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May 12, 2016

On Thursday May 12th, the Kansas City Construction Practice kicked off their summer breakfast event series with a discussion focused on Key Employee Incentive and Retention Plans – Creating a Motivated Management Team.

Key employees can be hard to find and even harder to keep. High-caliber employees drive the generation of profit and enterprise value, and can be a vital piece in a successful ownership transition. As a business owner, identifying these employees, understanding what motivates them to remain loyal, and encouraging them to stay the course, is critical to your company’s future, your financial independence and your personal legacy.

 While higher pay seems like the best answer, it doesn’t stop competitors from offering even higher pay or better opportunities, it doesn’t encourage the leadership mentality and it doesn’t invoke loyalty – in many cases an incentive or retention plan may be the best solution.  It is important to first understand what motivates your high-caliber employees and then design an effective plan that will benefit both the employer and employee. During our discussion today, Joyce Farris outlined a variety of different plan options and decisions to weigh as you go down this path.  To summarize, no matter what type of plan you institute, the plan should: 

  • Motivate key employees to attains goals and as they do, the company value should increase;
  • “Handcuff” the key employee to the company;  
  • Outline meaningful and realistic objectives that are well-communicated;
  • Provide substantial benefits and should be a win for both the employer and employee; and 
  • Provide specific guidelines on how to achieve the benefit (s).

To receive a copy of today’s presentation, for questions on this topic or for additional information, please contact Joyce Farris at 816.945.5121 or jfarris@cbiz.com

Save the Date for Part II in the Construction Breakfast Series: Employee Stock option Plans (ESOPs) in the Construction Industry, July 12th.

April 5, 2016

Originally featured in Thinking Bigger Magazine - March 2015

As a small business owner, there may come a time, if it hasn’t already, when you need money and you need it now.

There are a variety of funding options available: banks, home equity, the SBA, friends and family, investors, accounts receivable factoring, credit cards—the list goes on and on.

However, what if you have exhausted all of those sources and still have a short-term need for cash? As you begin the quest to find financing, you may consider alternative funding—an option becoming increasingly popular for small businesses across the country. 

 Because the traditional banking system’s regulations have made it increasingly difficult, time-consuming and, in some cases, impossible for a small business to get quick funding from their bank, this niche financing  industry has emerged, filling a need that many  primary funding resources have overlooked. 

What Exactly Is Alternative Funding?

Lending Club and Kabbage are two examples of companies providing alternative funding services. These, as well as other organizations in this niche, are primarily online resources focused on providing fast and flexible short-term financing to small businesses.

Typical lending ranges from $10,000 to $100,000. After the process has started, it usually takes about a day for the company to receive financing, assuming all the funding conditions have been met.

Kansas City is actually home to an alternative funder, CapFusion. Though the company provides funding to small businesses across the country, the company’s founders are based in Kansas City. And they may pay extra attention if they receive an application from a business that is located here, too.

Why Isn’t Everybody Using Alternative Funding?

There are pros and cons to all funding options, but the main cons associated with alternative funding include the associated costs, the dollar limits and the relative experience of the lender.

The costs of these loans can be significantly more than annualized rates associated with conventional financing. Using alternative funding, a typical transaction’s annualized interest expense is anywhere from 30 percent to 50 percent. Remember, there is a reason this niche is referred to as “alternative funding” and not primary funding.

Additionally, the players in this space typically lend in much lower dollar amounts than other types of financing. The thought behind this being, once a company has stabilized its cash flow and has time to patiently search for the best conventional financing arrangement, it will no longer need alternative financing. 

Lastly, as a relatively new niche, many companies in this space are relatively young. Some small business owners simply may prefer working with more established, well-recognized institutions.

What You Should Do

As if running a business doesn’t present enough challenge to the small business owner, I’ll add one more. It is important to understand all the financing options available to you and the pros and cons before you make a decision. Put in the time and effort to analyze your alternative financing options, the same way you would research other goods and services.

While working with an online alternative funding source may be your best solution, make sure your needs align with the company’s capabilities, and make certain you are working with the lending company that will be providing the financing, versus a broker, which will lead to substantially more costs.

Learn more about the author of this article, Daniel Kjergaard and our Entrepreneurial Services Group.

February 29, 2016

Can compensation paid to a hospital-employed physician be Fair Market Value (FMV) when the hospital loses money on the professional practice?

