May 24, 2016

Valuing Your Manufacturing Business

There are several reasons why a manufacturing business may need to be valued, such as divorce, estate or gift taxation disputes, or a shareholder dispute. One of the most common reasons is the sale or purchase of a business. In order to obtain the most accurate business valuation, a business owner should keep the following in mind:

  • All income producing assets from manufacturing activities should be identified and included when valuing the business. Manufacturing businesses usually own a large amount of property, plant, and equipment which accounts for a majority of the company’s assets. In addition, all patents and technologies that are licensed and generate additional revenue streams should be considered as they could increase or enhance the value of a business. Another item to consider is plant capacity. A manufacturing business may not currently be operating at full capacity, and if it were, could have additional cash flow which may substantially increase the value of the business.
  • The valuation needs to be based on realistic cash flow projections and a thorough business risk assessment. For a manufacturing business, cash flow projections and business risk assessment can be difficult to gauge. Many manufacturing firms develop new products and processes which may require a large investment. Without constant innovation, these products and processes may become obsolete and negatively impact future cash flows. Additionally, future cash flows can be affected by the accuracy of sales forecasts. It is necessary to review a manufacturing company’s approach to advertising and past market acceptance of their products in order to gain a better idea of expected future sales.

There are three commonly accepted business valuation approaches to consider when valuing a company.

  1. Asset-based approach: This approach is based on the value of the company’s net assets, including all tangible and intangible assets such as goodwill, trade names, and patents.
  2. Income-based approach: This approach is based on the company’s expected future cash flows. It requires the utilization of either a capitalization rate or a discount rate, which is the rate of return an investor would require to compensate for the risk associated with an investment in the company.
  3. Market-based approach: This approach relies upon market multiples derived by comparing the business to similar businesses that has already been sold.

Determining the most appropriate valuation approach depends on a number of factors, including the size of a business, the industry in which the business operates, and the outlook of the business being valued. Sometimes, it is best to utilize more than one valuation approach in order to obtain multiple indications of value. However, when a business is truly “asset-intensive”, such as many manufacturing companies, the most appropriate valuation approach may be the asset approach.

If you would like to discuss your valuation questions or explore your options for valuing your business please contact Kevin Summers at ksummers@anderscpa.com.

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May 17, 2016

Adulting 102: A Millennial’s Guide to Marriage

Wedding season has officially begun!  You’ve planned the wedding, the reception and the honeymoon, but have you planned for all the legal and financial changes once you get married?  Below is a guide for things you may need to do depending on your situation.

Name Change

If you are changing your name, it isn’t just as simple as writing it differently as you sign paperwork.  In order to officially change your name  Form SS-5 will need to be filed to notify the Social Security Administration of the name change.  You will receive a new Social Security card with your new name.  Also alert your employer of your name change.  You will likely need to change your name on credit cards, banking accounts (checks), driver’s license, and other bills.

Tax Withholding

Tax return filing status (single, married filing joint, married filing separate, head of household) is determined by what your status is on December 31st of any year in question.  When you get married the tax rate brackets are different than if you were single.  You should file a new Form W-4 with your employer updating your status and exemptions depending on your situation.

Moving

If you are changing your residence, notify the US Postal Service of your change of address.  You can have your mail forwarded for a period of time long enough for you to change your address with all of your mail correspondence.  You can notify the IRS of your address change by filing Form 8822.

Insurance

If you have been purchasing health insurance from the Health Insurance Marketplace you will want to make sure you report that you are now married.  This is very important as any advance premium tax credits you were receiving could cease with a status change.  You don’t want to end up owing a large tax bill to the IRS come April.

Since marriage is considered a life event where changes in coverage are allowed, it may be worth looking into being covered under your spouse’s plan.  Depending on what type of insurance their employer has it may be financially beneficial to be on their plan instead of your own plan either through the Marketplace or your own employer.

Beneficiaries

Have you been using your parents or someone else to be the designated beneficiary of your 401(K) and life insurance accounts?  It is now time to think about changing those beneficiaries to your spouse. It is not required to have your spouse as the beneficiary, but if you would want them to receive any benefits if something were to happen, they need to be listed as beneficiary.  You can always designate your parents or other relatives as secondary beneficiaries.

Wills

If you don’t have a will before you get married then you definitely need to have one after the blessed event.  You will want to make sure that you at least designate a medical power of attorney.  A medical power of attorney will be the person that would make medical decisions for you when you would be unable to do so.  If you want your property to go specifically to someone besides your new spouse you would want to specify that as well in your will.

