize.

One type of risk to consider is the competition. The COVID-19 pandemic and resulting economic impact has reengineered the competitive landscape in some markets. Unfortunately, many smaller businesses have closed, while larger, more financially stable companies have asserted their dominance. Be sure the budget accounts for your place in this hierarchy.

Another risk is compliance. Although regulatory oversight has diminished in many industries under the current presidential administration, this may change next year. Be it health care benefits, hiring and independent contractor policies, or waste disposal, factor compliance risk into your budget.

A third type of variance to consider is internal. If your business laid off employees this year, will you likely need to rehire some of them in 2021 as, one hopes, the economy rebounds from the pandemic? Also, investigate whether fraud affected this year’s budget and how next year’s edition may need more investment in internal controls to prevent losses.

Eyes on the prize

Above all, stay focused on the objective of creating a feasible, flexible budget. Many companies get caught up in trying to tie business improvement and strategic planning initiatives into the budgeting process. Doing so can lead to confusion and unexpectedly high demands of time and energy.

You’re looking to set a budget — not fix every minute aspect of the company. Our firm can help review your process and recommend improvements that will enable you to avoid common problems and get optimal use out of a well-constructed budget for next year.

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Online retail sales have been booming during the COVID-19 pandemic. This trend has been driven not only by the buying public’s increased inclination to minimize visits to brick-and-mortar stores, but also by the effectiveness of many retailers’ virtual marketing efforts.

One such effort that can benefit most any type of business is email marketing. Although social media marketing tends to get the lion’s share of attention these days, email remains a viable medium for getting out your message — particularly to existing customers.

As your company endeavors to continue marketing its products or services in an uncertain economy, be sure your emails hit the target by relying on some tried-and-true fundamentals.

Draw their attention

Every email starts with a subject line; be sure yours are catchy. They should be no longer than eight words and shouldn’t be in all caps. Put yourself in the customer’s place by paying close attention to demographics. Ask yourself whether you would open the email if you fit the profile. Also, clearly indicate the message’s content.

If your subject line is compelling enough, your recipients will open the email. And the first thing readers should see upon doing so is an equally memorable headline. Make sure it’s different from the subject line, short (four or five words) and in a larger font size than the body of the message.

Make your case

When it comes to the body of the email, make it a quick and easy read. Most people won’t read a lot of text. Think of each marketing email as an “elevator speech,” a quick and concise pitch for specific products or services.

Above all, be persuasive. Customers want to fulfill their needs at a reasonable price, but they may not always have a clear idea of what those needs are. Don’t expect them to search for answers about whether you can meet these expectations. Show them what you’ve got to offer and tell them why they should buy.

Add finishing touches

Consider including visual and interactive content in your marketing emails — such as images, GIFs and videos. Bear in mind, however, that not all email providers support every type of interactivity. Use it judiciously and gather feedback from customers on whether the content is a nice touch or an annoyance.

Last, but not least, close with a “call to action.” Instill a sense of urgency in readers by setting a deadline and telling them precisely what to do. Otherwise, they may interpret the email as merely informational and file it away for reference or simply delete it. Be sure to include clear, “clickable” contact info.

Measure and improve

These are just a few of the basics to keep in mind. We can help your business measure the results of its marketing activity, email and otherwise, and come up with cost-effective ideas for improving the profit-potential of how you interact with your customers and prospects.

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Every business owner is aware of the threat posed by cybercriminals. If a hacker were to gain access to the sensitive data about your business, customers or employees, the damage to your reputation and profitability could be severe.

You’re also probably aware of the specific danger of “phishing.” This is when a fraudster sends a phony communication (usually an email, but sometimes a text or instant message) that appears to be from a reputable source. The criminal’s objective is either to get recipients to reveal sensitive personal or company information or to click on a link exposing their computers to malicious software.

It’s a terrible thing to do, of course. Maybe you should give it a try.

An upfront investment

That’s right, many businesses are intentionally sending fake emails to their employees to determine how many recipients will fall for the scams and how much risk the companies face. These “phishing simulations” can be revealing and helpful, but they’re also fraught with hazards both financial and ethical.

