Forecasting the stock market and interest rates is a pursuit that has captivated investors for centuries. A huge cohort of Wall Street brain cells surrounds the prediction business of markets, interest rates and other economic forecasts.

However, the reality is that predicting the future movements of these financial indicators is an exercise in futility. As of the end of 2021, the median of twelve leading Wall Street forecasters analyzing the S&P 500 was to end calendar year 2022 at the 4,825 level, according to Bloomberg. The highest was 5,300 and the lowest was 4,400. The S&P 500 closed at 3,839. Is it an overstatement to say these predictions aren’t worth the paper they’re written on?

It has been a particularly tough year to predict with the outbreak of the war in Ukraine, China’s Zero-tolerance Covid policy and backbreaking inflation. But that is exactly the point! “Forecasting is difficult because it concerns the future,” goes an old Danish proverb.

Instead, it is crucial for investors is to have a well-crafted and balanced financial plan and to remain steadfast in adhering to it through thick and thin.

The stock market is a complex system that is influenced by a multitude of both known and unknown factors. Predicting its movement is like predicting the weather – it may be possible to make educated guesses, but ultimately the future is uncertain. Similarly, interest rates are influenced by a plethora of macroeconomic factors, such as inflation, GDP growth, and monetary policy, making it impossible to predict their movements with certainty.

What investors should focus on instead, is creating a financial plan that is tailored to their unique circumstances and goals. This plan should be grounded in sound financial principles such as diversification, asset allocation, and risk management. By diversifying their portfolio across different asset classes, investors can reduce their overall risk and increase their chances of achieving their financial goals.

A well-crafted financial plan should be flexible and adaptable to changing market conditions. This means that investors should be prepared to make adjustments when necessary, while remaining focused on their long-term goals.

Is your financial plan on sound footing? Reach out to us at [email protected] to get a professional analysis of your current plan.

Can you guess which months are the least productive of the year? If the timing of this article doesn’t give it away, you might be surprised to hear that it’s the first two months of the year. A study by the data collaboration software provider Redbooth found that January and February are the least productive months. Cold temperatures and daylight hours that are in short supply seem to cause dreary conditions that impact everyone’s productivity.

Instead of simply bundling up and waiting out the slump, try some new actions to boost productivity in your business or organization. Rae Ringel, president of leadership development consultants The Ringel Group, developed four strategies that can breathe new life into this notoriously gloomy time of year:

Experimentation Mode

The new year is an excellent time to think about introducing new routines, tools, and habits into a team’s culture. The more radical the departure from business-as-usual, the more likely employees are to break old habits and reexamine what brings out their best.

Some ideas include replacing hour-long meetings with 15-minute check-ins. Or setting aside one day a week as a meeting-free zone. Maybe even move to a 4-day work week? Whatever your team’s experiment is, be sure to commit to it for at least a few weeks.

Fail-fast February

Sometimes the key to success is failing spectacularly and quickly, but then working and changing a solution until it succeeds. The final product or strategy may be significantly different from the starting point, but in the end, the most important thing is that success is achieved.

Consider designating February (or March) as a month when fast failure will be celebrated. Encourage employees to creatively develop large and small ways to improve the organization, so that leaders can crack open underexplored opportunities and spark new thinking. One way to kick off the “fail-fast” month might include business leaders recalling their own most disastrous professional failures and what they learned from them.

Unexpected Appreciation

Many employees expect some type of monetary gift around the end of the year as a form of appreciation for a year’s work. When leaders surprise their employees with employee recognition moments early in the new year, these gestures can take on greater significance because they don’t feel obligatory. Leaders could frame such gestures as a “thank you in advance” for work to come in the new year. And these acts don’t have to be monumental. Sometimes food-delivery gift cards or other simple gifts can go a long way when they are unexpected.

