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Strategic planner urges employers to proceed with cautionBy Ginny Grimsley
November 28, 2011 (San Diego’s East County)--Small business owners should be planning now for how best to invest their windfall if Congress passes all the American Jobs Act incentives, says consultant Richard B. Sanford. Otherwise, they may quickly find themselves overextended.
“The jobs act rightfully emphasizes freeing up money so small business owners can hire new workers,” says
Sanford, author of Success by Design (www.ssbp.biz), a guide to simplified strategic business planning.
Sanford, author of Success by Design (www.ssbp.biz), a guide to simplified strategic business planning.
“One of the provisions is a payroll tax holiday on up to $50 million in wages for new workers or raises for existing ones,” he says.
“Businesses need to look at juicy carrots like this with a critical eye: This is a temporary tax holiday,” he says. “As proposed, it applies Jan. 1 to Dec. 31, 2012. But those payroll additions likely will be on the books long after the holiday ends.”
Businesses should be analyzing their market and their company now for ways to expand sales income and increase profits. They should execute those steps before they hire the first new worker, Sanford says.
“If they can look ahead and see a sustainable increase in income and profits with the bigger payroll, taxed at the full 6.2 percent rate, that’s a green light for hiring,” he says.
Other provisions of the jobs act include up to $4,000 in tax credits for businesses that hire people who have been out of work for at least six months. Employers would get a tax credit of up to $5,600 for hiring a veteran who has been jobless for six months or longer, and up to $9,600 for hiring a vet with a service-related disability.
“While those credits are enticing, keep in mind hiring is much riskier for a small business than a large one. For very small businesses, one bad hire can be disastrous,” Sanford says. “You should expect each hire to produce at least three times his or her salary in revenue.
“So while giving a veteran or a long-term jobless person work is laudable, employers need to approach those hires with the same care and caution as they would if there were no incentive. To justify the long-term employee expense, these new hires must be able to provide productive services for their employer and customers.”
Employers likely will also need to verify through unemployment claims how long the person has been out of work, he added.
Other small business incentives in the jobless act:
- Encourage businesses to invest in equipment by extending the current 100 percent expensing write-off into 2012.
- Help for small business contractors that want to bid on infrastructure contracts and get Small Business Administration surety bonds.
- Make it easier for jobless people to start their own small businesses by allowing them to use unemployment insurance money for up to 26 weeks. Currently, only some states consider jobless entrepreneurs eligible for unemployment payments. This provision would allow all 50 states to establish Self-Employment Assistance programs.
- Raise the cap on small businesses’ “mini” public offerings from $5 million to $50 million and reducing the costs for smaller companies to go public.
Richard B. Sanford has built careers in adult education, investment management and the insurance industry while leading the cause of small business in his home state of Michigan. Sanford organized the founding of the Small Business Association of Michigan, the state’s largest membership trade association. He has served as a National Advisory Board member and vice chair of the U.S. Small Business Administration.He is the author of Success By Design.
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