Growing a business is not an easy thing to do. There are so many things that need your should consider and execute to successfully expand a business. Understanding the market and the competition landscape, balancing the risk vs. the reward, identifying, and organizing the proper team to execute the growth plan, defining the logistical needs and future staffing levels. Let us also remember while executing a growth plan your business needs to continue providing best possible customer service. The list can seem endless. One other major concern is how quickly the business can get to cash flow positive during this process. This is why we want to discuss incentive opportunities.
What if I told you most growing businesses miss out on an opportunity to strengthen their cashflow position while executing their business growth initiatives? That opportunity comes in the form of state and local incentive programs created specifically to support growing organizations.
This article briefly identifies four types of business initiatives that state and local programs support. Although they are available businesses often times do not pursue them. This is typically due to the previously noted list of priorities. Your business may not have the internal resources or knowledge to pursue and execute.
If a company is planning to increase full-time headcount over the next 12-36 months, there could be incentive programs waiting for you. To be clear, these would need to be ‘net new’ full-time jobs. Like if a company is adding a new production line, expanding a current facility or need to expand to a new facility. These business projects will almost always require the hiring of net new full-time employees. What if a company is moving 15 to 35 jobs due to realignment of operating structure? This could be in line for incentives as well. In most cases, companies are moving so quickly to implement the needed changes that they forget to present these initiatives to the state and negotiate an incentive package.
Companies can negotiate with state and local governments to retain jobs when considering the possibility of moving jobs out of the state as well. Retention is an opportunity for a company that has a high-cost location in a state to say, “We have done some analysis and my costs of doing business in this state are too high. We have thought about moving jobs to another lower-cost state.” Possible savings a state might offer are a reduction in state income taxes, reductions in property taxes, or reductions in training costs. Retention is NOT pursued by nearly 95 percent of companies that would qualify. If your company has a footprint in multiple states, you likely have an opportunity where you can work with states to receive retention incentives.
$500 million in training grants are approved each year. But most companies that know about these funding opportunities do not complete the submission process. 7 out of 10 companies who start a training grant application never finish! For the three who complete and submit an application, the approval rate is very high. So, getting the submission process completed is the key. Again, organizations have other priorities. The time, effort and resources needed to not only submit an application but also monitor and administer the program through completion are usually not on staff. Knowing the incentive opportunity exists is one thing. Having the internal knowledge and bandwidth to execute the incentive process is a whole other thing.
Most companies will pursue prescriptive incentives, or those that are on the books. You can find prescriptive incentives on most government websites. Here they will tell you what they are and how to pursue them. What they do not tell you about and what is not pursued often enough are negotiated incentives. If you plan to spend millions of dollars on a new piece of capital equipment and the consequence of putting that capital equipment in is that you are going to save 30 percent on your energy cost, you should take one more step.
Prior to taking out the old equipment and putting in the new equipment, set up an energy study. By performing that study you compare the energy usage of the old equipment to the usage of the new equipment to show the 30 percent reduction in energy consumption. You might get anywhere from $10,000 to $500,000 in incentives from states or from utilities for the improvement and reduction in energy usage. Some states are also offering reduced energy cost programs as well. If your business includes warehouse space, distribution centers, food processing or manufacturing plants the power usage and cost are substantial. Getting approved for one of these energy savings programs can help reduce energy costs by 15-30% annually.
So again, growing a business is not an easy thing to do. Putting the lion’s share of your effort to successfully achieve your growth goals should always be the priority. But knowing the incentive landscape and understanding how incentive funding can impact the bottom-line of your business could be just as important to the success of your growth efforts. Do not miss the incentive opportunities! Let our team of experts guide you through the incentive landscape. We can help identify, negotiate, and secure state and local incentives on your behalf.
Thank you Richard Gonzalez at The Abbott Consulting Group for your contribution and explanation of how businesses can take advantage of existing incentive opportunities. You can contact Richard via: [email protected] or (203) 817-6474 / Abbottincentives.com.