On the financial side, a phishing simulation generally calls for an investment in software designed to create and distribute “realistic” phishing emails and then gather risk-assessment data. There are free, open-source platforms you might try. But their functionality is limited, and you’ll have to install and use them yourself without external tech support.

Commercially available phishing simulators are rich in features. Many come with educational tools so you can not only determine whether employees will fall for phishing scams, but also teach them how to avoid doing so. Developers typically offer installation assistance and ongoing support as well.

However, you’ll need to establish a budget and shop carefully. You must then regularly use the software as part of your company’s wider IT security measures to get an adequate return on investment.

Ethical quandaries

As mentioned, phishing simulations present ethical risks. Some might say that the very act of sending a deceptive email to employees is a betrayal of trust. What’s worse, if the simulated phishing message exploits particularly sensitive fears, you could incur a backlash from both employees and the public at large.

A major media company recently learned this the hard way when it tried to lure employees to respond to a phishing simulation email with promises of cash bonuses to those who remained on staff following layoffs related to the COVID-19 pandemic. Users who “clicked through” were met with a shaming message that they’d just failed a cybersecurity test. Angry employees took to social media, the story spread and the company’s reputation as an employer took a major hit.

Plan carefully

Adding phishing simulations to your cybersecurity arsenal may be a good idea. Just bear in mind that these aren’t a “one and done” type of activity. Simulations must be part of a well-planned, long-term and broadly executed effort that seeks to empathetically educate users, not alienate them. Contact us to discuss ways to prudently handle IT costs.

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The subject of payroll has been top-of-mind for business owners this year. The COVID-19 pandemic triggered economic changes that caused considerable fluctuations in the size of many companies’ workforces. Employees have been laid off, furloughed and, in some cases, rehired. There has also been crisis relief for eligible businesses in the form of the Paycheck Protection Program and the payroll tax credit.

Payroll recordkeeping was important in the “old normal,” but it’s even more important now as businesses continue to navigate their way through a slowly recovering economy and ongoing public health crisis.

Four years

Most employers must withhold federal income, Social Security and Medicare taxes from their employees’ paychecks. As such, you must keep records relating to these taxes for at least four years after the due date of an employee’s personal income tax return (generally, April 15) for the year in which the payment was made. This is often referred to as the “records-in-general rule.”

These records include your Employer Identification Number, as well as your employees’ names, addresses, occupations and Social Security numbers. You should also keep for four years the total amounts and dates of payments of compensation and amounts withheld for taxes or otherwise — including reported tips and the fair market value of noncash payments.

In addition, track and retain the compensation amounts subject to withholding for federal income, Social Security and Medicare taxes, as well as the corresponding amounts withheld for each tax (and the date withheld if withholding occurred on a day different from the payment date). Where applicable, note the reason(s) why total compensation and taxable amount for each tax rate are different.

So much more

A variety of other data and documents fall under the records-in-general rule. Examples include:

• The pay period covered by each payment of compensation,
• Forms W-4, “Employee’s Withholding Allowance Certificate,” and
• Each employee’s beginning and ending dates of employment.

If your business involves customer tipping, you should retain statements provided by employees reporting tips received. Also carefully track fringe benefits provided to employees, including any required substantiation. Retain evidence of adjustments or settlements of taxes and amounts and dates of tax deposits.

Follow the records-in-general rule, too, for records relating to wage continuation payments made to employees by the employer or third party under an accident or health plan. Documentation should include the beginning and ending dates of the period of absence, and the amount and weekly rate of each payment (including payments made by third parties).

Last, keep copies of each employee’s Form W-4S, “Request for Federal Income Tax Withholding From Sick Pay,” and, where applicable, copies of Form 8922, “Third-Party Sick Pay Recap.”

Valuable information

Proper and comprehensive payroll recordkeeping has become even more critical — and potentially more complex — this year. Our firm can help review your processes in this area and identify improvements that will enable you to avoid compliance problems and make better use of this valuable information.

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As year-end draws near, many businesses will be not only be generating their fourth quarter financial statements, but also looking back on the entire year’s financials. And what a year it’s been. The COVID-19 pandemic and resulting economic fallout have likely affected your sales and expenses, and you’ve probably noticed the impact on both. However, don’t overlook the importance of inventory management and its impact on your financial statements.