Congratulations on getting married!  The challenges above will likely be only the start of some of the differences that you will experience in this new chapter.  If you need financial or tax advice as you make your journey with a new spouse please contact an Anders advisor.

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May 10, 2016

Inside the Business of St. Louis Sports

The Anders Sports, Arts & Entertainment Group teamed with the St. Louis Sports Commission for the 4th annual Inside the Business of St. Louis Sports, a morning of engaging interviews and panel discussions at Washington University on May 5th. Local sports legends, media and fans came together to discuss the state of St. Louis sports and the economic impact on our city’s future.

St. Louis’ greatest Olympian, Jackie Joyner-Kersee started the day with her thoughts on the Olympic movement, the games in Rio, and her inspiring journey as a six-time Olympic medalist.

Media Views
A mix of St. Louis media veterans and fresh faces gave their takes on the local sports scene, prominent issues confronting the sports world, and the business of sports media.

Panelists included:
Frank Cusumano, Channel 5 KSDK Sportscaster, CBS Sports 920AM Radio
Audrey Dahlgren, Channel 5 KSDK Sportscaster
Randy Karraker, The Fast Lane Co-Host, 101 ESPN Radio
Maurice Drummond, Channel 4 KMOV Sports Director

Where to Next?
A panel of St. Louis sports executives and insiders tackled the big questions and issues bringing St. Louis sports to a crossroads and driving the region’s sports future.

Panelists included:
Chris Zimmerman, President and CEO of Business Operations for the St. Louis Blues
Jim Kavanaugh, CEO of World Wide Technology, CEO of the St. Louis Football Club
Ron Watermon, Vice-President of Communications for the St. Louis Cardinals
Frank Viverito, President of the St. Louis Sports Commission
Tim Hayden, Co-Founder and Managing Director of Stadia Ventures

To wrap-up the morning, Dave Peacock provided his insight as chair of the St. Louis Sports Commission, co-chair of the NFL Stadium Task Force and member of the MLS2STL Group.  Dave shared the ups and downs of the effort to keep the NFL in STL, his perspective on the state of the region, and his vision for growing and strengthening St. Louis from a sports standpoint.

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May 9, 2016

SLU Names Anders 2016 Distinguished Corporate Partner

Saint Louis University (SLU) named Anders the 2016 Distinguished Corporate Partner at the John Cook School of Business Excellence Awards on April 29. The award recognized Anders for the many years of support and guidance provided to the Cook School and its Accounting program.

The annual Saint Louis University Business Excellence Awards celebrates students, alumni, staff and faculty of the John Cook School of Business.

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May 3, 2016

Simplified Employee Pension Plans: SEP Eligibility and Setup

Many have heard of Simplified Employee Pension plans, or only know that SEP’s are a type of retirement vehicle. However, do we all really understand Simplified Employee Pension plans and how they work?

Part One of the two-part series will bring some clarity to the subject and give a breakdown of eligibility requirements.

DEFINITION OF A SEP

SEP plans are a tool many individuals use to save for retirement. Employers can setup and make tax-deductible contributions at their discretion. Any employer including sole proprietors, partnerships, corporations, and nonprofit organizations may setup a SEP plan. SEP plans are simple to implement and can be started at a lower cost than most other retirement plans. The discretionary contributions give the employer the freedom to make contributions in profitable years and refrain in other years.

ELIGIBILITY

SEP plans have certain employee eligibility requirements that include the following:

  • 21 years old
  • At least $550 per year in earnings
  • Employee has worked for the company in 3 of the last 5 years

All eligible employees are required to participate in the plan. Some employers may choose to make the eligibility requirements even less stringent if they so choose (Ex. Lowering the minimum age to 20).

SEP PLAN SETUP

SEP plans can be setup rather quickly.  The following steps show a simplified guideline of how to get the plan started.

  • Contact a retirement plan professional to have them help draft the SEP model and then act as the trustee
  • Execute a written agreement laying out the plan terms and guidelines
  • Provide employees with the agreement and detail on the plan’s eligibility requirements with language that states:
    • Different rates of return compared to other IRA’s are possible
    • Amendments will be announced 30 days prior to implementation
  • Employee will receive details on YTD employer contributions and account value by the following January 31st
  • Ensure that all eligible employees have established a SEP and are to receive any eligible contributions
  • Make Contributions by due date of the entities tax return (including extended deadlines)

Many plans follow the IRS provided guidelines on the model SEP Form 5035-SEP which can be modified to fit varying needs. The IRS website provided a template on their webpage.

Please look forward to Part 2, which will delve into how to make plan contributions and distributions.  As always, if you have additional questions, we at Anders are always willing to assist you with your financial planning needs. Contact an Anders advisor.

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