The Entrepreneurship Institute

by Scott Becker

Although the significant changes to health care reform take effect in 2014 for small business owners (employers with up to 50 employees) and then again in 2016 for businesses with 51-100 employees, all businesses should be aware of the following changes for 2013.

January 1, 2013
Beginning with the first plan year starting on or after January 1, 2013, employee contributions to a health care FSA cannot exceed $2,500 per employee per plan year.

Beginning January 1, 2013, the employee-paid portion of the Medicare payroll tax will increase for high income individuals earning over $200,000 (or $250,000 if married filing jointly). The employee-paid portion of the Medicare payroll tax will increase from 1.45% to 2.35% on earnings above these high-income thresholds. The employer-paid portion of the Medicare payroll tax will remain unchanged at 1.45% for all earnings.

January 31, 2013
For employers who issued 250+ Form W-2′s for 2011, the 2012 Form W-2′s that are issued by January 31, 2013 must report the cost of the employer’s health plan to include both the portion paid by the employer and the portion paid by the employee. This reporting is for informational purposes only as there is no change to the taxation of the employer-provided health benefits. Even though we are now past January 31st, the W-2s can still be corrected if this information was not included.

March 1, 2013
By March 1, 2013, employers must provide a new notice to all employees explaining the availability of State-based Health Benefit Exchanges, and whether or not the employee may be eligible for insurance affordability programs through the Exchange. The notice must be provided to new employees upon date of hire. Implementation of this section (18B) has been delayed until guidance is provided, which is expected in late summer or fall of 2013.

July 31, 2013
For self-insured plans (November/December 2011 & January 2012 plan years only), the first filing of Form 720 for PCORI (Patient Centered Outcomes Research Institute) annual plan fee will be due. February 2012 and later plan years won’t file the Form 720 until July 31, 2014.

August 1, 2013
Carriers who exceeded the allowed spending on non-medical costs in 2012 must pay rebates to employers. These rebates are based upon the carrier’s costs across its entire book of business within a state and market size – rebates are not based upon an employer’s own claims experience. Employers will have to share the rebate with participants proportional to their overall share of the costs, generally within three months of receipt of the rebate from the carrier. Self-insured plans are exempt from the MLR provision.

October 1, 2013
State-based Health Benefit Exchanges will begin open enrollment for individuals and small employers for coverage effective on or after January 1, 2014.

Beginning in 2014, large employers (at least 50 full-time equivalent employees) will be subject to penalties for not offering affordable coverage under the Affordable Care Act. This means that an employee does not have to pay more than 9.5% of family income for the employer provided plan and the plan pays at least 60% of covered health care expenses.

We continue to monitor this ever-changing healthcare landscape and are available, as always, to answer questions or provide assistance.

IRS or ROI?
They're both important this time of year. But which is more fun?

Three initials are no doubt on your mind this time of year—IRS. Specifically, you're wondering how the IRS will value your company's performance by looking backward over the past year. A variety of components—profit, loss, expenses, deductions, and a host of others—affect that evaluation. You want to influence those components (and have been trying to influence them) so that the IRS values your company's performance accurately and taxes it fairly.

But we suggest that now is also a great time to think about three other initials—ROI—and how to influence the components that make up ROI (return on investment). Thinking about these initials is fun because they look forward and don't have nearly so many factors—just three main ones, in fact.

How can you think about ROI? 

First, what goes into determining your ROI? Essentially, there are three financial indicators that figure into ROI: margin; efficiency, also known as turnover; and leverage, or risk. Improve any or all of these components and ROI will increase. (Your standing with the IRS will also increase, but let's not think about that.) 

Here's another way to look at it:

Right now we're interested in "B" because it breaks out the components of each element and shows how influencing one factor influences the end result. 

(The final equation, "D," of course, is the "bottom line" and is the ultimate goal. But to get there mathematically means eliminating sales and assets, which are two areas we can influence to improve ROI.) 

Margin (Income/Sales): You can attack margin in two ways: increase prices and reduce expenses. How is this best done? 

First, train your sales force in how to better communicate the value of your product or service. This route is harder than it sounds because most sales people simply present solutions instead of helping prospects understand—and appreciate—value. In other words, they educate but they don't persuade. In our experience, it takes about three months for salespeople or business developers not only to learn this skill but also to develop an efficient process for putting it to work. Once that happens you'll increase revenue by making more sales, increasing the amount of those sales, and you'll have a rationale for increasing prices.

Another way to look at it, suggests cash-flow specialist and CPA John Lafferty, is to break the sales element into three more components: number of customers, frequency of transactions, and value of an average transaction. Developing an action plan to build each of those components is the way to go, explains Lafferty, whose business is CFO Pro (www.cfopro.com). 

On the other hand, decreasing expenses is much easier in the short term than increasing sales, says Mark Holmes of B2BCFO (www.b2bcfo.com ). If gross margin is ten percent, for example, ten additional sales dollars equal the value of reducing expenses by only one dollar. Yes, assuming your customers are cooperative, increasing prices by a dollar takes you to the same place. But increasing prices presents a danger that decreasing expenses doesn't. Increase prices too much and you lose customers. 

Efficiency (Sales/Assets): Efficiency represents the number of sales dollars you can achieve per dollar of assets used to produce those sales. How does that translate into action?

For one thing, it might pay to outsource certain activities you now do internally. If an outside entity can produce sales more efficiently than you can, you'll use fewer assets to produce those sales dollars. Another strategy, of course, is to improve your in-house efficiency. 

