Day: April 16, 2024

Why Succession Planning in the Construction Industry Is Imperative

Succession planning is a critical strategic process that ensures business continuity in the event of a leadership change. It is a proactive approach that involves identifying and developing potential leaders who can replace key roles when they become vacant. This process is crucial in every industry, but it holds particular significance in construction due to its unique challenges and skills and knowledge requirements.

Succession planning in construction is important because it enables a smooth transition should someone in a key role leave or become unable to work. Construction projects often involve complex operations and long timelines. Having a well-prepared successor can ensure that projects stay on track during a leadership change. In addition, succession planning fosters a culture that shows staff development matters. By identifying potential leaders and providing them with training and mentorship, companies can enhance employee engagement and retention. Finally, succession planning reduces the risk of business disruption. In the construction industry, where contracts are time-bound and penalties for delays can be substantial, business continuity is critical.

Succession planning in the construction industry entails a systematic process beginning with identifying key roles that are critical for business operations. These roles often include the company owner, project manager, site supervisor, and other positions that are instrumental in decision-making and project execution.

Once these roles have been identified, potential successors are selected based on their skills, experience, and leadership potential. These individuals are then provided with targeted development opportunities, such as training programs, mentoring, job rotation, and exposure to strategic decision-making. This process helps them acquire the necessary skills and knowledge to succeed in their potential future roles.

The impacts of not having a succession plan in the construction industry can be severe. Without a plan, the transition of leadership roles can be chaotic and stressful, leading to disruptions in project execution. This can result in delays, cost overruns, and potential damage to the company’s reputation.

Furthermore, the lack of a succession plan can lead to a talent drain. If employees do not see opportunities for advancement within the company, they may choose to leave, taking their skills and knowledge with them. This can further exacerbate the leadership vacuum and affect the company’s long-term sustainability.

What’s more, in the absence of a succession plan, companies may resort to a hurried recruitment process, which can lead to the selection of leaders who are ill-prepared for their roles. This can impact the quality of decision-making and potentially put the entire business at risk.

Don’t leave the future of your business to chance. Invest time and resources in developing a robust succession plan that prepares the company for future leadership transitions and promotes long-term success.

Insights on ERP Implementations from People Who Have Been There

If you’re considering adopting an Enterprise Resource Planning (ERP) system, it likely means your business is doing well and has reached a point where getting to the next level requires systems that will promote efficiency and effectiveness, or you’re getting systems in place to support big growth over a long period of time. Congratulations either way!

My goal in writing this is to provide insights to maximize what an ERP can offer, and pitfalls to avoid, by sharing my own experiences and two case studies from local manufacturing businesses.

To start, what is an ERP? It’s a business software solution designed to manage data, resources, and operations. In lieu of separate systems for different functions, an ERP integrates and automates a variety of processes in one system, providing one source of “truth”; the ability to use data in ways that separate systems unable to communicate with each other can’t; and eliminating one-offs, workarounds, and fixes that cost time, money, and business.

With an ERP, you can have one system for accounting, customer relationship management, e-commerce, finance, human resources, inventory management, manufacturing, marketing, procurement, productivity, sales, supply chain, time systems, scheduling, and more, depending on the modules you choose. An ERP is scalable, so you can add new capabilities as your business grows or needs change.

In the past, ERPs were used primarily by very large, complex organizations. The cloud has made it more accessible, prompting businesses of all sizes to consider one as part of their digital strategy.

So, what can an ERP do? Depending on the system and modules you purchase, as well as the work your team puts into it, an ERP can boost competitiveness by helping your business operate more efficiently and effectively.

You can use data to schedule projects and production more effectively; make more informed decisions in real-time; more accurately estimate and track costs; automate tasks so staff can focus on value-added activities; improve customer service; reduce lead times; maximize production and profitability; and use data for predictive modeling.

ERPs can also help improve internal controls for accounting, financial reporting, and compliance; set the stage for growth, a new line of business, or a new business model; and support remote and distributed workers.

If you are losing time tracking down data…if your systems don’t “talk” to each other, limiting what you can do…if you’ve lost business, profits, or productivity due to data issues…if regulatory compliance keeps you up at night…or if you’re ready to move to the next level, it may be time for an ERP.

Beware! An ERP is not a silver bullet. You get out of it what you put into it. Moving to an ERP is a major undertaking requiring collaboration, teamwork, time, and commitment. Interested in learning more? Two leaders of local manufacturing companies generously agreed to share their ERP experiences.

Case Study: PTI

PTI manufactures equipment for leak detection in high-risk industries. Today, it has 65 employees working in New York and Switzerland. The company was having challenges managing forecasting and inventories. More people were required to help manage back-office work and data entry, increasing costs due to the need for manual processes, interventions required, and time spent trying to catch problems and fix them before they escalated.

