The Employee Retention Tax Credit was initiated in March 2020 to encourage business owners to retain staff during the COVID-19 pandemic. Two years later, we find ourselves in a time of economic instability with increasingly lower profit margins for small businesses. Adding to this burden, the Employee Retention Tax Credit will begin slowly slipping away.
ERC is filed on a company's amended 941, which is filed quarterly. Amendments are not evergreen. They expire. And this means the credit's statute of limitations begins to fall off quarterly once the deadline for an amended return passes. The first quarter that ERC could be claimed was the second quarter of 2020. The deadline for amended returns for that time period is July 21, 2023. Upon that date, business owners will no longer be able to claim for the second quarter of 2020, and so on, as each amendment deadline hits.
For the third quarter of 2021, the last quarter for which most businesses will be eligible, the amended 941 filing deadline is October 31, 2024. This is important to you if you still need to check your liability!
Without going into a ton of legislative background information, the basics of ERC are:
For 2020 you can get up to $5,000 per eligible employee
For 2021 you can get up to $7,000 per eligible employee for quarters 1, 2, and 3, maxing out at $21,000 per eligible employee for the year.
Qualifications have changed over the past two years. To simplify them:
A business must have a significant drop in revenue during 2020 / or, in turn, for the first three quarters of 2021 compared to 2019.
OR, they had to be operating under government restrictions.
There are specific nuances for individual industries that should be considered by your provider when your benefit calculation is being performed.
Working with an organization with a proven track record and history in the tax incentive field is essential. A reputable organization will always provide your ERC findings in writing, have a history of working with businesses on tax credits, and have the proper insurances if assistance working with the IRS is necessary.
If you have not taken the opportunity to review your business's ERC eligibility, GMG allows you to do so. We've been leading the industry in specialized tax credits for over twenty years. In the past five years, we have developed proprietary software that allows YOU, as the business owner, to review your eligibility privately and without obligation. You may check your business's eligibility for ERC and other tax credits here.
We encourage you to know what your business is entitled to, as it does mean the difference between surviving and thriving in the year to come!
Get the help your business needs!
Up to $5,000 for Every Employee You had 2017-2020
Up to $21,000 for Every Employee You have in 2021
Up to $2,400 for Every Employee You hire
Up to $150,000 for Every Commercial Building You Own
If you a worried about missing out on the growth opportunities for independent consultants right now, then something’s off. Most likely, there is not enough demand or not too many buyers for what you do. Or simply your offer, and I do not want to mince words here, sucks.
I know that because the need for business consultants has stayed high during every economic downturn in the last 18 years. (See the graph from Google Trends below.)
But not all consultants are equal.
Positioning is key.
ROI consultants, for example, are just not as much searched for as sales consultants or business consultants.
There is more demand for HR consultants than there is for DEI consultants. Health consultants dwarf wellness consultants.
Do your research. Go to Google Trends and see how your title compares to others.
Bring it home to three needs
I started my consulting journey as an independent consultant for localization, which is the discipline of culturally adapting a product to international markets.
It turns out that not so many companies who need help, care for it unless I was able to tie my activities to:
Increase in revenue,
Reduction of cost,
Improvement of relationships with clients, or
Team productivity and wellness.
In other words, tie your activities to money, relationships, or health. Examples are:
Money: Business consultants, sales consultants, and marketing consultants. ROI and OKR consultants don’t seem to be in demand that much.
Relationships: HR consultants, leadership consultants, and relationship consultants lead the pack. While the need for DEI consultants is currently growing, it dwarfs compared to the top three in this category.
Health: Health consultants seem to be what companies are looking for, but the term wellness consultant appears to resonate less. Feng Shui consultants? Forget about it in the business world.
See, for example, this comparison of consulting types on Google Trends.
Note that IT consultant and operational consultant are missing from my lists above. That’s not an oversight …
In the last 18 years, operational consultants have been at the bottom of the search list. So, if you are calling yourself the latter, consider making a change.
