​When you own a family business, there are two types of challenges you have to deal with; Business Challenges and Family Issues. We will talk about both, this week starting with Business Issues.

Business Challenges
 
Lack of written strategy. No documented business plan or long term planning. Decisions are made day-to-day in response to problems. No long-term or strategic planning.
 
Control of operations and compensation problems for family members. Dividends, salaries, benefits and compensation for non-participating family members are not clearly defined and justified.  Lack of participation in the day-to-day work and supervision required. Which family members are shareholders vs. daily management.  Difficulty controlling non-participating members of the family.
 
Vision, Growth and Expansion. Each family member has a different vision of the business and different goals. Problems due to lack of capital and new investment or resistance to re-investment in the business.  What measures must be taken to grow locally, nationally, and internationally.
 
Succession Planning. Most family organizations do not have a plan for handing the power to the next generation, leading to great political conflicts and divisions.  Problems when the next generation is not adequately prepared for take-over.  There are some specific issues related to the third generation.
 
Business Valuation and Exit strategy. No knowledge of the worth of the business, and the factors that make it valuable or decrease its value.  No clear plan on how to sell, close or walk away from the business.
 
Lack of talent and Training. Hiring family members who are not qualified or lack the skills and abilities for the organization. Inability to fire them when it is clear they are not working out.   There should be a specific training program when you integrate family members into the company. This should provide specific information related to the goals, expectations and obligations of the position.
 
High turnover of non-family members. Happens when employees feel that the family “mafia” will always advance over outsiders and when employees realize that management is incompetent.

You may know that Tom Gosche, Business Strategist of GLM, has been the President of the local Rotary Club of Schaumburg Hoffman Estates. This club has given time money and Energy to local causes for over 53 years. During that time, when the club was presented with a need, we figured out what we could do to help.

Along the way, we help start the Schaumburg AM Club and have been working together as much as we could to help the local community.

This project is no different. Dave Ligman, Autos teacher at Hoffman Estates High school, has been working with all of us over the years finding outstanding candidates for our Applied Technology Scholarships that helped students pay for education and training in the trades. We provided around $10,000 a year and had candidates’ winning the Rotary District 6440 Awards as well.

About a year ago, Dave Ligman mentioned to Don Minor, a long time Rotary member and very active with our Applied Technology Scholarships, that many students still need help getting the tools they needed for the training and beyond. Don found fellow Rotarians that could help put this together. Cris Hinojosa, owner of BNC Auto Body, gather the tools list and made contacts in getting quality tools.

Don enlisted the Help of the Schaumburg AM Club and Jim McKenzie came in to help. Holly Fath, our Club’s Youth Service Director became a cheerleader for the cause. After a short presentation at our meeting, hearing from a student we had award scholarships to in the past, we asked for financial support of the members in the club. Now, here we are giving the first set of tool kits to worthy students to use during their education and beyond.

I know there are many clients of GLM who are in the Auto industry. If you are interested in helping young students and potentially future employees, please contact Tom Gosche tgosche@scherotary.org 

Here is a Daily Herald Article Highlighting the program:
https://www.dailyherald.com/entlife/20220707/rotary-clubs-give-district-211-automotive-students-jump-start-on-careers

​GLM can provide an Opinion of Value of your business. This is based on information provided in your last three years Financial Statement, we can then estimate the Value of Your business.

There are a number of different methods that can be used to place an estimated value on a business. Different methods can yield different results. In fact, even the same method can yield varied results because different appraisers will make different assumptions.

In valuing Your business, our GLM’s Valuation used a modified version of the classic excess earnings method of valuation. We know from experience that this method offers a good estimate of value for small businesses.
In its simplest form, the method for excess earnings method of valuation makes use of the following items:

• Fair market value of the assets owned by the business less any debts owed by the business
• REAL income being earned by the owner(s) of the business (including items such as excess salary, profit, dividends, and business paid expenses that are not essential to business operations). 
• An earnings multiplier- The methods used for calculating the real owner income and for the appropriate earnings multiplier are detailed within the report.

