Blog

5 Outside Factors That May Affect Your Business In The Near Future

by Linda Coors on March 25, 2014 · 0 comments

5 Outside Factors That May Affect Your Business In The Near FutureEver heard of the butterfly effect? It’s the idea that a tiny change — even one that seems insignificant — in one place can manifest massive, cataclysmic change somewhere else down the line. A butterfly flaps its wings and changes the course of a tornado.

I’m not sure I buy the whole chaos theory, but I do know that there are many more factors involved in the fate of your business than what goes on within your four walls and on site with clients.

Here’s a look at some outside factors that may have a much bigger impact on your business than you think.

Minimum Wage

Recently, President Obama through executive order increased the minimum wage for federal workers to $10.10 per hour. He is now pushing that increase on private industry. The Republicans will likely block it, but it is hard to know for sure what they will do in an election year.

Unless you live in a state with a high minimum wage, you likely pay less than that. If your labor is 40 percent of your total cost, and that cost increases by more than 10 percent, you will find your bottom like decreasing by at least 4 percent if everything else stays the same.

It is important to consider this risk and plan for the possibility it occurs.

The Affordable Care Act

Another major risk to landscaping companies is the Affordable Care Act. Even if you don’t have 50 full-time employees, the act still affects you.

Companies with fewer than 50 employees cannot be individually underwritten by insurance companies, so rates are going up drastically for all companies across the board. You always have the option of dropping insurance altogether with no penalty, but it is important to consider what that will do to your workforce if they can go down the road to another company that does offer benefits.

Also, in the next two years, the 50-employee threshold may continue to drop until most, if not all, companies have to be compliant with the law. If that happens, you need to plan and be prepared ahead of time for additional costs that will bring.

Taxes And Section 179

One of the biggest breaks that small businesses receive every year is the Section 179 deduction that allows for current-year full deductibility of new equipment purchases up to a certain limit. In recent years that limit has been $500,000. As of Jan. 1, 2014, that limit fell to $25,000.

In the past, this deduction has always received widespread bipartisan support, so it is anticipated to be renewed again at some level. Most expect that Congress won’t act on it until after the November elections, but it will be retroactive to the start of 2014.

This makes it difficult for business owners to plan acquisitions. So it is important to keep an eye out for news regarding Section 179 so you can act quickly at the end of the year should you need to make some capital purchases.

The Global Economy

Read any newspaper from the last year or so, and you’ll find that a good portion of the world is in upheaval. There is continued vast unrest in the Middle East, in South America there is widespread government protest, and Russia is singlehandedly trying to restart the Cold War.

All of these things together are bringing about tremendous concern for the global economy. This impacts everything from interest rates, which affects variable-rate loans, to gas prices, which is likely one of your largest expenses after labor.

There isn’t much you can do about what happens around the world, but keeping yourself informed can help you to be prepared as things change.

Contracts

Hopefully you don’t perform any work without a contract in place. And hopefully you carefully scrutinize the contracts that you are signing. But all too often, business owners want jobs so badly, they just sign contracts without actually reviewing them in detail, or they do work with no contract at all.

It is critical now more than ever to have a contract in place and know what’s in it. Obviously having a contract gives you legal ground to protect your rights if you are not paid or something goes wrong on the job. But lately, some contracts circulating in our industry have provisions that can limit your rights and even jeopardize your business.

Provisions to read very carefully include:

  • Payment
  • Termination
  • Indemnification
  • Non-compete
  • Non-solicitation

There are some contracts out there right now that don’t allow you to lien or stop working if they don’t pay you, or prohibit you from selling more work within a certain radius of the property you are servicing. Be sure to read your contracts very carefully and have an attorney review them if you don’t understand something.

Keeping yourself informed during these times of uncertainty will make you prepared to maintain a healthy and profitable company.

Erin McCutcheon is a CPA and chief financial officer of HighGrove Partners. She was a featured guest during our 2013 Financial Management Summit. Listen to recordings of all three nights’ TeleSummit discussions by clicking the image below.

Image credit: Flickr

{ 0 comments… add one now }

Leave a Comment

Previous post:

Next post: