Small Business Archives

Employer Responsibilities under the Affordable Care Act (Obamacare)

Here is another attempt by the IRS to explain employer’s responsibilities in the never-ending saga of Obamacare. If you are a growing business, make sure you are aware of the number threshold of employees requiring you to purchase health insurance.

Employers with 50 or more full-time and full-time-equivalent employees are generally considered to be “applicable large employers” (ALEs) under the employer shared responsibility provisions of the ACA. Applicable large employers are subject to the employer shared responsibility provisions. However, more than 95 percent of employers are not ALEs and are not subject to these provisions because they have fewer than 50 full-time and full-time-equivalent employees.

Whether an employer is an ALE is determined each calendar year based on employment and hours of service data from the prior calendar year. An employer can find information about determining the size of its workforce in the employer shared responsibility provision questions and answers section of the IRS.gov/aca website and in the related final regulations.

In general, beginning January 1, 2015, ALEs with at least 100 full-time and full-time equivalent employees must offer affordable health coverage that provides minimum value to their full-time employees and their dependents or they may be subject to an employer shared responsibility payment. (On January 1, 2016 that threshold is lowered to 50 employees.) This payment would apply only if at least one of its full-time employees receives a premium tax credit through enrollment in a state based Marketplace or a federally facilitated or Marketplace. Also, starting in 2016 ALEs must report to the IRS information about the health care coverage, if any, they offered to their full-time employees for calendar year 2015, and must also furnish related statements to their full-time employees.

For 2014, the IRS will not assess employer shared responsibility payments and the information reporting related to the employer shared responsibility provisions is voluntary. In addition, the employer shared responsibility provisions will be phased in for smaller ALEs from 2015 to 2016. Specifically, ALEs that meet certain conditions regarding maintenance of workforce size and coverage in 2014 are not subject to the employer shared responsibility provision for 2015. For these employers, no employer shared responsibility payment will apply for any calendar month during 2015 (including, for an employer with a non-calendar year plan, the months in 2016 that are part of the 2015 plan year). However these employers are required to meet the information reporting requirements for 2015. The employer shared responsibility provision questions and answers section of the IRS.gov/aca website and the preamble to the employer shared responsibility final regulations describe the requirements for this relief in more detail. Both resources also describe additional forms of transition relief that apply for 2015.

Small employers, specifically those with fewer than 25 full-time equivalent employees, may be eligible for the small business health care tax credit.

Regardless of the number of employees, if an employer sponsors a self-insured health plan, it must report to the IRS certain information about its health insurance coverage plan for each covered employee.

More information

Find out more about the small business health care tax credit, applicable large employers, the employer shared responsibility provision, information reporting requirements and the premium tax credit at IRS.gov/aca.

Find out more about the health care law at HealthCare.gov.

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Business Information is King: Or How to Hit a Curveball

Years ago I coached one of my sons in Little League and Junior League. As the players progressed, a distinction developed between those who could, and those who couldn’t hit curveballs. Those who could not adjust and hit it like a fastball either struck out, or hit a three hop groundball to the shortstop. As the players reached 13, they were expected to start recognizing curveballs.

These memories came back to me as I read the article, Big data: The next frontier for innovation, competition, and productivity by Manyika et al. in the McKinsey Quarterly. The article discussed the worldwide exploding data, and how businesses can take advantage of it. I will compare the curveball and the authors’ data techniques :

Recognize the pitch and existence of big data: The first step in hitting a curveball and managing data, is to recognize the issue in front on you. Curve balls travel slower and spin to the side as opposed to spinning backwards. Likewise, a business must search and understand what data is being created, analyzed, and distributed in its industry. If you are not a data-type person, hire someone to help.
Curveballs and big data will play a bigger and bigger role in your future: I recall meeting a college star baseball player who did not perform at the same level at the Minor leagues because pitchers were throwing more curveballs, of which he couldn’t hit. The one rule I remember on managing a curveball is to his the inside of the ball (closest to you) and take the ball to right field if you are a right handed batter. In the same vein, if you cannot manage the wealth of big data growing every year in your industry, a competitor will.
Not all pitchers throw a similar curveball, and not all data is the same: Not all curveballs are created equal, some drop, some fade, some use a knuckle. Always take a “short stroke,” and not extend your arms or you will get ahead of the ball. And it should not be a surprise to you that with data, and its importance, it can vary in value and importance. Look for opportunities in your data and how it matches the core competencies of your business. But use the same technique of strategic planning as you do with any plan and adjust it to the data.