This method, when used properly, is able to predict the range of prices at which a business is likely to be sold. 
 
GLM’s Valuation uses the following elements in arriving at our estimate:

• 2019, 2020 and 2021 (and sometimes YTD 2022) profitability
• Company assets
• Type of business
• Business longevity
• Competitive environment
• Customer concentration
• Vendor concentration
• Geographic location
• Profitability trend
• Revenue trend
• Estimated value of plant and equipment owned by Your business
• Working-capital requirements

If you are interested in learn more about how much your business is worth, Contact us:
​
Tom Gosche
630-675-8971
tomg@goglm.com
Schedule a 30 Minute Online Meeting: https://tomgosche-goglm.zohobookings.com/#/customer/30minuteonlinemeeting

Direct from the IRS: Here’s what businesses need to know about the enhanced business meal deduction
The IRS encourages businesses to begin planning now to take advantage of tax benefits available to them when they file their 2022 federal income tax return. This includes the enhanced business meal deduction.
For 2021 and 2022 only, businesses can generally deduct the full cost of business-related food and beverages purchased from a restaurant. Otherwise, the limit is usually 50% of the cost of the meal.
To qualify for the enhanced deduction:

• The business owner or an employee of the business must be present when food or beverages are provided.
• Meals must be from restaurants, which includes businesses that prepare and sell food or beverages to retail customers for immediate on-premises or off-premises consumption.
• Payment or billing for the food and beverages occurs after December 31, 2020, and before January 1, 2023.
• The expense cannot be lavish or extravagant.

Grocery stores, convenience stores and other businesses that mostly sell pre-packaged goods not for immediate consumption, do not qualify as restaurants. ¬
Employers may not treat certain employer-operated eating facilities as restaurants, even if they operate under contract by a third party.
Here’s what business owners need to know about certain costs:

• The cost of the meal can include taxes and tips.
• The cost of transportation to and from the meal isn’t part of the cost of a business meal.

Entertainment events
Business owners may be able to deduct the costs of meals and beverages provided during an entertainment event if either of these apply:

• the purchase of the food and beverages occurs separately from the entertainment
• the cost of the food and beverages is separate from the cost of the entertainment on one or more bills, invoices, or receipts.

Businesses should review the special recordkeeping rules that apply to business meals.

Direct Link to Chicago.Gov: 
https://www.chicago.gov/city/en/depts/bacp/supp_info/minimumwageinformation.html

Summary
As of July 1, 2022 the minimum wage in Chicago is $15.40 per hour for employers with 21 or more workers, and $14.50 per hour for employers with 4 to 20 workers. Tipped workers (workers who receive tips as part of their wage, like restaurant servers) have a minimum wage of $8.70 for employers with 4 to 20 workers, and $9.24 for employers with 21 or more workers. If a tipped worker’s wages plus tips do not equal at least the full minimum wage, the employer must make up the difference.

As of July 1, 2022, the Minimum Wage to be paid under City contracts or concessionaire agreements pursuant to the Order is $16.00 per hour. When applying an allowance for gratuities to the wage of City concessionaire employees in positions that customarily receive gratuities, the resulting rate is $8.20 per hour.

Every July 1, Chicago’s minimum wage increases per the Minimum Wage Ordinance. The Chicago minimum wage is tiered for large businesses with 21 or more employees, and small businesses with 4-20 employees. The minimum wage for larger employees increases annually according to the Consumer Price Index or 2.5%, whichever is lower, since reaching $15 per hour in 2021. The minimum wage for small businesses continues to increase towards $15 per hour by 2023.

​Complaint
File a Complaint by calling 311, using CHI 311, or by filling out a Complaint Form.

I hope you enjoy your Memorial Day. Tom Gosche was interviewed about his past work with the Chicago Blitz Professional Indoor Football. 

Former Chicago Blitz Business Manager Tom Gosche tells the tales of running a Pro Indoor Football Team. As an Executive he wore many hats, did many deals and has even more stories.