Reconnecting with What Matters Most

Finally, reconnect your team with what matters most. This may be the customers an organization caters to, the clients it serves, or users of the products it develops. As an example, a law firm might bring in a client whose life was positively affected by the firm’s work.  That impactful work wouldn’t have been possible without a lot of team members who may never have heard the client’s name. The idea is for employees to see themselves as essential sparks in the work the organization performs. Reflecting on the new year can ground your team in your organization’s purpose and meaning.

The new calendar year offers an opportunity to shake things up in a meaningful way. You can’t change the weather, the amount of sunlight, or the general lack of enthusiasm, but the suggestions above can help build energy and excitement that can fuel productivity year-round.

If you own an interest in a closely held business, a buy-sell agreement should be a critical component of your estate and succession plans. These agreements provide for the orderly disposition of each owner’s interest after a “triggering event,” such as death, disability, divorce or withdrawal from the business. This is accomplished by permitting or requiring the company or the remaining owners to purchase the departing owner’s interest. Often, life insurance is used to fund the buyout.

Buy-sell agreements provide several important benefits, including keeping ownership and control within a family or other close-knit group, creating a market for otherwise unmarketable interests, and providing liquidity to pay estate taxes and other expenses. In some cases, a buy-sell agreement can even establish the value of an ownership interest for estate tax purposes.

However, because circumstances change, it’s important to review your buy-sell agreement periodically to ensure that it continues to meet your needs. The start of a new year is a good time to do that.

Focus on the valuation provision

It’s particularly critical to revisit the agreement’s valuation provision — the mechanism for setting the purchase price for an owner’s interest — to be sure that it reflects the current value of the business.

As you review your agreement, pay close attention to the valuation provision. Generally, a valuation provision follows one of these approaches when a triggering event occurs:

• Formulas, such as book value or a multiple of earnings or revenues as of a specified date,
• Negotiated price, or
• Independent appraisal by one or more business valuation experts.

Independent appraisals almost always produce the most accurate valuations. Formulas tend to become less reliable over time as circumstances change and may lead to over- or underpayments if earnings have fluctuated substantially since the valuation date.

A negotiated price can be a good approach in theory, but expecting owners to reach an agreement under stressful, potentially adversarial conditions is asking a lot. One potential solution is to use a negotiated price while providing for an independent appraisal in the event that the parties fail to agree on a price within a specified period.

Establish estate tax value

Business valuation is both an art and a science. Because the process is, to a certain extent, subjective, there can be some uncertainty over the value of a business for estate tax purposes.

If the IRS later determines that your business was undervalued on the estate tax return, your heirs may face unexpected — and unpleasant — tax liabilities. A carefully designed buy-sell agreement can, in some cases, establish the value of the business for estate tax purposes — even if it’s below fair market value in the eyes of the IRS — helping to avoid these surprises.

Generally, to establish business value, a buy-sell agreement must:

• Be a bona fide business arrangement,
• Not be a “testamentary device” designed to transfer the business to family members or other heirs at a discounted value,
• Have terms that are comparable to similar, arm’s-length agreements,
• Set a price that’s fixed by or determinable from the agreement and is reasonable at the time the agreement is executed, and
• Be binding during the owner’s life as well as at death, and binding on the owner’s estate or heirs after death.

Under IRS regulations, a buy-sell agreement is deemed to meet all of these requirements if at least 50% of the business’s value is owned by nonfamily members.

Contact us for help reviewing your buy-sell agreement.

This material has been prepared for informational purposes only, and is not intended to provide, nor should it be relied upon for, legal or tax advice. If you have any specific legal or tax questions regarding this content or related issues, please consult with your professional legal or tax advisor.

© 2023

Most not-for-profits can’t afford to turn down offers of financial support. At the same time, you shouldn’t blindly accept government or foundation grants simply because they’re offered. Some grants may come with excessive administrative burdens, cost inefficiencies and lost opportunities. Here’s how to evaluate them.

Administrative and other burdens

Smaller or newer nonprofits are at particular risk of unexpected consequences when they accept grants. But larger and growing organizations also need to be careful. As organizations expand, they usually enjoy more opportunities to widen the scope of their programming. This can open the door to more grants, including some that are outside the organization’s expertise and experience.