Cut back as necessary

Carrying too much inventory can reflect poorly on a business as the value of surplus items drops throughout the year. In turn, your financial statements won’t look as good as they could if they report a substantial amount of unsold goods.

Taking stock and perhaps cutting back on excess inventory reduces interest and storage costs. Doing so also improves your ability to detect fraud and theft. Yet another benefit is that, if you conduct inventory checks regularly, your processes should evolve over time — increasing your capacity to track what’s in stock, what’s selling and what’s not.

One improvement to perhaps budget for here: upgraded inventory tracking and ordering software. Newer applications can help you better forecast demand, minimize overstocking, and share data with suppliers to improve accuracy and efficiency.

Make tough decisions

If yours is a more service-oriented business, you can apply a similar approach. Check into whether you’re “overstocking” on services that just aren’t adding enough revenue to the bottom line anymore. Keeping infrastructure and, yes, even employees in place that aren’t contributing to profitability is much like leaving items on the shelves that aren’t selling.

Making improvements may require some tough calls. Sadly, this probably wouldn’t be the first time you’ve had to make difficult decisions in recent months. Many business owners have had to lay off or furlough employees and substantively alter how they deliver their products or services during the COVID-19 crisis.

You might have long-time customers to whom you provide certain services that just aren’t profitable anymore. If your company might start losing money on these customers, you may have to discontinue the services and sacrifice their business.

You can ease difficult transitions like this by referring customers to another, reputable service provider. Meanwhile, your business should be looking to either find new service areas to generate revenue or expand existing services to more robust market segments.

Take a hard look

As of this writing, the economy appears to be slowly recovering for most (though not all) industries. An environment like this means every dollar is precious and any type of waste or redundancy is even more dangerous.

Take a hard look at your approach to inventory management, or how you’re managing the services you provide, to ensure you’re in step with the times. We can help your business implement cost-effective inventory tracking processes, as well as assist you in gaining key insights from your financial statements.

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It’s been a year like no other. The sudden impact of the COVID-19 pandemic in March forced every business owner — ready or not — to execute his or her disaster response plan.

So, how did yours do? Although it may still be a little early to do a complete assessment of what went right and wrong during the crisis, you can take a quick look back right now while the experience is still fresh in your mind.

Get specific

When devising a disaster response plan, brainstorm as many scenarios as possible that could affect your company. What weather-related, environmental and socio-political threats do you face? Obviously, you can now add “pandemic” to the list.

The operative word, however, is “your.” Every company faces distinctive threats related to its industry, size, location(s), and products or services. Identify these as specifically as possible, based on what you’ve learned.

There are some constants for nearly every plan. Seek out alternative suppliers who could fill in for your current ones if necessary. Fortify your IT assets and functionality with enhanced recovery and security capabilities.

Communicate optimally

Another critical factor during and after a crisis is communication, both internal and external. Review whether and how your business was able to communicate in the initial months of the pandemic.

You and most of your management team probably needed to concentrate on maintaining or restoring operations. Who communicated with employees and other stakeholders to keep them abreast of your response and recovery progress? Typically, these parties include:

• Staff members and their families,
• Customers,
• Suppliers,
• Banks and other financial stakeholders, and
• Local authorities, first responders and community leaders (as appropriate).

Look into the communication channels that were used — such as voicemail, text messaging, email, website postings and social media. Which were most and least effective? Would some type of new technology enable your business to communicate better?

Revisit and update

If the events of this past spring illustrate anything, it’s that companies can’t create a disaster response plan and toss it on a shelf. Revisit the plan at least annually, looking for adjustments and new risk factors.

You’ll also want to keep the plan clear in the minds of your employees. Be sure that everyone — including new hires — knows exactly what to do by spelling out the communication channels, contacts and procedures you’ll use in the event of a disaster. Everyone should sign a written confirmation that they’ve read the plan’s details, either when hired or when the plan is substantially updated.

In addition, go over disaster response measures during company meetings once or twice a year. You might even want to hold live drills to give staff members a chance to practice their roles and responsibilities.

Heed the lessons

For years, advisors urged business owners to prepare for disasters or else. This year we got the “or else.” Despite the hardships and continuing challenges, however, the lessons being learned are invaluable. Please contact us to discuss ways to manage costs and maintain profitability during these difficult times.

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