Tom Gosche was the president and general business manager of the Chicago Blitz indoor football team from roughly 2015 through the 2017 seasons.
According to Wikipedia the Blitz were members of American Indoor Football (AIF) in 2015 and 2016 and the Continental Indoor Football League (CIFL) in 2014. They played their home games at the Odeum Expo Center. The Blitz briefly joined the regional Midwest Professional Indoor Football (MPIF) for the 2018 season, but ceased operations once again after three games.
Tom visited the Pigpen recently to tell us the tales of being in the front offices of a start up Indoor football team and the challenges that the position and circumstances brought. His marketing savvy, hard work by he and co-workers helped keep the team and the fledgling league they played in afloat. Join us in the podcast episode above to hear Tom's and the Indoor Chicago Blitz's stories.

​Even if you are not currently thinking of selling your business, you should make every effort to prepare or ‘groom’ your business so it is sold successfully at the first opportunity. While the financial advisors you appoint will work with you to address issues specific to your company, there are a number of general grooming points worth considering (even before you appoint advisors) to maximize the value of your business:

Sales & Profitability: Historically, you may have been setting your prices, and thus your profit margins, at levels designed to create barriers to entry for your competition. If you are planning for a business sale your focus is likely to be short term strategies. It will be time to re-examine your market and customer base to see if higher sales and turnover levels are achievable. If the proposed sale itself is a number of years away, you should consider performing a strategic review of the entire business.

Operating Costs: You should regularly review your operating expenses but this is especially so when preparing your business for sale. You need to identify avenues to reduce expenses without affecting the operational effectiveness of your business.

Profit Trends: Apart from current margins, a purchaser will be looking at profit trends. Buyers are looking to see stable and steady yearly profit trends. Therefore, risky projects should be avoided and longer-term contracts that may prove to be onerous should be fully considered before acceptance. Unprofitable contracts need to be reevaluated and, if appropriate, terminated, as it is quite possible they will be detrimental to the value of your business.

Management Team: The purchaser of your business will be looking to acquire a high caliber management team. It may be worth reviewing your corporate structure to ensure that job titles and role descriptions adequately reflect the contribution that your management team makes to your business. Any re-structure needs finalization well in advance of an anticipated sale. A purchaser may also want assurance that the management team is supportive of your decision to sell or at least that it is likely to stay with the business for a reasonable period post-transaction. You should consider talking to management - how cooperative will they be? You never know, they may be interested in buying the business themselves.

Asset Base: Are there any assets in the business that may be of little or no interest to potential purchasers- e.g. short-term investments, under-utilized property, equipment or perhaps surplus cash? Think about realizing and removing them from the business before the sale. It is also worthwhile having all your property assets valued individually.

Restructuring: If your business has more than one division, some thought should be given to restructuring it into a number of stand-alone entities and perhaps selling these separately. Any such reorganization will have potential tax implications and other complexities associated with it and it will be important to take professional advice before undertaking any such initiative.

Tax Planning: Details of the various tax factors that you need to consider are set out in section 4 of this guide. Initial points to address include making sure that all your Corporation Tax, PAYE and VAT returns and payments are up to date. In addition, any tax losses that your company may have built up over the years may now have a value to the extent that they are available for use by the potential purchaser. Personal tax planning opportunities should be discussed with your tax adviser.

Valuation Expectations: You must have realistic valuation expectations. Valuation is important but do not let it get in the way of securing the sale.
​
Timing: Deciding the best time to sell your business can be a difficult decision to make. Factors to be considered when making this decision include the level of corporate activity in your industry; the state of the economy; changes in sector relevant legislation; and available tax reliefs (e.g. do you have to be a certain age to avail of certain retirement reliefs or pension planning opportunities).

These are all thinks that can help you, not only get your business sold for a great price, but help you grow your business beyond anything you ever dreamed of. I recommend you talk with an expert that has helped many business owners increase the value of their business:

SCOTT HANSEN
http://www.scotthansenconsulting.com