Even small grants can bring sizable administrative burdens — for example, potential reporting requirements. You might not have staff with the requisite experience, or you may lack the processes and controls to collect the necessary data.

Grants that go outside your organization’s original mission can pose problems, too. For example, they might cause you to face IRS scrutiny regarding your exempt status.

Costs vs. benefits

As for costs, your nonprofit might incur expenses to complete a program that may not be allowable or reimbursable under the grant. As part of your initial grant research, be sure to calculate all possible costs against the original grant amount to determine its ultimate benefit to your organization.

Then, if you decide to go ahead with the grant, analyze any lost opportunity considerations. For unreimbursed costs associated with new grants, consider how else your organization could spend that money. Also think about how the grant affects staffing. Do you have staff resources in place or will you need to hire additional staff? Could you get more mission-related bang for your buck if you spent funds on an existing program as opposed to a new program?

Quantifying the benefit of a new grant or program can be equally (or more) challenging than identifying its costs. Assess each program to determine its impact on your organization’s mission. This will allow you to answer critical questions when evaluating a potential grant.

The long-run

If your organization has lost grants during the COVID-19 pandemic, you’re probably tempted to welcome any new funds with open arms. But in the long-run, it pays to scrutinize grants before you accept them. Contact us if your nonprofit is trying to grow revenue and needs fresh ideas.

This material has been prepared for informational purposes only, and is not intended to provide, nor should it be relied upon for, legal or tax advice. If you have any specific legal or tax questions regarding this content or related issues, please consult with your professional legal or tax advisor.

© 2023

Many small businesses start out as “lean enterprises,” with costs kept to a minimum to lower risks and maximize cash flow. But there comes a point in the evolution of many companies — particularly in a tight job market — when investing money in employee benefits becomes advisable, if not mandatory.

Is now the time for your small business to do so? As you compete for top talent and look to retain valued employees, would launching a retirement plan help your case? Quite possibly. And the good news is that the federal government is offering some intriguing incentives for eligible smaller companies ready to make the leap.

Late last year, the Consolidated Appropriations Act, 2023 was signed into law. Within this massive spending package lies the Setting Every Community Up for Retirement Enhancement 2.0 Act (SECURE 2.0). Its provisions bring three key improvements to the small employer pension plan start-up cost tax credit, beginning this year:

1. Full coverage for the smallest of small businesses. SECURE 2.0 makes the credit equal to the full amount of creditable plan start-up costs for employers with 50 or fewer employees, up to an annual cap. Previously, only 50% of costs were allowed. This limit still applies to employers with 51 to 100 employees.

2. Glitch fixed for multiemployer plans. SECURE 2.0 retroactively fixes a technical glitch that prevented employers who joined multiemployer plans in existence for more than 3 years from claiming the small employer pension plan start-up cost credit. If your business joined a pre-existing multiemployer plan before this period, contact us about filing amended returns to claim the credit.

3. Enhancement of employer contributions. Perhaps the biggest change brought by SECURE 2.0 is that certain employer contributions for a plan’s first 5 years now may qualify for the credit. The credit is increased by a percentage of employer contributions, up to a per-employee cap of $1,000, as follows:

• 100% in the plan’s first and second tax years,
• 75% in the third year,
• 50% in the fourth year, and
• 25% in the fifth year.

For employers with between 51 and 100 employees, the contribution portion of the credit is reduced by 2% times the number of employees above 50.

In addition, no employer contribution credit is allowed for contributions for employees who make more than $100,000 (adjusted for inflation after 2023). The credit for employer contributions is also unavailable for elective deferrals or contributions to defined benefit pension plans.

To be clear, though the name of the tax break is the ‘small employer pension plan start-up cost credit,’ it also applies to qualified plans such as 401(k)s and SIMPLE IRAs, as well as to Simplified Employee Pensions. Our firm can help you determine if now is the right time for your small business to launch a retirement plan and, if so, which one.

© 2023