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• 10 Must-Know Facts About the SBA Offer in Compromise
• 4 Ways Companies Fail – and How to Fight Them
• What Can Your Brand Do With Social Video Marketing Now?
• Why Your Company Needs a Succession Plan
• The Post-PPP Tax Realities You Should Know

10 Must-Know Facts About the SBA Offer in Compromise Posted: 26 Jan 2021 01:34 PM PST The tsunami of defaulted SBA loans is coming. For the last couple of years, it's been relatively quiet, but that's changing. Given what I'm expecting to see in the near future, I wanted to write an article that lays out what you need to know about the SBA offer in compromise (also known as an OIC) process if you hope to achieve a successful settlement and partial loan forgiveness. Your business must be closed To qualify for an SBA offer in compromise, the business must be closed.  Several years back, a client contacted me. His business was still open, but he wanted to explore the OIC. I told him that the SBA would not be willing to consider it. He did a little research on his own and discovered that the SBA standard operating procedures (SOPs) did carve out situations where the SBA would settle with businesses that are open and operating under certain circumstances. I explained to my client that, yes, I had seen that as well, but in practice, it was not something I've seen them do. Nonetheless, he insisted that we look at settling while the business was still open. The idea we came up with was somewhat of a purgatory situation. We were going to submit the request for loan forgiveness while the business was open, but we would commit to closing the business if and/or when the SBA approved the offer in compromise. We submitted the OIC package and waited for a response. Not long after we submitted the offer, we got an answer back. The SBA was unwilling to consider the terms of the settlement because the business was still open. In other words, it was a nonstarter for them. Since then, I've told this story to countless small business owners who have hoped that they could reduce their debt while remaining open. Unfortunately, in my experience, this is simply not the case, regardless of what the actual SBA SOPs state. The business's assets must be liquidated (legally) In most cases, liquidating the business's assets is not going to be sufficient to repay the debt in full. When people come to me and say they listed their business for sale, and they listed the price equal to the amount that they owe, I always tell them that that's not the right way to value your business. If I were a buyer, I would want to purchase a business based on what it's worth, not what the seller owes to their bank. The business's assets are usually going to sell for 15 to 20 cents on the dollar as compared to what you paid for the new, which is OK. Selling the business assets in many cases is just a formality. If you have a service business like mine, all you really have is a desk and a computer in most situations, stuff like that is of no interest to your lender. There's a couple of ways you can liquidate assets. You can find a buyer, you can have the bank find a buyer or the bank can put it into a general auction. No matter what you do, you must get your bank's permission before the assets are sold. I've had situations where people sell the assets on their own and then take the money and put it toward something else like credit card debt. It can be tempting to sell the assets, but doing this will disqualify you from settling your SBA debt, and the bank won't trust you. My advice is to cooperate with the bank.  If they want to sell the assets themselves, let them do it. If the bank wants you to find a buyer, post them on sites like Craigslist, or find an auctioneer who would be willing to sell them. Home equity matters One of the first questions I ask a potential client is, "Did you pledge your home as collateral?" Some states, like Texas, prohibit people from pledging their home as collateral. Not all states are like this. If you pledge your home as collateral and you enough equity to cover the loan balance, you may be out of luck. If the equity in the home (after applying a discount) is sufficient to cover the loan balance, the SBA won't be interested in settling. When we calculate how much equity is in a home, we don't take the market value minus existing loan balances. We'll take a discount off of market value since we have to assume in a foreclosure situation that a lender would account for costs such as attorney fees, realtor fees, etc. Complete forgiveness for SBA 7(a) loans doesn't exist If you're a borrower with an SBA 7(a) loan and you search for SBA loan forgiveness, you are not going to find anything useful. Why? Because SBA loan forgiveness has been lumped in with the Paycheck Protection Program. Unless you have a PPP loan, you should not expect 100% forgiveness. It doesn't matter how bad your financial situation is. The SBA offer in compromise is a negotiation. You can settle for very reasonable amounts, but it won't be $0. Be responsive to and proactive with your lender I totally understand how stressful this situation is for you. Your business is gone due to nothing that you did wrong.  