Recent government interest in the topic, as well as ongoing debates on the applicability of the Income Approach when valuing physician compensation, have highlighted the need to address this question. This article will explore the complexity of the issue, including some of the reasons why practice losses occur and focus specifically on the impact that operating in a quasi-regulated industry has on the determination of FMV.

Market Dynamics Impacting Physician Practices

Understanding the market dynamics impacting physician practices is an integral part of identifying why practice losses occur and how FMV is implicated when a hospital is subsidizing physician compensation.  Below are four important market factors that affect the finances of a physician practice.

Aging Population
Advances in healthcare have led to an increased life expectancy for Americans, and we now face an aging population. With an aging population comes an increased demand for healthcare services. While increasing life expectancies is positive; it does put a strain on healthcare resources. 

Supply and Demand of Physicians
Over past decades, the supply of physicians has not been able to keep up with demand. Now, the Affordable Care Act (ACA) has increased the number of insured patients, further increasing demand for healthcare services. One recent study reported a shortage of 46,100 to 90,400 physicians by 2025. The market is responding with non-physician practitioners, such as nurse practitioners and physician assistants; however, the demand for physicians will continue to exceed the supply. 

Hospital Employment Physician Practices
Over the past decade, there has been a substantial swing from private practice groups to hospital employment. Many financial changes occur when a hospital operates a physician practice. While these changes often have a positive financial impact, such as improved insurance contracts or bargain purchasing power for certain supplies, other changes often increase the expenses of the practice, such as increased salaries and benefits and overhead allocations from hospital departments. In addition, a hospital may choose to move certain services previously offered by the practice to another department of the hospital, whereas private practices take advantage of the in-office ancillary exception and often realize a profit from those ancillaries. Private practices must “break even” to stay in business; however, hospital-owned practices are merely a department or subsidiary of a larger operation and do not necessarily have the same economic restrictions.

Government Payers
Medicare is the most significant payer for many physician practices. It is the rare physician practice that can survive without participating in the Medicare program. But, Medicare reimbursement rates are not negotiated like other payers; they are regulated by Congress.  Sequestration and other government imposed sanctions increase the pressure on available dollars to fund Medicare. Recently, a budget deal was struck to keep the federal government functioning and depends largely on Medicare cuts. Additionally, government payers, such as Medicare and Medicaid, are typically the lowest payers in a market. Changes in Medicare do not only impact government payers in the long run; Medicare largely sets the reimbursement for much of the healthcare market.  Commercial insurances often index their fee schedule to the Medicare fee schedule, so when Medicare cuts rates, the commercial insurances presumably will follow.

Each of the above dynamics can contribute to physician practice losses. Valuators have an obligation to gain an understanding of a client’s business and industry, including the dynamics listed above. As such, each of the above market factors can significantly impact a FMV analysis. Below, we will discuss the resulting implications for FMV.

Impact on FMV

The aging population, coupled with the supply and demand for physicians, creates a significant amount of pressure on the physician practice model. Traditional market theory of supply and demand does not hold true in physician practices, due primarily to a regulated reimbursement model. As previously discussed, demand for physician services is exceeding supply. The increase in demand is reflected in market data traditionally used to value physician compensation, but is not reflected to the same extent in the government reimbursement. Further, the aging patient base that is creating much of the demand is increasingly covered by Medicare. Unfavorable payer markets and the requirement for hospitals to treat patients regardless of their ability to pay further increase the volume of Medicare, Medicaid, and uninsured patients. This will generally lead to lower reimbursement, leaving less money available for physician compensation, and potentially leading to losses at the practice level.

The question remains: can physician services be supported as FMV even when practice losses are incurred? In attempting to answer this question, we must consider how FMV is determined. Valuators are required to consider all three primary valuation approaches: the Market, Income, and Cost Approaches, and then use professional judgment to determine the applicability of each. 

As healthcare valuators, we have historically been somewhat limited to the Market Approach for physician compensation valuations. With the inapplicability of the Cost Approach, along with the issue of physician practice losses, ultimate reliance on the Market Approach is commonplace. However, ultimate reliance on the Market Approach does not diminish the importance, or responsibility, of considering the Income Approach.

The application of the Market Approach alone results in compensation driven by market data without consideration for the economic impact on the hospital or practice. This creates risk, as inappropriate application of the market data causes self-perpetuating increases in physician compensation without regard for the impact on the hospital. 