Depending on your business, there are many ways to improve efficiency. You can emphasize quality (reducing scrap, for example), automate manual operations, provide incentives for labor to work smarter and harder. We are not experts in these areas but can introduce you to resources who are.

Another tried-and-true strategy for increasing this figure is to outsource a portion of your sales process, such as lead generation. And that's something in which we are experts.

Leverage (Assets/Equity) and Risk: The final component of our formula is leverage. This one is easy to influence mathematically because the only way to improve that ratio is to increase debt (also known as leverage). The caveat is that leverage cuts two ways, depending in whether your company is in the black or in the red. If you are leveraged and profitable, a small increase in income can produce a larger return on equity. But if you are leveraged and unprofitable, a small loss is magnified because it reduces return on equity by a multiple of the loss. So, if your company is in the red, risk increases exponentially. 

How much leverage makes sense for your company? Consultants like Mark Holmes can help you answer that question.

In summary, the bottom line is more complicated than the two numbers it comprises—net income divided by the equity invested in your business.

If you break it down into margin, efficiency (turnover), and leverage, you can determine where your firm has the best opportunities to actively improve your ROI. 

If you decide to increase margin or sales volume see us, we can help through consultative sales training, coaching, and the development of a custom sales process that will enable your sales team to better communicate value. We also offer lead generation and appointment-setting services.

In April we published a column—"Is ADHD Affecting Your Sales Results?"—about how ADHD might affect some salespeople, their managers, and their productivity. A number of readers told us they were surprised that the prevalence of ADHD in salespeople may be twice that of the general population.

Others felt they had just looked into a mirror.

A manufacturing CEO—who is also his company's primary business developer—called excitedly and said, "That article seems to be written about me!"

Among the behaviors associated with ADHD (Attention-Deficit/Hyperactivity Disorder) are difficulty with focusing, prioritizing, starting projects (or finishing them), and others. About nine million of 234 million adult Americans—four percent—are thought to be affected by ADHD, reports the Attention Deficit Disorder Association.

Since I was about to board a plane, I could take only a few minutes to reassure him: Increasing his consultative selling skills and developing a customized sales process would structure his sales calls, enabling him to stay focused during a sales call.

Within weeks he enrolled in our consultative selling course, FOCIS. He now tells us he is putting it to work in the field with great success. He has longer meetings, receives compliments on his preparation, gets more advances (that is, prospects committing to "advance" to the next step), and, most important, is winningsignificantly more new business. And by that we mean 30 percent more in business closed and scheduled for 2013.

Key Point: Our article appeared just six months ago.

We are not experts in treating ADHD. But we are experts in building consultative selling skills and creating a sales process that improves both efficiency and effectiveness. The good news is that FOCIS, our consultative selling course, works for people with or without ADHD. Nearly anyone can face ADHD-like roadblocks in their work.

Deadlines or other stressors, for example, can bring such behaviors to the surface, says Dale Davison, an executive coach in Wilmette, Illinois, who works with salespeople and others experiencing ADHD: " 'Choking' under pressure can happen to anyone—on the golf course or in the board room." Her Website is www.dale-davison.com.

More good news is that recent research tends to support the notion that some of the most disorganized people can be the most talented and creative. Testing has shown that individuals with ADHD tend to think in so-called creative ways, explains Duke University researcher David Rabiner, Ph.D: "That means they may be especially well suited for entrepreneurial pursuits and careers that place a premium on divergent thinking skills."

But, warns Dr. Julie Schweitzer, "Raw energy is not enough. Achieving success requires skills. Traditional routes are hard for ADHD people so there are benefits to coaching." Schweitzer is an associate professor of clinical psychiatry at the UC Davis MIND Institute.

What can sales managers do to support a salesperson with self-sabotaging ADHD-like behaviors?

1. Provide a customized sales process that keeps them on track while developing new business. (We can help with this one.)

2. Set up and support an accountability structure emphasizing time management training, supervision, and incremental deadlines. Poor "executive functioning" skills, commonly the result of ADHD, can lead to underestimating how long a project will take or, on the flip side, overestimating how much time is left until a project is due.

3. Take workplace dynamics into account. In traditional office environments, ADHD'ers in sales should have less open space and less distraction. Headphones, work-break schedules of 25 minutes on and five minutes off, limiting disruptive e-mail traffic—each of these tactics and others can be encouraged. Although sales managers can't control home office environments, they can—and should—suggest that home offices are quiet and void of distractions.

But in our increasingly attention-deficited society, it seems, keeping anything quiet and void of distractions is not so easy.

How bad is it?

In one small, Time-Warner study, "digital natives" (Millennials in their twenties who grew up with digital) switched media venues 27 times per non-working hour. That's roughly 13 times in 30 minutes or the time it takes to watch one episode of The Office. "Digital immigrants," who grew up with old-school technology and adapted to digital, switched media venues 17 times per non-working hour.

Keep in mind that by 2020 Millenials (born from 1982 to 2004) are expected to make up nearly half the workforce.

Does this mean society and selling are on a collision course with ADHD? Possibly, but it also just might mean that the number of sales people will keep growing because selling can be a great profession for ADHD'ers and others who like to change their focus 27 times in 60 minutes.

One thing I'm fairly certain of, however, is that Millennials won't just be calling me after looking into the ADHD mirror. They'll be calling and e-mailing and texting and tweeting and . . . whatever. I guess I'll just have to stay focused myself.

As for any questions you might have about consultative selling, please communicate with us any way you want, though phoning 847-446-0008 might be easiest. But no matter how many media venues you use we'll still read or listen to or watch only one venue at a time. That means you'll have our full attention right away.