A completely random pandemic ravaged our nation. Now, you're left with several hundred thousand dollars in SBA debt, and no business with which to pay it back. The temptation is to hide, bury your head in the sand and not deal with it. However, to successfully settle your debt through the OIC program, you need to be responsive to, and proactive with, your lender. When your banker calls you or emails, return the call or email them promptly with the information they're looking for. If you haven't heard from your lender in a few weeks and you've been waiting on them, follow up and make sure that your file didn't get lost in the cracks. I can't tell you how many people have contacted me and said, "I never heard from my bank. I thought they forgot about me. So, therefore, I did nothing. Now, I got a letter from the U.S. Treasury. What should I do?" I tell them that, unfortunately, once it goes to the U.S. Treasury, there isn't much I can do. (More on the US Treasury below.) Make an honest effort I understand the temptation to fill out the paperwork as quickly as possible, send it off, close your eyes and hope for the best, but in a situation like this, you need to demonstrate that you're taking this process seriously. If you submit an OIC that's hastily put together, your lender may assume that you're not serious about it. Sure, it will take you time to get the information they're asking for, such as your current bank balances, a summary of your personal expenses or what your regular take-home income is, but without that information, your lender and the SBA can't make an informed decision. The OIC is based on your personal financial information. They're not using arbitrary amounts or percentages to determine whether or not you should settle. They're looking at your personal financial statement and all the other documents that go along with the OIC to make a decision. Don't make lowball offers The key to making a reasonable settlement offer is being realistic about your personal financial situation. Your offer needs to reflect the reality of your situation. For sure, some of my borrowers are in very difficult circumstances and will make an offer that's consistent with that. However, I know people who, despite the fact that they can't afford to repay their SBA loan, do have resources that they can tap into. By making a realistic offer, you're signaling to the SBA lender and the SBA that you understand the parameters of their process and that you are willing to make a settlement offer that is in line with those parameters. The 1099 is not negotiable One of the first questions people will ask me about settlements is, "Will I get a 1099?" In theory, the 1099 should go out if there is loan forgiveness, but I can tell you in practice that there's a lot of confusion, even among the banks. When I worked for the largest SBA lender in the country, at the end of every year, they would ask us to fill out an Excel spreadsheet. We were supposed to list what kind of 1099 they were getting and who was getting it. None of us truly understood if the 1099 was supposed to go to the borrower or the guarantor. For the most part, we sent a 1099 to the borrower, regardless of whether it was the legal entity or the personal guarantor that actually settled. When someone takes a job, they negotiate things like salary, bonus, vacation and their title. What they can't negotiate is whether or not they get a W-2 from their employer. The IRS requires that they get a W-2, and, therefore, they do. Just like the W-2, whether or not you get a 1099 is nonnegotiable. Lump sums are better for you (and them) If you've ever checked out SBA Form 1150, you will see that it states that a lump sum is preferred. In a situation where you're dealing with SBA loan default, everyone involved wants to just do a deal, work out a settlement and move on. The lender already has you as a defaulted borrower. In many cases, they're not interested in taking five more years of payments (that's the typical payment term of an OIC payment plan). The SBA is typically agreeable to monthly payments if it makes sense, but if the lender is not agreeable, there's not much you can do. I advocate to borrowers that they should find a way to pay in a lump sum. The reason for this is that if you, for example, enter into a repayment program that is five years long, and if you miss a payment, the lender has the right to declare that settlement agreement to be null and void. They keep any payments you made up to that point, and then the entire amount of the loan could be declared due. In other words, missing a single payment, (whether it's your fault or not), could kill the settlement, and you're back to square one. I prefer it if someone receives a lump sum from somewhere. Even if you have to make payments to that other lender, at least if you default with the other lender, you've locked in the total amount of forgiveness by paying your lump sum in a one-time payment to your lender. The threat of bankruptcy scares no one Pretty much every borrower I talk to mentions bankruptcy. As a former lender, the threat of bankruptcy doesn't move the needle in most cases. As a workout officer, my job was to look at what your offer is and compare it to the amount we could get (in theory, anyway) if we sue you. When you make a settlement offer, you must make an offer that's in line with the assets and the income that you have, as opposed to expecting them to accept any offer you give because they're afraid you'll file for bankruptcy. Doing a bankruptcy first renders you unable to settle after the fact. You'll never know what you'll be able to settle for if you do the bankruptcy first. If you attempt to settle, however, you'll know where you stand with your lender. There's nothing that says you can't start the OIC process and then file for bankruptcy if it doesn't go the way you want. The SBA OIC process can be confusing and complicated, with lots of moving parts. The big thing about settling an SBA loan is that you have to understand the rules of the game, just like any other game in the world. If you don't understand the rules of the game, it's virtually impossible to win.