When it comes to IT consultants, I could have easily left them in their own category but didn’t. But I strongly believe that they need to connect their work to the Three Needs or they'll starve.
They can help companies reduce technical debt (money), improve collaboration between IT and the business (relationships), or reduce stress for agile development teams (health).
I suggest they act less like a corporate IT team who justifies their being based on the existence of technology. That’s like forecasting the weather because weather is here.
As an independent consultant, you have got to have a purpose and need.
Choose your toolkit
Nobody buys consulting let alone consulting hours. They buy the outcomes they want and shop for the consultant they believe can best help them get results.
The five tools independent consultants can offer are:
Information
Training
Services
Products
Coaching
Clients expect consultants to offer all five.
When I worked as a localization consultant, my average engagement time per client was 5.7 years. That’s huge in a niche market where the average is 4.3 MONTHS, not years.
When I asked my clients why they kept me on board so long, they all gave the same answer: ‘There are plenty of other experts with your type of knowledge out there. We keep you engaged because you made me a better leader, my team better collaborators, and my vendors better suppliers.’
In other words, they thought I was everybody's coach.
Side note: This feedback was the catalyst for me to become a full-time coach, but I still offer information and training to all of my clients, and I am adding services and products as ‘we speak.’
Seek clarity on which tools your clients need most during the recession.
Tighten your Niche
I hate to break it to you, but small business owners are not a niche. They are a demographic.
No one introduces themselves at a party as being ‘a small business owner.’ The same is true for ‘heart-centered leaders’, ‘female entrepreneurs’ or ‘fearless business leaders.’
People introduce themselves in terms of what they do, for example ‘CEO of a software development company, ‘VP of Sales for an ice cream company’ or ‘I own a barber shop.’
Your niche has five elements:
Self-identifiable
Easy to find
You can get them specific results
You like them
They can pay you
When they start out, independent consultants are often fuzzy about these criteria. I typically work with very smart and driven consultants who can help a variety of people master lots of challenges.
They resist niching down over fears that they might lose opportunities if they did.
The irony is that more often than not, the opposite is the case. They lose opportunities because they are too wishy-washy about whom they want to serve and how.
In recessions, people look for certainty and get irritated by more ambiguity.
Change your time horizon
Corporate America is obsessed with the next quarter. That short-term focus has infected so many corporate workers and they often take that virus with them when they start their businesses.
It’s already hard to sell people a vision beyond the next quarter. In recessions, it’s often impossible.
Focus on quick wins, fast results, and immediate ROI.
This is not the time to propose enhancements and customizations for a CRM, for example. It’s an opportunity to draw out of technology what is already in it.
If you would like to review or have a second opinion on how you can increase momentum during the recession, see if you can still snag an opportunity to meet with me for an Accelerator Audit.
We are going to cover three things:
1. Attract leads with the Authority Builder so that we speak to people we want and keep away those that we don't.
2. Engage potential clients with the event appointment funnel so that we can start conversations naturally and select - not sell - the people we want to work with.
3. Scale your practice with the Delivery Power Matrix so that you can serve more clients without working more hours.
Planning for a successful future without your business is a smart strategy. One of the traps that business owners commonly fall into as they begin planning for their successful future without the business is seeing what they need to do and trying to do everything all at once. However, much like your business didn’t spring into success overnight all those years ago, future-oriented planning doesn’t need to be a one-and-done proposition.
Let’s look at how a phased approach to planning can help you get the most out of your efforts and make the process more manageable.
You Can’t Catch the Fish WithoutThrowing in a Line
Bill Burns was ready to go fishing. Over 40 years, he grew what was originally a one-man logistics consulting agency into a mid-sized inventory management services business with 15 offices. His daughter Katie and longtime employee Lester Clay played big roles in the company’s growth through a proprietary software they’d created in the early years. Bill knew exactly how much he needed to retire with financial security. But he didn’t know how to go about getting it. He originally wanted to sell the business to Katie and Lester, but he knew they didn’t have the kind of people skills he had to attract new clients. He worried that if he sold to an outsider, they’d just buy for the proprietary software and lay his employees off. Plus, he wasn’t even sure what he’d do in retirement other than fish, and he was afraid he’d get bored.
