Take Credit for Your Business Part II; New Opportunities on the Horizon

 

In a 2011 blog Article, Take Credit for Your Business, we discussed how the R&D Tax credit provided potential sources of cash for manufacturers of all sizes that have incurred expenses in pursuit of new or improved process (e.g. Additive Manufacturing), products (e.g. new product engineering, or applications of AM throughout the product development lifecycle), performance, reliability, or quality. However, until 2016 the reality was that many small and mid-size companies and their tax advisors felt it was simply not viable to pursue this tax credit. The reasons included the complexity of the documentation, the cost of hiring experts to do documentation, and general confusion over what expenses qualified and which did not. In many other cases, the tax credits generated could not be used because of limitations created by current tax rules. So it’s not surprising that the majority of companies that have historically taken advantage of this benefit were big businesses. visit here milfster.org

We are pleased to report, that this situation has changed due to some late legislation that was passed in December 2015: the Protecting Americans from Tax Hikes (PATH) Act of 2015. That legislation, in addition to making the tax credit permanent for the first time in the credit’s 35-year history, significantly enhanced how small and mid-sized manufacturers (SMMs) can benefit from the research tax credits they can generate, utilizing the following significant provisions:

• Eligible SMM’s may now claim the credit against the Alternative Minimum Tax (AMT) to offset AMT for tax years beginning after December 31, 2015.
• Some start-up companies may offset payroll taxes with the credit: beginning in tax years beginning after December 31, 2015, certain start-up companies will be allowed to utilize the research credit to offset the employer’s payroll tax (i.e., FICA) liabilities.

How are these significant changes? In years past, a large number of eligible SMM’s (especially S Corporations and other flow-through entities) did not pursue the R&D Tax Credit because the AMT prevented them from using the R&D Tax Credits that they could generate. In addition, young companies typically don’t have a need for tax credits because their expenditures are higher than their sales, thus creating operating losses. Both of these new changes will allow a higher number of companies to immediately monetize the credits they can generate!

According to Scott Schmidt of Black Line Group, the definition of R&D under the law remains much broader than most people realize. For example, time and materials spent prototyping using AM technologies and equipment, costs to experiment with different designs and materials, the design/engineering of new parts and components, and periodically activities related to software development, can all potentially generate R&D Tax Credits.

Manufacturers of all kinds, including those that design and develop their own products, as well as contract manufacturers and job shops, can all take advantage of the R&D Tax Credit. Both the customer and vendor (job shop/contract manufacturer) of an R&D part can take the credit, since the customer will have qualified expenditures around the “PRODUCT” development/improvement activities of the part or component, while the vendor will have qualified expenditures associated with developing the “PROCESS” for making the part.

Schmidt encourages potential and first time users of the R&D tax credit to get ahead of the game and immediately start documenting their “qualified costs” in preparation to start pursuing the R&D Tax Credit in 2016. He notes that companies that make parts for their larger customers in particular (e.g. metal stampers and fabricators, precision machinists, mold builders and plastic injection molders, tool and die makers) should seriously begin to evaluate whether they are eligible for the credit.

Note:  the information contained in this article should not be interpreted as advice or as an endorsement of any product or service, and cannot be used by the reader for promoting, marketing, or recommending any matter or actions addressed in this article to other parties. Mr. Devereaux is not a tax expert and anyone who wishes to pursue this credit should consult a tax accountant for advice.

*Originally posted on the Manufacturing Innovation Blog by Doug Deveraux on August 15, 2016

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Don’t Fear Sustainability, Celebrate It

Photo Credit:Blisstree

 

By Mary Stokes

 

There is an unending struggle to understand sustainability, because well, let’s face it – it is a difficult concept to nail down.  It’s tough to even define sustainability in a way that does not exclude part of what it is.  In navigating the murky waters of  which sustainable practices are best for individual companies, a few, let’s say “myths”, have reared their ugly heads causing companies to shy away from what could be the next steps in expanding their company’s presence.

 

That said, we want to debunk a number of myths concerning sustainability, especially when it comes to small businesses.

 

 

1) It’s Only About Being Green

 

While “being green” is the most recognizable component of sustainability, it is not the entire focus. Sustainable practices have the benefit of minimizing environmental impact in mind, but they are also designed with the bottom line as a primary focus by cutting costs and increasing profits.  To say that sustainability is solely concerned with the environment is incorrect. It is more accurate to say that environmentally sound practices and cost saving measures are intricately entwined and they gain momentum symbiotically.  It is difficult to have one without the other.
 