4 Ways Companies Fail – and How to Fight Them Posted: 26 Jan 2021 11:16 AM PST In a successful business, everything runs like clockwork: Every team member knows what they are doing, every action is meaningful, and every plan is well designed. In a failing business, everything can unravel quickly: Losses stack up, creating chaos across the board. A product undergoes incessant changes, and communication problems begin to snowball. Customers aren't sure whom to contact with their questions, tasks are difficult to track, and the results are impossible to measure. Of course, no business is perfect. Every company can improve how it works. This is often a gradual process, and as companies go through this journey, they often look to the Japanese philosophy of kaizen. Kaizen aims to improve productivity, effectiveness, and communication, and to reduce waste. Kaizen has an extensive classification of different types of waste, but they all boil down to three classes: muda, muri and mura. Muda, or ineffective processes that do not add value, is probably the best known and most common of the three. But what makes processes ineffective? And how can a business improve its effectiveness to minimize losses and give meaning to its actions? I've collected some typical cases of how businesses experience losses – and how they tend to get stuck in traps like overworking and missing every deadline. Through these cases, I also explain how you can break this vicious cycle by changing your mindset about goal-setting or by selecting a dedicated goal management system.  Case 1: Losses due to constant changes One of the most critical types of loss is caused by constant alterations and remodeling. How many times have you heard a team member say, "Well, I thought this change would be helpful," triggering yet another round of product redesign? In a company, this often implies misalignment between the high-level vision or goals and the ground-level methods of achieving them.  Example A company launches a new product line, but the vision for the final product changes repeatedly. The product is redesigned multiple times to accommodate the ideas of the marketing team, the engineering team and key stakeholders. The development process becomes unacceptably long – and yet, once the product enters the market, it lacks critical functions and fails to meet customers' core needs.  Cause The team is focused on the process rather than the goal. The goal itself lacks clear criteria: The objective of "creating a good product" allows for too much interpretation, creating a rift in the team instead of bringing staff together.  Company's losses Bad customer experience Wasted resources Low team morale Solution To eliminate this type of loss, it's crucial to define your final goal clearly and specify the benchmarks necessary to achieve it. Without a clear definition, your goal isn't much more than a shapeless dream. The easiest way to visualize your ultimate goal (and intermediate goals) is to build a goal tree of interconnected, time-linked objectives.  Case 2: Losses due to meaningless work  Meaningless work is work that contributes nothing to a business and accomplishes nothing. This often happens when staff don't see a purpose in the work they are doing and measure its effectiveness only by a narrow set of criteria, such as the number of code lines written, meetings held, or emails read.  Example Several teams jointly decide to add new features to a product and develop an action plan. During the development process, it turns out that the features contradict each other and only confuse users. As a result, management decides that the features can't be used together in one product. Cause Every team is working hard to achieve their own specific goal but fails to coordinate their work with others. As a result, the efforts of at least one team go down the drain. Company's losses Wasted resources Low team morale Solution Before your team starts any work, it's important to understand clearly how it relates to the bigger picture, and the associated expectations and anticipated results. If the whole team shares a single, strategic vision and concept for a product, the problems related to misalignment will disappear.  Case 3: Losses due to poor human resource management  Another key cause of company chaos is the failure to leverage team members as intended. Imagine, in a hockey game, if the coach put a strong forward in net as a goalkeeper. The result would be disaster. A strong business values employees' ideas and supports their ambitions to learn and develop. To make the most of your team's talents, it's essential to find a role for each team member that best suits their abilities.  Example A customer service star is promoted to a role in the sales department. However, this employee struggles in the new job, feels that their efforts aren't producing results and eventually resigns. This employee's talent was caring – and a willingness to achieve the best results by supporting people. The sales role focused more on assertiveness than empathy and care, which made it a poor fit for the employee.  