As a business owner, you must be aware of data. Those who can use data efficiently will have power, and power means a competitive advantage. Others who ignore data may find their services or goods reduced to a commodity. The age of data is an age that is accessible by everyone.

Cash Flow and the Life Blood of a Business

My youngest son, Austin, likes to play the “net cash game” method of settling debts. I owe him $10, but then I pull out a twenty, he then takes out five ones from his wallet and states I now owe him $15. Then we exchange back and forth until the accountant in me realizes that I paid him $25 for a $10 debt. At 16 he bought an Audi…no surprise.

Business cash flow with customers and vendors can seem like the same game. Taking from here to pay there, paying partial or late payments to vendors to “make payroll.” Dan Ginsberg writes about this in Ten Steps to End the Dash for Cash. His point is well taken. Too many small and medium-sized businesses do not look at the underlying reasons for working capital shortages.

Here are some areas you should consider in addition to looking deeper into his suggestions:

Take a close look at the profitability of your services or products: Too many companies are afraid to discontinue losing products or services thinking that they will come around. There is no room for favorites in business. You must take a hard look, but before that, you must determine that your costing information is accurate. This requirement is a cost accounting function. If you do not have good information to make your decision, then your decision may not be a good one.
Take a close look at the profitability of your customers. Have you ever read The 80/20 Principle by Richard Koch? The book argues that clients that represent twenty percent of your revenue are absorbing eighty percent of your company’s time? Can you think of customers like that? If you do, you should consider whether they are worth keeping. Remember, that extra time can be used to bring in better clients or service clients that are more profitable.
Generate a list of monthly metrics that represent the health of your cash flow: Most business only look at monthly sales. There are several other cash flow metrics that you can monitor in order to gauge the health of your business. List them and use them.

Cash flow is the blood of a business. Take its pulse and regulate it to a healthy future.

The Affordable Care Act and the Small Business

If you are unsure on how the Healthcare Act will affect your business in the near future, you can find answers at the Department of Labor web site. The main question is if an employer can be fined for failing to provide employees with notice about the ACA new health insurance markets? Some businesses were concerned about the $100 fine for not doing so.

Background: The ACA requires employers to provide their workers with a notice about the state health insurance exchanges. These exchanges will sell insurance to individuals who don’t get coverage through their employers. The exchanges are also available to small businesses.

The notice should inform employees:

About the Health Insurance Marketplace;
That, depending on their income and what coverage may be offered by the employer, they may be able to get lower cost private insurance in the Marketplace; and
That if they buy insurance through the Marketplace, they may lose the employer contribution (if any) to their health benefits

The U.S. Department of Labor has two model notices to help employers comply. There is one model for employers who do not offer a health plan and another model for employers who offer a health plan or some or all employees:

The model notices are also available in Spanish and MS Word format at https://www.dol.gov/ebsa/healthreform/.

Employers may use one of these models, as applicable, or a modified version. More compliance assistance information is available in a Technical Release issued by the US Department of Labor.

The answer to the persistent question though is: No. If your company is covered by the Fair Labor Standards Act, it should provide a written notice to its employees about the Health Insurance Marketplace by October 1, 2013, but there is no fine or penalty under the law for failing to provide the notice.

Businesses should stay on top of such laws or make an alliance with a health insurance professional to keep you abreast of all developments.

“Breaking Bad” Habits of Ignoring Your Strengths and Copying Others

Have you ever tried to compete on the “other guy’s field?” So many businesses and people try to copy other company’s strategies because the other guy is successful. Why not strategize using your own skills and resources?

Take Andrew Huang for example. Instead of covering the “Breaking Bad” Theme like so many have done before, he used a different approach. Watch him cover the theme using items commonly found in a meth lab.

Andrew broke the bad habit of many artists. Basically these artists film sessions covering a hit song with the intent to sound exactly like the original version using the same instruments. Their goal was to pick up an audience and a following. Yet, Andrew accomplished this by combining the music with the dynamics of the program. He was able to stand apart from the millions that ache for a “following.”

This thinking not only applies to artists, but to businesses. When your competitor launches a new idea, don’t try to replicate it. Instead, try to leapfrog it using other strengths that are inherent to you and your company. The typical “SWOT Analysis” is used in strategic planning, though as only a small part of it. The SWOT analysis is measuring the internal aspects of your business (strengths and weaknesses) against the external aspects of your business (opportunities and threats).

Setting a strategic plan means taking a novel approach to your business using all available information from your internal accounting to external market conditions. This entails being brutally honest. For example, if there are products, or personnel that do not align with your strategy, you must eliminate them. The concept that Jim Collins in states in his book, Built to Last is the get the right people on the bus before it leaves. Don’t drag people along that you hope will change. If they don’t mix with the new direction, then you are better off letting them find a job that they can agree with.