2) It Is Expensive

 

Perhaps the most commonly held belief about sustainability, is that it is expensive to put into practice. This largely depends on the area in which a business desires to be sustainable.  Implementing sustainable practices might be as simple as finding a way of  adjusting lighting, heating, and air conditioning.  It could also be the process of revising the way items are manufactured. Some companies have been able to introduce an additional revenue stream by recycling excess materials.  Depending on the vision and goals of the business, the practices of sustainability can be as varied as the companies that implement them.

It should be noted here that a sustainability consultant should be in every small businesses figurative Rolladex.  A knowledgeable consultant can minimize expenses, streamline processes, and prioritize cost saving measures.  Sustainability consultants can offer a variety of services, ranging from air and water balancing to custom component 3D modeling, each option carries the potential for savings and lower overall costs.  Keep in mind, that even small changes can make a visible difference.

 

 

3) There Is No Immediate Return

 

A common concern businesses have is that the return for implementing sustainable practices, is not immediate.  This is not necessarily the case; many sustainable changes involve decreased energy use and will be readily apparent in the electric and gas bills for the month following the implementation.  Additionally, a business that is visibly investing in sustainability will receive positive attention and brand recognition.  That’s right, sustainability is good for marketing!

Ray Anderson, founder and chairman of Interface Inc, a textile manufacturer, says of the reality of sustainability for his company, “Sustainability has given my company a competitive edge in more ways than one…It has proven to be the most powerful marketplace differentiator I have known in my long career…It has rewarded us with more positive visibility and goodwill among our customers than the slickest, most expensive advertising or marketing campaign could possibly have generated. And a strong environmental ethic has no equal for attracting and motivating good people, galvanizing them around a shared higher purpose, and giving them a powerful reason to join and to stay.”

The value in positive PR, brand recognition, lower costs, and decreased environmental impact cannot be overstated.  Customers notice and appreciate the effort to be environmentally and economically sustainable, and a new customer base is formed with those who purposefully search out businesses that are concerned with sustainability.  Talented employees are attracted to a business that cares about the bigger picture, and this in turn encourages them to care about the business.  Even simple changes can prove to be enormously beneficial, and can improve efficiency, both for the short and long term.
 

4) It Is Difficult and Time-Consuming

 

Another practical concern for small businesses is that any changes required to be sustainable are difficult or require an excessive amount of time to implement.  Let us put you at ease, sustainability does not have to be difficult nor time-consuming to implement.  It can be as simple as adjusting how the heating and air conditioning take effect; or as involved as testing and reformatting of systems used, but again, a good sustainability consultant can alleviate both of these concerns, allowing you to marshall your energies towards running your business.
We understand that each business is unique, and sustainability needs will differ from business to business, but sustainability is something to be embraced and celebrated, not feared.

 

 

For a free on-site assessment, please feel free to contact us at 612.237.8647 or at support@ses-inc.org.  We have partnered with several fantastic companies around the Greater Twin Cities area and it would be our pleasure to serve you as well.  

 

 

 

Where Sustainability Thrives, So Does Longevity

 

Sustainability is a word oft batted around, but what does it actually mean for your company?

 

 

                                             Photo Credit: Rebekah Bye – http://www.simplicityink.com

 

By Mary Stokes

There is certainly confusion concerning what sustainability is, and which parts of business it affects.  The UN’s Bruntland Commission in their 1987 report, Our Common Future, defined it as, “development that meets the needs of the present without compromising the ability of future generations to meet their own needs”.  While this is applicable as a way of life, it is equally important for businesses, especially with regard to manufacturing and business practices.

 

The goal of sustainable development is to create an environment that lends itself to longevity.  In an age where many businesses are not expected to pass the 18 year mark, longevity is a desired yet elusive trait.  However, it does not have to be; sustainability is the key to not only corporate longevity, but also corporate success and flourishment.

 

Sustainability does not mean the end of innovation.  Rather, it encourages a different type of creativity in each aspect of a business’s workings.  This may mean updating and changing practices in the manufacturing aspect, or simply modifying the surroundings to create a more energy-efficient environment.  The ideal approach is a blend of short-term and long-term changes, with a focus on both the immediate return and the future return.  A balanced approach will improve the potential for longevity without causing strain by reducing profits.  Implementing sustainability actually encourages innovation by challenging businesses to brainstorm new approaches to decreasing waste and improving production.