Cause The company didn't understand how to unleash employees' potential. First of all, management had no clear vision of core business needs, or of the specific skills needed from an employee to add value to the business. They also lacked sufficient knowledge about the employee's strengths and qualifications to pair them with the most appropriate work.  Company's losses Low morale and high staff turnover Head-hunting costs (to replace the employee) Time spent on education and onboarding Risks related to hiring a new employee    Solution The key starting point is to understand the purpose of your product or service is – the specific problem it solves – and how value is created throughout the production process. This will help you anticipate customer requirements and expectations, and determine your specific skill and resource needs.  Case 4: Losses due to staff rotation and idle time  Constant changes and goal misalignment aren't the only reasons why companies slide into chaos. Adding staff to a team at the later stages of a project can slow down the development process significantly, leading to further losses.   Example A company often adds new projects, and each new project has a different set of requirements, technical stacks and necessary skills. As a result, the bulk of the company's time is spent on staff onboarding and transitions, rather than on actual product development.   Cause New team members always need time to get up to speed. Repeated adjustments to ever-changing needs and circumstances prevent the team from focusing on bigger and more important goals. More time is spent on learning than on adding value to a specific project.  Company's losses Exhausted team Time spent on education and onboarding   Solution Rallying your team around a shared goal is a key action to lead your company to success. Strategic approaches to planning, like the balanced scorecard goal-setting framework, allow your team to forecast the required resources and skills – and achieve synergy between multiple goals.  Bringing it all together These examples show that vague goals or a lack of shared vision can kill any project, leading to reputational and operational losses for a business. To reduce waste, it's crucial to set achievable goals, define clear success criteria, and then break down each goal into a hierarchy of measurable benchmarks. Management studies have produced multiple frameworks that any company can use to facilitate goal-setting and create a goal tree – a structure of interconnected objectives and the actions necessary to achieve them. Either manually or with a carefully selected goal tracker, setting proper objectives will streamline your business processes, focus your team's needs and requirements more effectively, and rekindle employee engagement.

What Can Your Brand Do With Social Video Marketing Now? Posted: 26 Jan 2021 10:37 AM PST How can businesses use social video now? For both B2C and B2B brands, the short answer is that you can use social video to accomplish a lot, from raising brand awareness to driving sales. Despite the hype when brands like Ocean Spray go viral, most of the benefit of social video comes from the core best practices of knowing your audience, tailoring your message to the platform, and creating content that resonates with potential customers. Even without millions of views, well-made social videos can compensate for low- or no-touch shopping experiences for consumers and business decision-makers. They introduce consumers to new D2C brands and help business buyers gather the information they need to research and compare solutions.  Video posts and ads also have higher engagement rates than text-only or static-image content, so they can help you capture your audience's attention. Even better, you don't have to luck into – or try to force – a viral video moment to connect with your customers.  Where can you place your social videos and ads? Social video platforms are always evolving, but here's a snapshot of some of today's best options for businesses: Instagram Reels Reels is Instagram's answer to TikTok. Users get two length options with Instagram Reels: 15 and 30 seconds. Reels recently added shopping so viewers can buy directly from the videos they watch. Meanwhile, TikTok has partnered with Shopify to let store owners create video ads from the e-commerce platform.  Other Instagram and Facebook video ad channels With nearly a dozen other channels besides Reels, Instagram and its parent, Facebook, give brands plenty of video placement options: Instagram feed, Stories and Explore  Audience Network native, in-stream and other placements Facebook feed, in-stream, Marketplace and Stories Facebook Marketplace, Instant Articles, and News Feed allow videos up to four hours long, but for most Facebook and Instagram video placements, the limit is two minutes. LinkedIn  On LinkedIn, native videos can run as long as 10 minutes, although LinkedIn notes that the ideal run time is three minutes or less. One recommendation for longer videos is to create a series of shorter videos for LinkedIn ad campaigns. In fact, LinkedIn reports that the video ads that do best are under 15 seconds. Twitter Most businesses can tweet videos or run video ads up to two minutes and 20 seconds long on Twitter. Like LinkedIn, Twitter recommends keeping your video ads to 15 seconds or shorter. YouTube Fifteen minutes is the basic time limit for video shares on YouTube, but you can upload longer videos once your account is verified. Video ads on the platform range from six to 20 seconds.  