Try “Breaking Bad” habits and push your company to a horizon that offers more than immediate gratification. (BTW, I don’t recall a guitar being and essential tool in a meth lab.)

The Strategy of the “Argo” Writer and Why You Should Take Notice

Do you use “vertical” logic to solve a problem? This classic method for problem solving works out a solutions using a step-by-step method until a person arrives at a conclusion. Engineers I’ve known, have used this approach.

Or do you address problems “horizontally”? That is, having a thousand ideas but being unconcerned with how to implement the strategy of arriving at your destination.

Many will look at these two approaches and say the first is more left brain, the second more right brain. However, the better approach is to use both sides of your brain and think more entrepreneurial.

This appears to be the thinking of Joshuah Bearman, the “Argo” writer according to a Los Angeles Times article. According to the article, “Argo” prompted Bearman, …to think about storytelling in a different way–and to go entrepreneurial with his latest project, a tale of San Diego drug smuggler called ‘Coronado High’.” According to the article, Bearman negotiated a trifecta revenue package with publishing with GQ magazine( print), Atavist (a digital e-book publisher), and Sony Pictures (movie). These avenues displayed different “colors” of the project serving different audiences.

This strategy pushes Bearman into his own “Blue Ocean” by distinguishing his project from other journalists, novelists, and screenwriters. Though these multiple platforms operate separately, they will complement each other making this project greater than the sum of its parts. Why? Because one person hearing the audio version may want to see the movie, for example.

Some say that other writers will not be able to duplicate Bearman’s strategy because of his “Argo” clout, but I disagree. In business, there is always an industry leader that tests the water. If Bearman is successful, these(and other) publishers will be looking for other authors to replicate the success.

Multimedia is hear to stay, but the industry leader will be the person who can change with it. Multimedia platforms are not stagnant and demand a dynamic entrepreneur to change with them.

The Vision of a Strategic Plan

Douglas C Engelbart created many things in the world of the computer age. But one thing he created and demonstrated in 1968 was the computer mouse. This invention surely has outlived him. His vision was well beyond most businesses 3 or 5 year plan. No, his vision manifested itself in private homes within 20 years with Apple and Microsoft.

Recently I conducted a number of strategy sessions for clients. During that process, we identify a 10-20 vision. This sometimes is a hard stage because small business owners tend to limit their vision to what they think is reasonably attainable. This is a mistake in strategic planning. If you limit your 20 year vision to what is “reasonably attainable,” then you can do no better than reasonable success. As you develop your strategic plan, here are some pointers:

Don’t look at your company and industy in their current state, but as the way you want them to be.
Don’t look at an idealistic future and say, “But the problem is…” Leave that stage to the implementation.
It is possible to have two visions, but they must be compatible to each other so as to not drain resources.
Don’t limit yourself geographically unless you truly do not have the desire to operate outside a limited geographic area. There must be good reasons to limit yourself.
Bounce crazy ideas off others during the session. If you don’t think differently than your competitor, you will never defeat them.
Don’t let your vision copy current visions of your competitors. Try to leap-frog them utilizing trends and technology.
Make sure you vision addresses the issues you identified at the beginning of the process. These issues are both strategic and financial.
Once you set your vision, articulate your mission.

These tips work for not only a business strategy, but a personal career. Great visionaries do great things assuming they know how to impliment their visions.

The Fourth Industrial Revolution? Or Should It Be Called an “Evolution?”

Remember when Tron came out in the movies? No, not the last one, the first one with Jeff Bridges in 1982. They spoke of terms like “memory” and “data.” These were really foreign terms to the “not yet prime time” personal computer generation. The whole concept just wasn’t comprehensible to the general public thus leading to disappointing box office receipts.

We are there again, but now in reality. The Internet of Things and the future of manufacuring published in McKinsey & Company discusses the next threshold in manufacturing. That is, the ability to link manufacturing into some cyber-physical system into some global supply-chain. In fact, some say the technology already exists. Andreas Tschiesner states in the article, “…manufacturers will need to coordinate with more and more suppliers–often globally, and with longer transport times, more manufacturing steps, and significantly more parties.” He also predicts that “container logistics in maritime shipping” could become Stone Age. I believe he takes this stand because we will no longer be shipping massive amounts of parts to store in different segments of the world, but supply smaller quantities of parts on demand.