 

Recently, Dell started recycling carbon fiber and plastics into new products, a major change that could potentially create $1 trillion of additional value.  While this is a recent change, the point Vice Chairman of Operations Jeff Clarke makes is that while their recent changes are eco-friendly, they have also created a better product with increased value, which is of equal importance.

 

In an interview with blogger Taylor Eason, Jon Ruel, CEO of Trefelthen Vineyards, has a slightly different take on sustainability practices.  While the demand for organic and sustainable products has increased in recent years, as the public has become more informed, he notes that the green and sustainable part of business is less for the creation of a “delicious and authentic” wine product and more for the longevity of the business, so “[they] can keep making delicious wine for years to come.”

 

Both businesses are concerned with sustainability, but they present a picture of both long-term and short-term gains.  A balance of both is necessary for the longevity of a business; additionally, putting sustainability to practice is encouraging a new level of innovation in business practices.

 

Rather than viewing sustainability as difficult or having no substantial short-term return, businesses ought to see it in light of the innovation and challenge it can bring to their practices and employees.  In fact, sustainability can drive growth by creating a competitive environment and encouraging employees to be knowledgeable and care about sustainability.

 

In order to have a lasting impact and create future value, sustainability is an absolute must.  The futures of businesses are impingent on their sustainable practices.  Where sustainability thrives, so does longevity.

 

 

Mary Stokes is a technical writer based out of the Twin Cities metro area.  You can contact her at http://www.tyrison7.wordpress.com.

 

 

Getting straight-armed with your glove recycling efforts?

Read how this food manufacturer pushed back by participating in this gloves takeback program 

                                                     Photo Credit: Sustainable Manufacturer Network

 

Lundberg Family Farms of Richvale, Calif., grows, produces, packages, and markets 150 organic, gluten-free, and whole grain food products using organic and eco-positive methods. The third-generation family company’s motto is “Embrace wholesome,” so it’s only natural that embracing sustainability would be an integral part of the company’s culture.

“Our company is committed to nourishing a healthier planet and protecting the environment for generations to come,” said Ashley Vega, the company’s sustainability specialist.

A zero waste culture is a crucial ingredient of the business model. Missing from its zero landfill recipe was a sustainable outlet for its used nitrile gloves that had been worn in production. The gloves represented about 15 percent of the company’s landfill waste.

Lundberg participated in Kimberly-Clark Professional’s (KCP) RightCycle program.

The program is designed to enable companies with waste reduction goals to outlet hard-to-recycle items, such as nitrile gloves and single-use apparel, to be converted into eco-friendly consumer goods.

The way the takeback program works is fairly simple. KCP provides a receptacle for the discarded gloves and single-use apparel, which the manufacturer then uses to ship to a KCP recycling center when full. The items are sorted and processed into pellets or powder, which becomes the raw material for new molded durable goods such as patio furniture, shelving, and flower pots (see Figure 1).

Figure 1: Kimberly-Clark Professional aims to make zero landfill achievable by facilitating a simple takeback program.

Since its inception in 2011, the RightCycle program has helped divert more than 300 tons of waste from landfills. More than 150 companies currently participate in the program, a Kimberly-Clark representative reported.

Zero Waste Certification Well in Hand

Figure 2:  Lundberg Family Farms credits the KCP RightCycle program with helping it achieve zero waste certification by taking back and recycling its spent nitrile gloves.

Lundberg recycled nearly 1 ton of nitrile gloves in its first few months in the RightCycle program. “You’re either throwing the gloves away or giving them a second life. The latter is always better,” Vega said.

The company expects its glove waste landfill diversion rate to total 4 tons annually.

“The changeover was really painless,” Vega relayed. “And our employees are actively recycling the gloves even more than we anticipated.”

The company achieved platinum Zero Waste Facility Certification from the U.S. Zero Waste Business Council. Vega credits the RightCycle program with helping it achieve the certification.

Kimberly-Clark Professional recently expanded the takeback program to the industrial segment.RightCycle is part of the company’s Exceptional Workplaces initiative.

