Issue link: http://read.dmtmag.com/i/280096
On the Numbers March 2014 | Construction Equipment Distribution | www.cedmag.com | 47 Step 1 – If You Have It Make Sure You Keep It. No big secret here; just take the time to ensure that your assets are properly protected and unavailable to creditors should an unfortunate incident take place. In today's litigious society, it pays to use ownership vehicles that limit exposure to creditors. Family limited partnerships and similar structures, properly formed, can achieve this goal. For example, a business owner can own 1 percent of the FLP and still control 100 percent. In the construction equipment business it pays to make sure that the corporate veil is maintained, meaning all compliance requirements are met and documented annually with business and personal transac- tions kept separate. One little personal liability slip can wipe you out in a heartbeat. Me, I like sleeping at night, and knowing that the legal entity I use is properly managed lets me do that. Updating your tax planning annu- ally is a must. For example, the tax bill required when you sell your company is extremely different from what you owe if you sell your stock. I have seen numerous cases in which the amount of the tax bill from asset sales killed the deal. If you plan to sell within five years you better start figuring out how to lower the tax bill and increase the proceeds now – while you have to time to do something about it. Knowing the status of your retire- ment accounts is also a must. You would be amazed at the options you have to consider to minimize the tax bite related to 401(k)s, defined contribution profit sharing plans, IRAs, etc. You worked hard to accumulate the amounts in these plans, and if you are not careful you could give back the bulk of the balance in income and estate taxes, when in many cases you could stretch the tax liability another 30 to 40 years, with the balances keeping their tax-free earning ability. One last point regarding your personal situation, and that relates to life insurance. Life insurance today, especially the term policies, are very cost effective and a great way to (A) defer a detrimental tax event, (B) facilitate a buy or sell transaction, (C) add to certain types of retirement plan benefits, or (D) just fund your family's lifestyle should you die at an early age. Every business owner should annually address these issues with professionals who know what they are talking about – if you need better help, I know where you can get it. Step 2 – Benchmark. Every business has changed over the last 10 years, and yours is no different. Almost every outside influence on your business has been beating up your balance sheet and operating results. So, to reverse the impact, many of you adopted new technology, new product lines, made personnel adjustments, changed arrangements with OEMs, embraced the transition into the rental business, pared down investments in assets, and in general have done more with less. So, how you doing? Really? How do you know? AED offers three major resources you can use to benchmark and improve your business. First we offer the annual Cost of Doing Business Report (CODB), a very good tool to indicate which depart- ment or expense categories need reviewing and further study. If your internal financial statements are set up using industry standards it should take no more than 90 minutes to complete the survey. The survey and instructions can be found at http:// www.aednet.org/codb/. Best of all: The report is free to survey partici- pants. Note: If you have never partici- pated in CODB, do it this year – this is the year to catch up and make sure you are competitive in your market. AED also offers a higher level of benchmarking using 20 Groups, where dealers meet two to four times a year to discuss best practices and specifically how each participant can improve their operating results. Group members usually remain in the group for 11 years, and if I pointed out AED's 20 Group members to you, you would see they are among AED's best dealers. AED is now also offering a new, flexible High-Profit Dealer Group – one to four meetings per year, plus virtual meetings to discuss specific topics, monthly access to participant financial statements, monthly review of financial information by the moderator, calls with the moderator to review monthly or quarterly operat- ing results, access to industry experts as required. And it's all moderated by yours truly. We'll work together in whatever form you like to make you more money and help you keep what you earned. How to Increase Wealth Here are two of the five steps essential to every dealer's business and personal financial wellbeing – we'll cover Steps 3-5 next month. BY GARRY BARTECKI GARRY BARTECKI (gbartecki@ aednet.org) is AED's vice president of Finance.