Conversely, in situations where a hospital is incurring a loss on a physician practice, sole reliance on the Income Approach would not be adequate to support competitive or FMV physician compensation. However, many valuators feel singular reliance on the Income Approach in such a situation would not result in an appropriate indication of FMV, due to the market factors and restrictions discussed above. Assuming the employing hospital has sufficiently documented the community need for the physician’s professional services, and physician compensation can be supported as FMV under the Market Approach, it may be appropriate to place little to no reliance on the Income Approach in a final conclusion of value. 


Valuators, attorneys and the government have all considered the implication of practice losses on FMV, and the theoretical debate is sure to continue. The facts and circumstances of each market and each individual transaction between a hospital and physician should be carefully considered in conjunction with practice losses and the Income Approach to value. Proper documentation of factors such as community need, physician supply and demand,  and the history and ability to recruit in a particular market are just a few of the factors that should be analyzed when determining the FMV of physician compensation and the appropriate consideration of the Market or Income Approaches.

February 29, 2016

Originally published on Startland News

You know the feeling you get when you find $20 in your pocket that you forgot was there?

Or have you seen the late-night infomercials about all the “found money” just sitting around waiting for you to claim it?

It’s exciting stuff — the kind that makes your pulse race and your mind wander to the endless possibilities available to you and your newly found money. But then the nagging voice in the back of your head questions, “Are there other savings opportunities I may be missing out on?”
As a startup, you may be overlooking something more lucrative than that extra $20. It’s called a Research and Development (R&D) tax credit and may even result in CASH!

The Basics: Beginning this year, startup companies with gross receipts of less than $5 million may elect to claim the R&D credit against payroll tax liabilities. Congress wants to encourage companies to remain persistent in developing new products and has created a way for companies investing in these activities to save money.

Almost any for-profit company working on new products or processes may qualify, regardless of whether the company is currently making money. Specific items might include software application, new tangible products or even upgrades to older products. Another great indicator is if you have engineers, computer programmers or other technicians on staff.

Who qualifies: We won’t go into the specifics of the calculation here, but basically, if you’re spending money on personnel and outside professionals to research a new product or platform, you’ll likely qualify for the credit.
The hardest thing for most companies is trying to compile all the research and development costs at the end of the year. While all good companies track spending, they don’t necessarily track costs for specific types of tasks, so when it comes to the end of the year, it may be difficult to accumulate the actual research costs incurred.

The best thing to do is make sure your accounting platform is setup to capture these costs as they occur. Understanding what type of costs can go toward the credit is critical to maximizing the accumulation. For example, does an administrative assistant helping a computer programmer compile data qualify? The answer to that and similar questions depends on the business.

The Bottom Line: Now is the ideal time to talk with your accounting and tax advisors to guarantee you are taking the proper steps to ensure you don’t leave money on the table. 

The only question you should be asking yourself now is, are you ready to discover your company’s hidden savings?  After all, in the words of another late-night infomercial, “It’s your money”.

By: Dan Schmidt, Founder of EBCFO and Ben Anderson, Manager at CBIZ MHM, LLC Kansas City

November 5, 2015

Together, with Husch Blackwell and UMB Bank, CBIZ MHM, LLC proudly sponsored a seminar dedicated to the Manufacturing and Distribution industry on October 29th. Held at Boulevard Brewery, the seminar focused on the cybersecurity threats facing the manufacturing and distribution industry. Attendees heard from accounting, financial and legal professionals as they discussed the industry economic forecast, data breach threats to companies in the Kansas City area, vendor security and risk management.

To wrap up the seminar, special guests Chris Lamb, FBI - Cyber Investigations, and John Cowles, Assistant US Attorney – USAO, Western District of MO, focused on the current trends in cyber investigations (locally and nationally) and prevention tips.   

The Manufacturing industry is important to CBIZ MHM and we are very pleased to have had several clients and guests attend the event to learn more about the security challenges facing this industry. Below, we have included the top ten takeaways from the seminar.  As an additional resource, the presentation is available for download here

  1. Understand the global threat – Threats to cybersecurity are increasing both in quantity and severity. From 2012 to 2013, data breaches doubled!
  2. Know the cost – From 2013 to 2014, the average cost of data breaches went up by more than 15%, making the average $3.5 million.
  3. Know your data - Know what data your company has, where it is stored and how it’s secured.
  4. Clean it out - Look for opportunities to eliminate old and unnecessary data.
  5. Use your resources – There are third party professionals who are experts in various aspects of cybersecurity, including the FBI, all of which are resources for you - use them! 
  6. Mitigate your risk - A formal risk assessment should be performed at least annually – whether done internally or by a third party specialist.
  7. Get covered – Companies should consider obtaining insurance to cover cybersecurity incidents and review policies with specialists to make sure they provide adequate coverage.
  8. Educate your employees – 93% of employees knowingly violate cyber security policies. People are the biggest cause of security breaches. Employees need to be trained and updated on cybersecurity issues.
  9. Size DOESN’T matter – In fact, the smaller the business is, the easier it is to hack!
  10. It could happen to you – The odds of a Manufacturing company being targeted for a cyber-attack are 1 in 3. No one is immune to an attack; assume you will be targeted at some point! It is important to be proactive and have a plan in place ahead of time!

