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October 2018
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Now is the time

BEFORE YOU DO ANYTHING ELSE……TAKE OUT YOUR HANDHELD AND/OR CALENDER AND MAKE AN ENTRY FOR

OCTOBER 10, 2018 AT 1PM CENTRAL TIME

Because I will be on a panel sponsored by MHW discussing ESOP’s for Material Handling, Equipment Rental Co/ Dealerships, and Related Industries.

As you know I have been discussing the ESOP option for Dealers wanting to transition out or take some dollars off the table. The panel will specifically deal with equipment dealerships and ways to maximize your take home proceeds from a sale, as well as eliminate future federal and state taxes going forward.

If you are thinking of transitioning out within the next five years YOU HAVE TO SPEND THE HOUR LISTENIING TO THIS PRESENTATION. …..BECAUSE NOW IS THE TIME TO REVIEW YOUR SITUATION SINCE INTEREST RATES ARE LOW, FINANCING IS ABUNDANT AND COMPANY VALUES ARE AT A HIGH POINT RIGHT NOW.

ESOP’s give you the option to stay on, keep your employees, avoid tax on the sales proceeds, get out from under of personal guarantees and have no requirement to pay future federal or state income taxes. What is not to like!

My point #1 is values are at a high point, giving you the ability to cash out now and keep your job for as long as you like. Point #2 is if you don’t sell now, and Mr. Recession hits us big time, it will take you 10 years to get back to today’s value. You want to take that risk? Some dealers believe they should wait because the company may be worth more in the future…..it may be …. but when? And there is good chance it will not be worth what it is today……so why take that chance when you could be clipping coupons from your tax deferred sales proceeds you collected today.

So, MARK YOUR CALENDER AND REGISTER TODAY TO LISTEN IN TO THE OCTOBER 10TH ESOP WEBINAR.

Any questions about the webinar…. let me know.

Next on my list is the reminder to get that calculation estimating your 2018 federal income taxes.  Most folks have their 2017 returns in their possession and can request a 2018 calculation using 2017 income/expense data unless you know of a factor that will materially change the 2018 taxable income.

Tariffs maybe a good thing and maybe a bad thing. In the short term more bad then good. In the long term probably more good then bad. I believe that scenario fits for both the material handling industry as well as its customers.

One OEM I know announced a 3% price increase for 2019 along with a 4.5% tariff surcharge. When I saw that I said “WHAT, CAN’T BE!” …but it is. To get this straight, I am going to incur a 7.5% price increase I need to pass on to customers (lots of luck with that) pay more in floor plan interest, use up more of my financing dry powder, decrease my rental ROI because I doubt I could pass on a 7% rental rate increase and in general mess up my balance sheet and net profit line for the foreseeable future.

That is the BAD PART.

On the other hand ……. if the tariff effort bears fruit your customers should be doing more business and selling more product overseas. And for those customers that don’t sell overseas, I am sure most will be selling more products to the US companies that do. All of which means more demand for material handling products or services.

So, you have hurt for a short time in exchange for a long-term benefit. THE GOOD PART.

Depending how fast you turn over your inventory or add units to replace existing rental units will decide what downside to expect from a tariff expense. Depending how good you are at selling these units off to customers as sales or rental units will decide what kind of pain you incur. Guess you could always tell customers they will get a bigger tax deduction if they buy one of the new units and see it that works. (That was a joke). In short be prepared to seek out options to help avoid the short-term pain. Buy used units to sell, keep rental units longer to shorten up the bite, refurbish your rental units for sale, add more extras to your rental billing to offset the tariff impact.

Never a dull moment in the material handling business.

Now do not forget…..Oct 10 at 1pm central time……Get that tax calculation done.

I would like to hear how the tax calculations are coming out. Happy with the results. Disappointed. Not sure. Don’t understand a word they are saying. Gbartecki@comcast.net.

Been through the ESOP process and can help you decide if you qualify or not.

 

Garry Bartecki is a CPA MBA with GB Financial Services LLC. E-mail editorial@mhwmag.com to contact Garry.
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