CEO Oliver Stauffer explains, “Because of the unique nature of our business, we needed more than what basic systems could provide. We saw the potential for gains in linking material and financial information effectively, and we knew we needed something that would cover the full enterprise to get the most long-term value in terms of cost savings.

About a year ago, we decided to explore an ERP. One of the best decisions we made was to hire a firm to help us select the right ERP for our business. We had a team of about 10 people representing key parts of the business provide input. The search firm evaluated more than 50 different systems based on our requirements and identified three that could work. We conducted a rigorous selection process and chose the vendor and system we wanted to move ahead with in September. Implementation started at year-end.

Originally, implementation was going to take three months. We didn’t want to rush and were more concerned about getting it right, so we extended the implementation period. We found a system that does most of what we wanted, with some customization and upstream infrastructure required.

I think choosing the right ERP is the most critical part of the process. Hiring a firm to help you understand which system will best serve your needs is so important, as is gaining input and buy-in from all departments.

Be prepared to address what happens when the system may not be exactly what every department wants. Not everyone may end up happy, so you must find a way to navigate to a place that everyone can live with. In PTI’s case, that meant agreeing to additional sales infrastructure. Finally, you need a champion – someone who is going to oversee the entire process and maintain momentum and buy-in from start to finish.”

Case Study: MPI, Inc.

MPI is the world leader in wax-room and ceramic core injection, assembly, and automation equipment, with operations in Poughkeepsie, NY, and sales worldwide. MPI previously had an ERP, but the company that created it stopped providing maintenance and was sold. With each piece of MPI equipment having about 2,000 part numbers adding up to over 65,000 parts across the product line, MPI leadership knew it was time to change.

A large internal team was involved with the planning. They hired a company to help value stream processes and select the final ERP solution. They also chose an implementation company with a solid background in project management.

According to MPI President Aaron Phipps, “The client manager at the implementation company knew what he was doing and everything was going fine, but he decided to leave his firm. We ended up moving to another implementation company, but we found they lacked project management skills and most of the responsibility shifted to us. Two weeks before go-live we were told the project was on time and within budget. By go live, we found we were two months behind and $100,000 over budget. We didn’t stay with them.

When it comes to choosing software, you have to be careful. Some vendors are so focused on the sale that they make promises that they can’t keep. We chose an ERP that’s well-known in the industry and has been around for a while. Still, if I knew then what I know now, I would have gone a different route. We gave up a lot. Our business doesn’t fit with the system’s out-of-the-box solution.

That said, we are using the system and getting some benefits from it. We have better data and can make better decisions. My Engineering Department would say there are benefits from consistency throughout the entire company. The software helped unify and align operations across the company.”

What advice does Aaron give based on his experiences?

“Be aware that certain things can exist outside the system and be more accurate and less expensive.
With the new ERP, it is more expensive to run our business and certain tasks involve more work. You have to be prepared to dedicate staff to maximize what it can do.
Up front, define what the completed project includes and do not allow additional charges until completion is reached. For example, up front we confirmed how one link should work, but it didn’t. After a lot of effort, they agreed we were right and said they would update it during the next upgrade six months later, or we could pay to expedite it. We just threw it out. Having a definition of project completion would have helped address issues like that.
When evaluating a system, look at procedures everyone does like clocking in and out, and count the number of clicks it takes to complete a task. You may find an ERP adds work.
Everyone in the company needs to understand how their actions affect others. For some people, the new system is better but for others, it’s harder.
An ERP implementation is harder and more expensive than you think. We went with a number of modules and then decided to pull back and drop a few. The cost is far more expensive when you take into account the software, implementation, and service fees.
Vet all of the subcontractors as best you can and be prepared with contingencies.”

Make no mistake about it, this is a huge time, cost, and personnel commitment. As the case studies show, you can do everything right and still face significant challenges that you need to muscle through. Still, it is a game-changer for many and can set the stage for operational efficiencies, cost-effectiveness, and more.

If you’re considering an ERP system, start by doing some research. Talk to colleagues about their experiences. Do a cost-benefit analysis to ensure it’s the right time to move ahead. Be prepared for what it will take – your staff will be shouldering extra responsibilities for several months and possibly even years – as you make the transition. Training and upskilling will be required. You may need full-time resources to maximize ROI once a system is in place. Ultimately, you’ll get out of it what you put into it.

Federal and State Tax Incentives: What’s Available to Help Small Businesses in 2024?

Recognizing small businesses are the backbone of the U.S. economy, the Federal and NY State governments offer many tax incentives to support growth, development, and sustainability. The first step to maximizing tax deductions (which reduce the amount of business income subject to taxes), credits (which reduce the amount of taxes you owe dollar for dollar), and other incentives is knowing which ones exist and may apply to your business.