Why Making Your Business More Sustainable Doesn’t Have To Be Expensive Or Hard

 

Photo Credit: Shutterstock

 

It can be daunting for small business owners even to consider sustainability when they have other things to think about – like day-to-day operations and the company’s bottom line. But that doesn’t mean companies with limited resources should stay away from investing in a sustainability program.

Willis Wood, founder of Trade Show Emporium, says it’s “a common myth” that achieving sustainability costs a lot of money. “I faced the challenge of wanting to provide environmentally friendly trade show exhibits,” he says, “but at first, they were more expensive than a traditional exhibit. After working with manufacturers to get the price point down, we made it possible to get a green exhibit to be the same price of a traditional exhibit.”

Business owners contemplating how they can afford a sustainability strategy – and what the return on investment will be – need to take a long-term approach. That includes identifying business priorities, looking at the big picture, and being flexible.

Start With A Solid Framework

Sustainability should be treated like any business priority, with actual, realistic metrics that can be measured and considered in terms of a company’s overall ROI.

It’s important to have a relentless focus, recommends Kathy Nieland, U.S. Sustainable Business Solutions Leader at PricewaterhouseCoopers. “Sustainability is a wide field, and it is easy to get distracted,” she explains. “It can be hard to cut through the noise.”

Think about larger-scale initiatives, she recommends, adding that the field is moving from simple activities such as using double-sided printing in offices to transforming factories, supply-chains, and product design.

Make Integration A Priority

To be effective, sustainability needs to be worked into a business’ core strategy. This means starting with executive discussions at the top and ensuring that priorities trickle down to the everyday.

Wood of Trade Show Emporium explains that it’s important to start with a vision. “After being in the industry for a few years, I noticed the huge impact the trade show industry had on the environment,” he says.

Wood remained dedicated to his original goal, transitioning his business to recyclable and sustainable materials. “My company is now one of the top vendors for displays produced from environmentally friendly, renewable materials,” he says.

And it’s not enough just to think about what’s happening right in front of you. There are wider implications to sustainability changes as well, and it pays to look at the social, economic, and environmental impact of those changes. Wood’s company, for example, takes its program a step further by helping vendors recycle their old trade show exhibits, preventing them from ending up in landfills.

The Three Ways to Become Profitable

A recent Harvard Business Review article points out that companies will typically take three approaches to making sustainability profitable.

1. Start with a more expensive investment to generate lower long-term yield.
2. Bootstrap sustainability through small changes that save a lot of money, which can then fund bigger initiatives.
3. Share sustainability efforts with customers and suppliers to create new and unique business models.

“Have a company meeting and brainstorm how to incorporate sustainability into your organization,” explains Wood of Trade Show Emporium. “Vote on the top 5 most important sustainability objectives. Then set a date as a goal for each of these objectives so that they can be met.”

Get Creative

Sustainability is far from a black-and-white field. There’s no one right way to implement any strategy, and performance metrics aren’t always fixed.

“Sustainability success measurements vary with each company’s priorities,” emphasizes Paula McEvoy, co-director of the Sustainable Design Initiative at Perkins+Will. “Savings in water and energy costs are easy to identify and for some companies, that’s the primary goal. The more interesting measurements come when companies tie their sustainability plans to their corporate mission.”

Business owners should be prepared to experiment, though, since everyone has an opinion. “Whether you’re trying to optimize office temperatures or finding an Eco-friendly soap,” McEvoy says, “people will want to weigh in. You won’t get it right the first time, but as long as you’re working towards a clear goal, that’s okay.”

At the end of the day, it’s a learning process for everyone, particularly when changes to equipment and operations are involved. And business owners shouldn’t be afraid to ask for help. “Don’t overlook the educational components that will be required to make your plan succeed,” says McEvoy. “This can be as simple as posters and emails but may also require outside expertise for in-depth training.”

– Written by Ritika Puri

*Originally posted in the Business Insider on November 12, 2013

Five Benefits of Embracing Sustainability and Green Manufacturing

By Brian Lagas

Embracing sustainable and green principles is not just a trend. Cultivating sustainable and green practices helps organizations become more efficient, competitive and profitable. It’s more than simply “a good thing to do.” Manufacturers are realizing the many practical short-term and long-term financial benefits to implementing environmentally conscious improvements.