What kind of social video content should you create? Most of the time, we think of short-form video when we think social – brief customer testimonials, product demos, and animated explainer videos of a minute or two are all prime examples. And for some platforms and audiences, short videos do work best.  However, longer video posts can also work. In fact, many professionals rely on video content for work now. For example, the Content Marketing Institute reports that, in 2020, more than half of tech professionals and engineers said they watched at least an hour's worth of video for work each week. These are some long-form video options to consider: Excerpts from webinar recordings that drive traffic to gated content or a registration page In-depth explainer videos that break down complex concepts or processes for business decision-makers  In-depth product or service tutorial walk-throughs (especially helpful for SaaS marketing) Longer case studies that include video interviews with clients or customers Mini-documentaries that showcase your business's culture, technology or creative process While your followers may see your video posts in their feed, your target audience is more likely to see your videos if you run them as social ads. Social video ads let you customize your audience to reach different segments of your target market based on their attributes. Social video ads can reach audience members outside of social platforms as well: YouTube, LinkedIn and Facebook all serve ads offsite.  Live social video options Facebook and Instagram offer livestreaming options, and LinkedIn is currently beta-testing livestreaming with a selected group of applicants. Twitter's live video platform, Periscope, requires a separate account, although you can create one with your Twitter credentials.  B2B companies can livestream product launches, conferences, and behind-the-scenes interviews with SMBs and company leaders. But the most immediate livestream results so far seem to be in the B2C space.  Forbes reports that global B2C brands such as L'Oreal and Kim Kardashian ran successful livestream shopping campaigns in 2020 that paired their products with Chinese social media influencers. Livestream shopping is something like an old-school infomercial updated for social media, with social celebrities, audience interaction, flash deals and instant purchasing.  Whether you're showcasing your expertise for a B2B audience through native video or driving B2C sales through paid social video ads, a few best practices apply generally to all social video campaigns.  Social video marketing best practices 1. Know the aspect ratio and other specs for each platform you use. Limits in pixel size, file size, aspect ratios and file formats vary from one platform to another, sometimes even within the same platform. For example, Instagram Stories video ads must be at least 500 x 889 pixels, while carousel video ads on Instagram should be square – ideally 180 x 1080 pixels.  Hootsuite's guide to social media video requirements is helpful for an overview of many platforms. It's also a good idea to double-check the specs for each platform you plan to use before you shoot your footage. 2. Be consistent with your thumbnail. Create a branded thumbnail cover image or overlay logo for your videos and keep it consistent, with versions available for each different aspect ratio and resolution you need for each platform and channel.  3. Use captions on every video. Engaging dialogue matters, but most viewers won't hear it. A 2019 Verizon study found that 69% of Americans watch videos with the sound off while they're in public, and a quarter mute videos even at home. Accessibility is another reason to caption videos.  4. Include a call to action. Most social platforms let you add a CTA button or card at the end of your video so viewers can take the next step, whether that's making a purchase, registering for a webinar or downloading a whitepaper. If there's no CTA link tool on your platform of choice, include a URL at the end and in the text of your social post or ad. 5. Leverage platform data to tailor content to your target audience. The ability to personalize your social video messaging helps you reach the exact people who are most likely to watch your video and follow your CTA. Track your campaigns' performance and adjust your targeting and messaging as needed. Starting your social video marketing If your company is brand-new to social video, start small, with one platform, one format, and videos of 15 seconds or less. If you already run social video campaigns but haven't seen the kind of ROI you want, review the tips above. You may need to shorten your videos, add captions, revisit your targeting and improve your CTAs. Keep experimenting and learning, because the potential for engagement and conversions from social video is worth the effort. [Read related article: 4 Tricks to Increase Your Social Media Views and Go Viral]

