byline: Chris Frye, CPA

The past several years have been extremely trying times for businesses of all shapes and sizes. Organizations that were once booming with activity have seen significant declines in top-line revenue and overall profitability. Some entities have downsized, right-sized or closed their doors altogether. Maintaining the status quo has often been the new measure of success. Nevertheless, businesses who were well positioned to weather the economic storm are now seeking out new opportunities to expand, grow and get ahead of their competition.

Growth has always been a widely debated topic in the business world. How much is enough? Is growth happening too quickly? What is the best avenue for growth? These are just a few of the common questions faced when looking to expand. Many industries have seen growth and consolidation in the form of mergers and acquisitions.

When done right, this can be a viable option to seamlessly integrate two groups with common synergies or provide immediate entry into a new geographic market or service line. However, when done hastily and without proper due diligence, a merger or acquisition can lead to unintended consequences including cultural chaos and, potentially, failure.

Growing your organization can be a daunting task, especially when starting from the ground up. The key is to harness the power of your existing customers, your team members and your marketing plan.

Tap into your existing customer base

Studies have shown that it costs significantly more to attract and obtain a new customer versus maintaining a current relationship. While maintaining relationships is good, growing relationships is even better. Are your customers aware of all of your product or service offerings? Are you taking time to listen to what they perceive as value? Are you asking the right questions to understand their true needs? Current customers provide the perfect opportunity for cross-selling or up-selling. This allows for revenue growth while also increasing your value and solidifying current customer relationships. In addition, these customers become “raving fans” who will vouch for your product or expertise to other potential buyers.

Empower your team members

No one understands your business and its unique value proposition better than your employees. Their period of interaction with a customer or potential customer is often the “make or break” point in relation to the overall experience. Are you addressing each point in the cycle of customer interaction for potential breakdowns? Are you asking for their feedback with regards to the resources made available to them? Are you educating your employees on the importance of their role in advancing the business? Not everyone is wired to “sell.” However, most team members can “market” your business in some way, shape or form. When team members present themselves professionally within the workplace and in the community, it will almost certainly have a positive impact on the bottom line.

Develop a marketing plan

Marketing plans are similar to a New Year’s resolution. They sound good at the beginning of the year, but the flame ultimately dwindles as we fail to stick to our outlined goals and objectives. If your organization has not developed a marketing plan, I would strongly encourage you to do so. Getting something on paper is the first step in documenting your plan so that you can hold yourself accountable. Marketing plans need to be established at the entity level as well as with individual team members. The strategies will be different, and each team member will bring his or her own unique skill set to the table. Do you want to meet with one new prospect per month? Perhaps attend three significant trade shows or conferences? Regardless of your approach, the important thing with a marketing plan is to document it, execute it and measure it. These initiatives will surely lead to new opportunities.

Where do you see your organization in five years? If growing your business is one of your primary goals, it is important to begin laying the groundwork for your future. Most would agree that growth should not be pursued for the sake of getting “bigger.” Bigger is not always better. There need to be ancillary benefits to the growth, most importantly profitability. Expansion needs to occur at a rate that the organization is able to handle and sustain. Well thought out organic growth can provide a steady, stable path to success. Remember to utilize your current customers, team members and marketing plan along your climb to the top.

Chris Frye, CPA is a manager with the professional accounting firm Yount, Hyde & Barbour, P.C.  His areas of expertise include assisting clients in the construction and non-profit industries with assurance, tax, and advisory services with an emphasis on strategic planning. Frye is a member of the Virginia Society of Certified Public Accountants.

 

With 2013 now in the rearview mirror, some small businesses can breathe a brief sigh of relief. Whether or not the past year was a success, a failure or a little bit of both, it is important to learn from the past while laying the groundwork for a solid future. While many of us learned a lot about ourselves and our businesses in 2013, there are still issues looming that will rear their heads in 2014 and beyond. 

Health-care reform

This coming March, it will be four years since the Patient Protection and Affordable Care Act (ACA) was signed into law. You would be hard-pressed to find a more hotly debated topic over the past decade.

Many of the ACA’s reforms have already been put in place. Confusion and uncertainty remains within the small business community regarding health insurance options and how we can educate our workforces on their responsibilities and alternatives. Most businesses were pleased to receive a one-year reprieve from the employer mandate. This potentially costly provision has now been delayed until 2015 (2016 for those with 50–99 employees). 

According to the U.S. Treasury Department, 96 percent of employers have fewer than 50 full-time workers and will be exempt from the employer mandate altogether. However, significant changes to insurance plans offered in the small-group market have the potential to create pricing turmoil for those small businesses that still elect to provide this highly valued benefit to their employees. Some will see costs go down, although many will see premium increases as a result of the new underwriting standards and requirements for essential health benefits. Understanding how your organization will be impacted will assist in budgeting for these costs in the future.

Economic recovery

Many people will debate as to the true extent of the economic recovery. Most would agree that things are in better shape than four or five years ago, but a far cry from being ideal. Different industries have been affected in different ways. Some are seeing incremental growth while others are still treading water. The stock market ended the year at record highs and 2013 returns were as good as they have been in 15 years.  Is this a springboard to continued growth in 2014, or are we being set-up for an epic fall? That is the million-dollar (or maybe trillion-dollar) question. 

The 2016 presidential election will likely go a long way in determining the direction of our economy in the foreseeable future. Midterm elections may also cause some “blips” on the radar; however, many prognosticators think the economy will take a “wait and see” approach. Barring any unforeseen circumstances, the next few years may see minimal, but positive growth until the next leader in the White House emerges. Small businesses should proceed with cautious optimism and be ready to swiftly adapt to market changes. Balancing growth and anticipating the optimal workforce composition will be key.

Tax reform and expiring provisions

2013 provided a host of new tax provisions, many of which the full wrath may not be seen until the filing deadline in April 2014 and beyond. The new 3.8 percent and 0.9 percent Medicare tax were brought about in conjunction with the Affordable Care Act. A new 39.6 percent top tax bracket and potential 20 percent rate on capital gains and qualified dividends for high-income individuals was spurned from the American Taxpayer Relief Act of 2012. These taxes ultimately will impact the owners of many small businesses, and could play a major role in whether or not capital for expansion and growth is deployed in 2014. 

The generous $500,000 limitation for Section 179 depreciation has reverted to $25,000. Many eyes will be closely watching Congress in early 2014 to determine if this will be retroactively extended. My best guess is that Congress will meet us in the middle and extend the Section 179 limitation at a $250,000 annual amount. In my opinion, Congress would be foolish to allow the Section 179 limitation to decrease to such a negligible amount. This would certainly discourage investment at a time where our economy is in need of additional positive momentum. Businesses must monitor this and be ready to react and adjust accordingly.

What lies ahead in 2014 is anyone’s guess. Organizations and leaders must be ready to adapt to change quickly. While we must be cognizant of the obstacles and issues that could bring us down, we should attack each day with a positive attitude and entrepreneurial spirit, seeking to make ourselves and those around us better. Never be afraid to fail. As the great basketball coach John Wooden said, “Failure is not fatal, but failure to change might be.”

Chris Frye, CPA is a manager with the professional accounting firm Yount, Hyde & Barbour PC  His areas of expertise include assisting clients in the construction and non-profit industries with assurance, tax, and advisory services with an emphasis on strategic planning. Chris has also earned a CSPM (Certified in Strategic Performance Management) designation through MentorPlus®. Frye is a member of the Virginia Society of Certified Public Accountants.