Did you miss the seminar, but want to make sure you are added to future invitation lists? Contact aelliott@cbiz.com.

October 8, 2015

Together, with Spencer Fane, CBIZ MHM proudly sponsored the 2nd Annual Architecture, Engineering and Construction industry seminar on October 1st. This year the half day seminar was focused on Transition and Next Generation Planning and concluded with legal trends in the industry. The A/E/C industry is important to CBIZ MHM and we are very pleased to have had several clients and guests attend the event to learn more about the challenges faced and available options when transition planning. The following is a brief summary of the seminar. As an additional resource, the slide deck from this presentation can also be downloaded here

KEY TAKE AWAY: Whether you’re planning for ownership transition of the business during life or planning for the ownership transition of the business upon death, it is imperative that you have a transition plan in place now. 

Joyce Farris, Managing Director at CBIZ MHM, LLC and David Seitter, Partner at Spencer Fane LLP, co-presented the main portion of this half day seminar. During this time, Farris and Seitter focused on the aspects of the transition planning process, available options, the steps you need to consider when formulating a long term action plan and how to ensure you have aligned all of the key aspects which fall within the plan. The presentation slides provide more information on the important steps you should consider when putting a plan in place, and your next steps to ensure you and your business are covered for the future.

David Schatz, Partner at Spencer Fane LLP, concluded the day with legal trends in the construction industry. This section is also reflected in our slide deck and includes important 2015 industry trends and how they may affect your bottom line.

For more information or any questions regarding the presentation or slide deck, please contact Joyce Farris, David Seitter or David Schatz.

Did you miss the seminar, but want to make sure you are added to future invitation lists? Contact aelliott@cbiz.com

September 28, 2015

To support the highway system, the federal government, states and some jurisdictions impose a tax on motor fuel consumption. Fuel tax rates and exemptions vary on the federal, state and local level. Additionally, there are a number of fuel tax exemptions, which further complicates fuel tax planning.

If your company transports cold goods, if you use diesel particulate filters, pave roads, provide bus services or export goods, you may benefit from a CBIZ MHM fuel tax refund study. These studies help companies meet their fuel tax obligations while maximizing the benefits of the available exemptions.

Learn more about CBIZ MHM Fuel Tax Refund Studies.

September 16, 2015

Threats to cybersecurity are increasing both in quantity and severity. From 2012 to 2013, data breaches doubled. From 2013 to 2014, the average cost of data breaches went up by more than 15% to $3.5 million.

On October 29th CBIZ and Mayer Hoffman McCann P.C., along with Husch Blackwell and UMB Bank, invite C-Suite executives and Owners to join  us for a free half day seminar focused on the cybersecurity threats facing the manufacturing and distribution industry. Hear from accounting, financial and legal professionals as they discuss the industry economic forecast, data breach threats to your company, vendor security and risk management.

Closing Presenter: John Cowles, Assistant U.S. Attorney, Western District of Missouri
Trends & Tips in Security Fraud

Economic Outlook
Poachers, Hackers & Spies: The Data Breach Gang
Vendor & Security Risk Management

Boulevard Brewery
2501 Southwest Blvd
Kansas City, Missouri

This seminar will be eligible for up to 3 CPE & CLE credits
Check in begins at 1:00PM
Seminar runs from 1:30 PM – 4:30 PM
Appetizers and cocktails immediately following

To register and for more information, click here.

September 10, 2015

On Thursday, October 22nd the Kansas City CFO group will host the fourth quarter breakfast series event at CBIZ MHM Kansas City, which will feature a panel of local Private Equity experts. This panel will focus on the Private Equity landscape in Kansas City and will address a variety of questions prepared by a moderator including: what equity investors are looking for (both for targets and from a financial statement standpoint), how the private equity market currently looks in Kansas City, and much more!

To register, visit: https://kccfoseriesprivateequity.eventbrite.com

August 31, 2015


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