Why Your Company Needs a Succession Plan Posted: 26 Jan 2021 05:00 AM PST Succession planning is not an intuitive part of many companies' future planning strategies. Although it makes sense to plan for future leadership and critical position transitions as best as possible, developing a succession plan when organizations have limited knowledge about the succession planning process or are unsure about current potential successors can be tough. Succession planning provides a head start for organizations that feel they have team members who can potentially play larger roles in the company when the time is needed. Taking the time and spending the energy and resources on a solid, evolving succession plan pays off in ways that many companies do not fully understand until the act of transitioning key roles occurs. What is succession planning? Although succession planning is identified in many ways, the practice is typically described as a focused process for identifying, developing, and preparing future leaders and subject matter experts (SMEs) to maintain a proverbial "pipeline" of probable next-gen leaders. This process, typically, is mostly an internally focused one. That is, succession planning is generally a program that identifies current employees within the organization that it desires to further develop (e.g., train, coach, mentor, etc.) for future leadership or key roles in the company. Research shows most companies don't have a succession plan or program to develop one in place. A study by the Furst Group found that more than 50% of companies admit to not having a succession planning program. Further, as the Furst Group study highlights, when you factor in that close to close to 40% of the U.S. workforce retired in 2020, not having succession plans in place has many companies scrambling to be prepared for the future. The succession planning process varies, but it's generally a 12 to 36-month process of preparation and development. During this process, there should never be any guarantee or promise to an employee of a future promotion or move into a key position. What this process does is identify an employee for learning new skills and training that positions them for possible advancement down the road. [Looking for human resources software that can help with succession planning? Check out the HR software we think is best for small businesses.]  How to develop a succession plan Succession plans can be as simple or as complex as you desire. It is important to not let perfect be the enemy of really good. ProSky, a provider of predictive intelligence for hiring managers and human capital professionals, offers a five-step method for initiating a succession planning program. Take one step at a time, and do not be afraid to add or remove steps that you feel best position your organization for long-term success. Identify important (or critical) positions. Most companies do not create a succession plan for every single position (although some do). You are best served selecting all of the essential SME and mid-to high-level management roles to initially focus on.  Assess all organizational employees. Next, you want to develop simple assessments that help leaders identify potential candidates for advancement within your current team. Remember, you are not "anointing" your next CEO right now – you are simply identifying candidates with promise and whom the organization may select to invest time and treasure in.  Select current team members. When succession planning falls apart, it is usually at this step when it is time to select employees for development as future leadership. Identify and enhance your training and development tools, both internally and externally, and allow time and space for the identified personnel to train and be mentored A major deficiency that companies commonly overlook is creating time for employers to seek outside training courses, mentor sessions, and so on. This is an investment in your selected team members, and it needs to be recognized as such through planning and workload (re)distribution. Create your program and begin development. Now is the time to create, with the help of your HR team, or an external HR specialist, the tools and development methods that you can use to develop your selected team members. This should be through a combination of internal (e.g., managerial/SME job shadowing, mentoring, retired company manager-led coaching, etc.) and external resources (e.g., workshops, conferences, external coaching resources, webinars, books, etc.). Do not overlook small resources, nor should you be afraid of spending money on larger, more comprehensive learning models and resources.  Evaluate and duplicate. All organizational programs, regardless of their focus and purpose, should be evaluated constantly. You should always look for improvement, advancement, development, etc. Your succession planning program is, without a doubt, no different. As you see it working smoothly, continue repeating this program initiative again and again. It is also advised to include succession planning within your organizational strategic plan.  