Payroll Realities

In addition to salary, most employers contribute social security, medicare, federal and state unemployment insurance, 401k match, workers' comp, health and disability insurance on behalf of the employee.

For example, take a look below at the additional contributions each employer makes each year on behalf of an employee that earns $50,000 salary:

Social Security (6.2% of first $106,800):
$3,100

Medicare (1.45% of salary):
$725

Federal and State Unemployment Insurance:
$420

401(k) - 6% Match:
$3,000

Workers' compensation and Disability Insurance:
$500

Health Insurance (80% Employer Contribution):
$7,500 (single) $23,000 (family)

Total Salary:
$62,145 (single) $77,645 (family)

% Above Salary:
24.3% (single) 55.3% (family)
**Please note above figures are estimates and may vary.

Huge Opportunity for Companies - Section 179 Accelerated Depreciation

In an effort to stimulate the economy, President Obama and our Congress increased the 2011 Section 179 accelerated depreciation deduction allowance. Businesses who acquire equipment including machinery, computers, and other tangible goods, prefer a substantial accelerated deduction in a single tax year in order to minimize tax liability. This accelerated deduction is known by its section in the tax code: a Section 179 deduction. The 2011 law increases the amount of qualified
property that a business can expense under Section 179 to $500,000. This incentive is for equipment placed in service before January 1, 2012. Vendors of capital equipment should present this information to their prospects early in the sales cycle as this benefit can really move the needle. One caveat, this benefit only has an impact when dealing with companies that have taxable income/profit. Deductions are useless if there is nothing to deduct.

Asset Valuation

It's amazing how much credence is given to comparable multiples when determining the value of an asset... be it a single family home or medium sized business. The value of any asset should be centered around the future cash flows that it can generate not on "that house/business sold for this, so mine is worth that." The value of an asset is the present value of its future cash flows.

Paying Cash For Equipment

The most prudent way to manage precious capital is to match the equipment costs with its benefits. For example, you wouldn't pay for 5 years of cell phone service upfront, or prepay 3 years worth of electricity bills. Finance the purchase of the equipment, pay a low interest rate and take the capital that you have in the bank and invest in your core business making a return much higher than what your paying your finance company. The power of leverage.