A New England specialty manufacturer came to us with precise goals of a more organized tax structure and operational training program. The business had approximately $3.5 million in annual revenue and required extensive employee training to instill the owners’ confidence in the management structure.
The C&A team helped the manufacturer obtain a cash infusion of over $300,000 through tax refunds and develop a more effective tax structure while eliminating the reliance on the business owners to run operations. Read this case study and find out how our experts achieved the company’s Growth to Goal objectives.
The Client’s Requirements
A New England specialty manufacturer with around $3.5 million in annual revenue was in dire need of a more efficient tax structure and more precise identification of stakeholder goals. The business had one fully-involved and one absent owner. Both owners had the same goal — to exit the business and retire within the next two years.
However, the management team lacked the skills to assume the business’s day-to-day responsibilities and facilitate the exit for the two owners. Moreover, there were many tax inefficiencies throughout the company.
The owners were unsure if an exit would provide enough liquidity to meet their retirement needs. They needed to regain confidence in the management structure and develop an operational training program that would position the company well for Employee Stock Ownership Plan.
Before implementing any programs, C&A held a series of strategic meetings. These meetings’ main goal was to uncover the owner’s desire for the company to live on through employee ownership.
Our experts conducted a detailed analysis to determine the best approach. They found several important items that needed addressing so that both owners could realize their goals. Primarily, this included the owners’ financial goals from the business sale, which would allow both owners to retire at their desired income level.
Besides this, there were other tax savings the business could take advantage of to help bridge the gap during the transition to employee ownership. Lastly, the company had several critical operational problems that needed to be resolved through the Growth to Goal model.
After developing a good understanding of both parties’ goals, C&A professionals moved to the next step. This was to establish a series of action items needed to realize all of the plans.
Next Steps: R&D Tax Credits
First, we conducted a calculation of value for the company and quantified the approximate gap in funds needed for the owners’ retirement. The client took advantage of R&D tax credits, obtaining a benefit of approximately $75,000 for the business. We also helped the company generate around $250,000 in tax refund through a change of inventory policy.
After clearing these goals, our team moved to the second primary concern — critical management training. The Growth to Goal Model’s implementation allowed the business to solidify its short-term strategy and establish exiting owners’ goals.
More importantly, it also helped identify a precise training program to position the company for future employee ownership. The focused training with the future leadership team enabled the implementation of financial systems and controls to guide the business every month.
C&A’s thorough approach provided clear identification of all stakeholder goals for both owners. The cash infusion of over $300,000 obtained through tax refunds paved the way for a more tax-efficient structure on an ongoing annual basis. In return, this increased efficiency and net profit margin helped grow the company’s Enterprise Value.
The strategic planning resulted in a precise vision for the future that both the exiting owners and executive leaders were aligned on. Moreover, the operation training program positioned the company in a favorable situation for the intended employee stock ownership plan.
Ultimately, these results provided increased ownership confidence and helped both owners identify the value gap and what they needed to achieve their goals. Simultaneously, the increased ownership confidence eliminated the reliance on the business owners to run operations.
If you require expert tax strategy advisory and effective operational training for your business, contact us today. Call (508) 797-5003 or reach out to us online.