Lastly, here are some helpful do's and don'ts that G&A Partners has shared with its clients. One of their recommendations, as we have also shared, is not hesitating to look outside your company for new or additional talent. This practice can enrich your overall succession planning endeavors. Source: G&A Partners   Why is having a succession plan important? When it comes to senior roles and key positions within the organization, not knowing how future transitions of leadership will be handled can be unsettling and potentially calamitous to the organization. Many of these possibilities include: Industry-specific talent shortages. Within many industries, there is fierce competition for leadership and top talent. If you are not maximizing your own talent and bringing in new talent, there is a likely threat that you will be outmaneuvered by your competition who is. Identifying skill gaps and training needs. Leaders and HR teams need to be constantly identifying and assessing the talent and resource needs within their organization. As the industry and marketplace evolve, the company, thus the workforce, need to evolve as well. Retaining institutional knowledge. "Knowledge continuity" is a term that refers to what is lost when turnover is extensive and replacements are solely brought in from the outside. Internal succession offers a richness of company knowledge and history that allows for more efficient planning and progress as age-old organizational (and industry) knowledge is passed from one to another throughout transitions or a "changing of the guard." Increasing morale and retention through employee-investment. Sparkbay reports that when employees see that there are opportunities for advancement within the organization they work for, they stay longer and work harder. Specifically, 94% of employees said they would stay with their employer longer if the company invested in their professional development. What if a company has no one of interest to develop? This is the case in many companies, large and small. Although there may be a desire to develop an actionable succession plan, in some organizations, there could be only a few or no employees of interest (or who do not have the ambition, interest or talent) to develop over time for the company's future needs. This issue is both a present challenge, as well as a future staffing challenge, that must be overcome. If you are a small business, the challenge could be as simple as having too small a team, with few human resources in which to select from for development. Many small family run/owned companies fall into this category, which is further complicated as, much of the time, family members are preselected to take over whether they have been properly trained, mentored and prepared or not. Small companies As is often the case with organizations with a small number of employees and limited resources, there is a dearth of viable candidates. To develop a pipeline of potential future talent, reach out to networks, boards and other industry-specific resources to expose industry professionals to your company and its brand. This practice will make word-of-mouth recruitment of someone external much easier if you have done the work ahead of time within your network. Some companies initially bake future external hires into their larger succession plan for the company. This practice ensures that new professionals with new ideas, perspectives and ways of thinking are being added to the company's corpus. Larger companies If you are a larger company with this challenge, there are more available options. If you cannot identify any future SMEs to fill in when current SMEs depart from the company, then you have a hiring and workforce development problem. You should spend time carefully assessing which key team members are presently performing well and who is not. The time to make personnel corrections to your team is now. Do not wait until critical employees depart your organization to realize that you should have worked harder on staffing your team's pipeline with top talent. If you have a senior leadership concern (e.g., director level, C-suite, executive, etc.), then a similar approach should be carefully reviewed by the senior leadership team (with the guidance of HR). At times, this challenge can be solved by looking externally. Regardless, take internal candidates of interest, who lack skill sets or experience in important areas, and invest in external training and development opportunities so you can honestly assess their ability to proceed in leadership if and when needed. Additionally, if you have a team of directors and none of them are able to, based on their skills, move to the next level, then carefully and wisely prune your director-level team and bring in new team members whose capacity is far more diverse and capable for the company's future needs and desires. How succession planning fits into 'career pathing' Career pathing is a broader term applied to a company's overall approach to training and development for its employees. Although not all companies have a formal career pathing program, it, too, is a wise idea to implement. Chances are that your company's top talent is looking for additional training, mentoring and opportunities for growth. If your employees cannot find these opportunities within your organization, they will leave for one that can provide them with the chances for growth they are seeking.