But what does this mean to the smaller business? The obvious answer is that the smaller business person must positioned their company to be in this “process and device” supply chain before their competitors. In other words, using the emerging global integrated systems to serve customers more efficiently. Especially if the business is the last piece of a supply chain in the manufacturing of a product.

If a business supplies services, then the concept can be the same. Let’s say a business supplies personnel around the world. The integrated Internet system can position and supply teams at a much quicker pace.

The challenge for the small business is to develop a strategy that can accomodate such technological advances without starting all over again. This would be an evolution of their strategy, not a revolution.

Baby Steps and the Strategy of Life and Business

My colleague, Erik and I were discussing strategy implementation and busy schedules. The issue was how to accomplish multiple goals with in a year with so many obligations, and so little time. Frankly, almost anyone, or any business can learn to function on this track as long as they are disciplined, honest with themselves, and strategic.

The late Stephen Haines stated in his book, Strategic and Systems Thinking: I Winning Formula that his Centre’s research has shown that many planning models have no ideal future vision as the place to start, only two out of fourteen had some kind of a measurement system to define success, over half of the models did not even link the plan to budgets, and none of them dealt with helping organize implementation.

A lot of this is not new to strategists. The real question is, in life and business, how to move “multiple game pieces” along without losing ground in any one. Here are some tips:

Personal life

Losing half your life: The place to start is what you do for a living. So many people I know want to skip Monday- Wednesday at work. They live for Friday- Sunday. If you think about it, a person of this mindset will “gloss over” half their week and lose those valuable moments to achieve their strategic goals.
Move the pieces forward in baby steps: Let’s say you want to read the Bible in one year. Take baby steps each day in a planned out strategy. Or, you may want to learn to play an instrument. Practice 20 minutes a day.
Discipline: If you stay disciplined in your life, you can achieve quite a lot in just over a summer. The trick is to limit things that do not further your strategy like television, web browsing, and video games.

Business

Think of your business as a life: Your business has a limited life. It may beyond your life, but some day it will end. This means that the sand is running out of the hour glass every day and anything that you do that is not implementing your strategy towards your vision is a negative. Every day wasted is a day lost. That lost time will not come back again.
Think-Plan-Act-Measure-Adjust: The Association for Strategic Planning, of which I am a member, has Think-Plan-Act as their mantra. I am a little more descriptive by adding measure and adjust. Strategic Plans are not stagnant. They live an breath with your company. You must must make a deliberate effort (baby steps) every week to push towards that horizon that you have developed.
Know Your Surroundings: When you hike in the forest, you should be aware of your surroundings. Wild animals could be lurking around any corner. This is true with business. Be aware of your changing industry. For businesses that deal internationally, that could be political and cultural changes. You cannot push toward your goal in a vacuum.

This, obviously, is not a complete formula for personal and business success. However, if you practice some of these points, you may find you (and your business) in a remarkable place twelve months from now.

Productivity Strategies Can Lead to More Powerful Results, Even in a Messy Garage

I walked into my garage last week and saw it for what it really was…a non-toxic wasteland. Christmas decorations, sleeping bags, cardboard boxes, surfboards, etc. Where would I start? I picked up a box and a surfboard tumbled onto a case of half-used bottled water.

A small business person can have the same feeling about their business. You try to manage the business, but the “fires” you have to put out keep you from moving a step forward. For small businesses, here are some tips:

Do a strategic plan. In a nutshell, a strategic plan is :
1. A vision, maybe 20 years. This vision is the horizon you want to achieve.
2. Create a strategy which is how you generally want to achieve your vision.
Take stock of what you have to work with. How good is the condition of your accounting records? Can you look at them and see a reasonably accurate history? Look at your strengths, weaknesses, obstacles, and your competition. A small business owner must be honest in accessing what their current status. To miscalculate will start you on the wrong level.
Lay out the actions you need to implement your strategies. These actions should be disciplined and realistic. Small business owners must not set up tasks that they cannot achieve. Try delegating as much as you can.
Measure your progress in lieu of your strategy. Again, I ask the small business owner, how good is the condition of your accounting records? Can you use them to to establish a basis to measure your progress? Most small business owners I meet don’t think in those terms.

So, what does this have to do with my garage? Well, my vision is to get both cars into the garage, but well before a 20 year horizon. Taking stock in what I have, I see that I can lift most of the objects, but will need one of my three strong boys to help me lift the heavy stuff into the attic. My action plan is to do a little each weekend without putting more stuff into the garage. Lastly, by measure will be how much of the garage floor I can see each week.

Just like in small business management, small task management can be manageable.