The Difference Between Sustainability and “Going Green”

“Going green” is not the same thing as sustainability, albeit they are related. Although the terms are often used interchangeably, green is more frequently associated with a singular product or process. Examples include improving a specific operation so that it does not harm the environment or creating a product made entirely out of recycled materials.

Sustainability is typically more associated with an organization’s holistic approach; it takes the entire production process and logistics into consideration. For example, you may purchase a green product made out of recycled goods. However, if that product was made overseas, and environmentally harmful methods were used to transport that product to the United States, this would not be adhering to sustainable principles.

In the manufacturing world, it is advantageous to focus on both green and sustainability. While targeted improvements can be beneficial to your company, looking at the “bigger picture” maximizes the perks of an environmental focus. Here are five critical ways to embrace sustainability and green to positively impact your organization:

1. Reduce Energy-Related Costs

Energy and water costs are a prime concern for manufacturers. Focusing on improvements can reduce these expenses. Often, these improvements are realized as annual savings as opposed to quicker, short-term cost reductions.

Switching to energy-efficient lighting and adjusting lighting levels in accordance with your production schedule will reduce your long-term electrical costs. Regular equipment inspections will also prove beneficial. For example, air compressor leaks can be a waste of energy and increase expenses. Changing how you package your products and supplies can provide cost reductions and free up space at your facility. Solar and wind energy, along with energy efficient equipment and machinery, will greatly reduce monthly utility bills. Implementing strategies such as recycling and going paperless will also save on supply costs. Sustainability can improve your bottom-line.

2. Attract New Customers and Increase Sales

Green and sustainable practices can make your company more marketable. Consumers are more conscious of the environment, and making improvements will strengthen your reputation. Whether you’re an OEM or a supplier, highlighting your initiatives to the public will help you attract a whole new base of customers, resulting in increased sales. This is important to manufacturers seeking government contracts where green manufacturing standards are often a factor.

Technology and social media have enabled buyers to easily (and publicly) promote or criticize companies for their green practices, or lack thereof.

3. Tax Incentives

There are a variety of tax credits and rebates on both the federal and state level for manufacturers who proactively implement more sustainable improvements. There may be incentives available to your business. Check out:
U.S. Department of Energy’s website
Database of State Incentives for Renewables & Efficiency

4. Boost Workforce Morale and Innovations

Sustainability improvements are a collaborative effort. When employees work together to identify and implement green and sustainable initiatives, it fosters a culture of teamwork and continuous improvement. Employees work harder when they are engaged and have a sense of pride in their company. By internally communicating the importance of changes and the impact they are having on the business and environment, manufacturers will positively influence their corporate culture.

Sustainability can also ignite innovation. For example, if you challenge your engineers and machinists to reduce material scraps or recycle more waste during the manufacturing process, it often leads to additional ideas for operational improvements.

5. Societal Impact

In addition to helping your company’s profitability, your actions can make a real difference. By implementing changes, you will have a smaller carbon footprint and reduce the number of toxins released into the atmosphere. Future generations ultimately benefit from improved air and water quality, fewer landfills and more renewable energy sources.

Sustainability and Green Manufacturing Success Stories

U.S. manufacturers are achieving quantifiable results by working with their local MEP Centers on sustainability and green initiatives. Some successes include:

• E3 Review Strengthens Virginia Company’s Environmental Commitment, Resulting in Over $200,000 in Operational Cost Savings – read more.
• Lean and Clean Programs Help New Jersey Manufacturer Realize $3 Million in New / Retained Sales, 5 New Employees and $500,000 in Cost Savings – read more.
• Profitable Sustainability Initiative (PSI) Helps Wisconsin Company Reduce Fuel and Emissions, Recognize $75,000 in Costs Related to Shipping – read more.
• Energy Savings Project Leads Kansas Organization to more than $61,000 in Overall Equipment Savings and $24,000 in Annual Energy Savings – read more.
• Energy Efficiency Project Helps New Hampshire Manufacturer Reduce Energy Consumption by 10% and Save $25,000 Annually – read more.

MEP is partnering on federal initiatives to help companies: 1) gain a competitive edge by reducing environmental costs and impact, and 2) enter new markets by developing environmentally focused materials, products, and processes. For more information about MEP’s sustainability efforts, visit our website or please contact your local MEP Center.

 

*Originally posted in Manufacturing Innovation Blog, September 10, 2015