Business Incentives

At the federal level, the Qualified Business Income (QBI) Deduction remains a significant benefit for small businesses. The QBI (also referred to as Section 199A) deduction allows eligible small business owners and self-employed individuals to deduct up to 20% of their QBI.

Then there’s Internal Revenue Code (IRC) Section 179. If you buy or lease (with qualified financing) appreciable business equipment, deduct the full purchase price (or lease amount) from your gross income. Eligible equipment can include computers, furniture, machinery, vehicles, and more. Plus, for 2024, there’s a 60% bonus depreciation to reduce your tax liability further.

You can also reduce your income tax liability with Section 174 tax credits for research and development. The tax credit is available to businesses of all sizes for qualifying research activities like software development, architectural design, product enhancements, and more.

As for New York, the Investment Tax Credit rewards businesses that invest in production property and equipment, providing a credit of 5% to 10% on their investments. Furthermore, the START-UP NY program creates tax-free zones for new and expanding businesses, offering a ten-year tax holiday on various state taxes to qualified businesses that relocate to these zones.

Hiring and Retention Incentives

The Federal Work Opportunity Tax Credit (WOTC) is available to businesses that hire individuals from certain groups facing barriers to employment like veterans, individuals on public assistance, ex-felons, qualified summer youth, and more. The WOTC credit equals 40% of the first $6,000 in qualified first-year wages. The maximum credit is $2,400.

New York State also offers a number of different tax credits for hiring employees from targeted groups. What’s more, the Excelsior Jobs Program provides refundable tax credits for businesses in certain industries that commit to invest in, hire, and retain employees in NY. Also, the Empowerment Zone Tax Credit provides an employer in a designated empowerment zone up to a 20% credit of the first $15,000 in annual wages paid to residents of the zone for services within the zone. Click here to learn more.

There are also incentives to help you retain employees. For example, under SECURE 2.0, you may be eligible to claim a tax credit of up to $5,000 for each of three years for the costs to start, administer, and educate employees about a SEP, Simple IRA, or other qualified plan. Under the Employer-Provided Childcare Credit, you may be eligible to receive a tax credit of up to $150,000/year for a qualified childcare facility, resources, and referrals.

Workforce Development Incentives

When you invest in developing your employees’ skills, you may be eligible for New York tax incentives. For example, the Employee Training Incentive Program provides a refundable tax credit of up to 50% of eligible training costs, as well as a tax credit of 50% of any stipend paid to an intern. The Empire State apprenticeship tax credit provides a credit of $2,000 to $6000 per apprentice per year (up to five years), with a higher credit available when the apprentice is a disadvantaged youth.

Energy Incentives

The Inflation Reduction Act (IRA), combined with New York State incentives, can help your small business adopt clean energy technologies and equipment and save on energy costs. For example:

Energy Efficient Commercial Buildings. Receive a Federal tax credit of up to $5 per square foot for new construction or a retrofit involving lighting, heating, cooling, ventilation, hot water systems, and building envelop improvements. In addition, in New York, you may be eligible for a variety of equipment rebates for heat pumps, boilers, water control systems, HVAC systems, lighting, weatherization, and more, depending on your energy provider.
New Electric Vehicles. Receive a Federal tax credit of up to $7,500 for vehicles under 14,000 pounds and up to $40,000 for larger vehicles. In addition, the Charge NY initiative offers up to $2,000 in rebates for new EV car purchases or leases.
Vehicle Charging & Fueling Stations. Receive a Federal tax credit of up to 30% ($100,000 maximum) for installing a vehicle charging station. In addition, NYS offers up to a $2,000 rebate per port at workplaces plus an additional $500 per port if located in a disadvantaged community.
Receive a Federal tax credit of up to 30%, plus another 40% in bonus credits if certain materials are mined, produced, or manufactured in the U.S.; if the business is in a low-income or energy community; and if labor requirements are met. Also, accelerate depreciation on installation costs. Combine that with potential NYS tax credits, financing, and incentives.

Click here to learn more. To find additional information on tax incentives click here and here.

This article highlights a sampling of the tax incentives available to support small businesses in New York. It’s important to recognize each incentive has its own eligibility requirements, guidelines, and rules. Still, with the new year barely under way, it’s a good time to consider how tax incentives may play into your financial strategy and support growth in 2024.

As always, it’s in your best interest to speak with a tax professional when it comes to any tax matters. RBT CPAs has been providing accounting, tax, audit, and business advisory services to businesses throughout the Hudson Valley for over 50 years. If you want to learn more about tax incentives and the implications of any move you make, please don’t hesitate to give us a call at 845-567-9000. We can be Remarkably Better Together.