Bill felt overwhelmed with how much he had to figure out. He shared these thoughts with Glen, his most trusted business advisor. “I think the most important area to focus on is making you inconsequential to the business,” Glen said. “You’re the rainmaker now, and to get the money you need, you’ll need to replace yourself.”
After reconfirming that Bill’s financial security target was accurate, Glen told Bill something that took much of the weight off his shoulders.
“Since Katie and Lester are comfortable sticking on the operations side, we can bring in a professional management team to help develop skills on the sales side. That’ll open up a lot of different paths for you to reach your personal and financial goals. It may also give you some leverage when you decide to sell.”
Bill was tentative at first. No one had ever outsold him at his company. But after seeing the professional management team that Glen and a new recruiting firm helped put together, he felt more confident, and for good reason.
The management team formalized his company’s sales process. Profits began to increase year over year because Bill wasn’t the only one capable of making big sales anymore. The management team used the additional profits to attract strong managers and operations people, which led to even more increases.
With more people helping to grow the company, Bill had more free time. He found hobbies he liked in addition to fishing and found himself spending more time away from the office doing them because of the strength of his sales team. He built a new plan for the future based on his new interests and goals.
Best of all, the expanded advisor team that Glen helped assemble had the expertise to negotiate with potential third-party buyers. Sales performance had finally caught up to the cutting-edge developments in operations, making his new team, including Katie, Lester, and new managers, just as valuable as the software.
With a strong management team and encouragement from Katie and Lester, Bill sold the company to a large international buyer, achieved financial security, and protected his employees.
Phased Planning Can Make the Process More Manageable
Like many business owners, Bill saw how much work he had to do and felt overwhelmed. When you’re responsible for your business’ success, it’s not uncommon to feel this way. Fortunately, with advice from a planning-oriented advisor and his new advisor team, Bill learned that he could do his planning in phases and didn’t have to be everything to everyone.
Phased planning allowed him to focus on the most important actions he could take and work through the initial challenges in a more limited area. His success in one portion of planning led to success in other areas over time, which also allowed Bill to move forward with planning for his personal future once the business future was clear. By committing to phased planning, Bill reaped the benefits, proving to himself that he didn’t have to tackle everything all at once.
We strive to help business owners identify and prioritize their objectives with respect to their business, their employees, and their family. If you are ready to talk about your goals for the future and get insights into how you might achieve those goals, we’d be happy to sit down and talk with you. Please feel free to contact us at your convenience.
The information contained in this article is general in nature and is not legal, tax or financial advice. For information regarding your particular situation, contact an attorney or a tax or financial professional. The information in this newsletter is provided with the understanding that it does not render legal, accounting, tax or financial advice. In specific cases, clients should consult their legal, accounting, tax or financial professional. This article is not intended to give advice or to represent our firm as being qualified to give advice in all areas of professional services. Exit Planning is a discipline that typically requires the collaboration of multiple professional advisors. To the extent that our firm does not have the expertise required on a particular matter, we will always work closely with you to help you gain access to the resources and professional advice that you need.
Any examples provided are hypothetical and for illustrative purposes only. Examples include fictitious names and do not represent any particular person or entity.
As a business owner, you manage all sorts of complexity in your work. Goals, expectations, and the people who help you meet them may change. But even though things constantly change, you can still adapt, thanks to smart and focused business planning. After all, if your company couldn’t adapt to change, it likely wouldn’t be as successful as it is today.
The Employee Retention Tax Credit was initiated in March 2020 to encourage business owners to retain staff during the COVID-19 pandemic. Two years later, we find ourselves in a time of economic instability with increasingly lower profit margins for small businesses. Adding to this burden, the Employee Retention Tax Credit will begin slowly slipping away.