The Post-PPP Tax Realities You Should Know Posted: 26 Jan 2021 04:30 AM PST More than 5 million businesses took advantage of the forgivable Paycheck Protection Program loans that were part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Recent changes to the program could have tax implications. Here's what small business owners who received a PPP loan need to know before filing their 2020 taxes. What was promised in the Paycheck Protection Program? In the wake of widespread lockdowns, many small businesses experienced greatly reduced patronage, dwindling revenues and, in many cases, potentially permanent closure. In a bid to counter those issues, Congress passed the CARES Act as a multipronged stimulus package that included loans for distressed industries, an expansion of unemployment benefits, and billions in emergency grants. The other major aspect of the CARES Act that sought to help entrepreneurs was the $350 billion set aside for small business loans from the Small Business Administration. Through Congress' action, the PPP attempted to help small businesses cover their payroll costs and keep people employed through the pandemic by providing up to 2.5 times their monthly payroll expenses, with a hard cap of $10 million per loan. These are some qualifying expenses for forgiven PPP loan proceeds: At least 60% of the loan, up to $100,000 per employee, used for payroll Employees paid at their regular levels throughout the eight or 24 weeks of the loan The continuation of healthcare benefits State and local compensation taxes Other business costs, such as rent, mortgage interest and utilities Though the initial batch of PPP loan proceeds quickly dried up, the PPP served as a life raft for many small businesses. Last month, the SBA announced that another run of PPP funding would begin with the new year. With $284 billion set aside for this latest iteration of the PPP, the program is set to provide up to $2 million per loan to help each PPP borrower. This time around, applicants were limited to businesses with 300 or fewer employees that could demonstrate at least a 25% reduction in quarterly year-over-year revenue. These are some additional business expenses forgiven through the latest round of PPP: Software Personal protective equipment (PPE) Property damages How does the PPP affect taxes? While the idea of receiving funding from the government with no expectation of paying it back was a balm for small business owners, one area of confusion has been its potential impact on taxes. Since the loans would be forgiven, questions remained as to whether the forgiven amount would be considered taxable income and whether expenses covered by the loan could be deducted. Though the PPP was seen as a lifeline, many experts warned that the original legislation could be a tax-laden time bomb. That confusion came to a head last May when the IRS issued Notice 2020-32, which stated that if forgiven PPP loans were not taxable, expenses that would be considered a tax deduction in a normal year, such as rent and utilities, would not be deductible in the 2020 tax year. The announcement effectively kneecapped one of the most attractive parts of the PPP. When Congress passed the latest round of PPP funding through the Coronavirus Response and Relief Supplemental Appropriations Act (CRRSAA), it reversed the IRS' decision by declaring that a forgiven PPP loan would be tax-exempt income. Thanks to that clarification from Congress, businesses can get a PPP loan and still get the employee retention tax credit (ERTC) for tax years 2020 and 2021. What should you consider now? Though Congress has walked back the IRS' stance on the PPP and its relation to deductible income, that doesn't necessarily mean you can leave those funds out of the conversation on your 2020 taxes. Rafael Alvarez, founder and CEO of ATAX, believes that whether you received PPP funding in its first iteration or later on in 2020, you should still be careful when it comes to taxes. "There are still a lot of unanswered questions," Alvarez said. "What about the expenses that the business owner paid with the PPP? If the income is entirely tax-exempt, are the expenses nonreportable? There are a lot of issues." Some of those issues, he said, stem from confusion in the PPP application process. In some cases, application woes meant businesses received money that they weren't qualified for in the first place. For instance, a company might have stated that it had employees when it only had independent contractors. While that may seem like a case of semantics to the layperson, that kind of difference could have major implications when it comes time to file business taxes. How those funds were used is also important to keep in mind. "Any money that the business owner used to pay something else that is not included in the PPP requirements, they will have to report the amount as income and expenses in their business tax return," Alvarez said. Be careful with tax credits. One area that could be impacted by the PPP is the ERTC. Though businesses that get the PPP can still obtain the ERTC, how much of a credit you receive could be altered as a result, said Jackie Meyer, a certified public accountant and the president and founder of Meyer Tax Consulting. "The PPP loan forgiveness payroll calculations affect the calculations for the employee retention credit," she said. "You can't utilize the same payroll expenses in both calculations – they have to be different." Meyer also pointed out that if a business takes the ERTC in addition to the forgiven loan, it's no longer allowed to take the work opportunity tax credit (WOTC). See if your state considers your PPP loan taxable income. Though PPP loans are fully tax-exempt at the federal level, make sure to check your state's stance on the matter. Though a number of states have taken steps to follow federal guidelines, your state and local taxes may be impacted. According to the SBA, 21 states and Washington, D.C., are "rolling conformity states, meaning they automatically conform to the most current Internal Revenue Code (IRC) for both individual and corporate income taxes." Some states – such as New Jersey, Mississippi and Arkansas – have selective income tax conformity, so you'll have to check your local guidelines if you operate in one of these states. Massachusetts and Pennsylvania offer rolling conformity to corporate income taxes, though Massachusetts has static conformity and Pennsylvania has selective conformity for individual income taxes.

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