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Staffing News Online

NJSA's Staffing News Online is a monthly e-newsletter that is available to the staffing industry.  The content for Staffing News Online comes directly from our industry partners.  If you are an NJSA industry partner and would like to submit content for Staffing News Online, please email office@njsa.com with your article.

  • Thursday, January 31, 2019 8:52 AM | Denise Downing (Administrator)

    Final regulations issued by the IRS last week affirmed that most staffing firms will indeed be eligible for the new 2018 “pass-through entity” tax deduction, under the Tax Cuts and Jobs Act (TCJA). As indicated in our August, 2018 post, we were optimistic that the staffing industry would be eligible for the new tax deduction, as outlined in Section 199(A) of the Internal Revenue Code. Last week’s pronouncement confirms the good news.

    The new tax break allows owners of certain “pass-through” business entities (S-corporations, LLCs, LLPs, partnerships, and sole proprietorships) to potentially deduct up to 20% of “Qualified Business Income” – or “QBI” - from federal taxable income. When passed, the TCJA left tax professionals with a litany of questions concerning a taxpayer’s eligibility for the new tax break, due to the unclear language in the law. Certain industries (including consulting, medicine, accounting, and law) were specifically barred from benefitting under section 199A, while others were clearly eligible. However, a wide swath of industries (particularly those in certain service businesses) were left guessing as to whether they would benefit. The temporary staffing industry was particularly uncertain as to their standing under the TCJA.

    Before the final regulations were issued, the American Staffing Association had written to the Treasury Department and outlined several arguments as to why the staffing industry should be able to claim the tax deduction. The principal argument was that staffing firms are selling labor (and are not providing excluded services, such as health or law). The arguments were clearly successful.

    The actual amount of the tax deduction is extremely complicated and is based upon certain formulas, including the amount of the business’s wages, and will vary greatly from company to company, depending upon specific and unique taxpayer circumstances. Those staffing firms who offer true consulting services (workforce consulting, for example) should also be wary of some continuing limitations on the ability to claim the tax deduction.

    It is imperative for staffing firms to coordinate closely with their tax advisors in order to maximize the potential benefits. Still, this month’s news is a “huge win” for the staffing industry.

  • Wednesday, January 16, 2019 8:48 AM | Denise Downing (Administrator)

    When it comes to delivering shareworthy CX, what do staffing customers want most? Check out these eyeopening statistics, and get the full CX Infographic here:

    The stakes are high

    • 43% of customers will pay more for a great experience
    • 73% of buyers point to CX as an important factor in purchasing decisions
    • 13% of unsatisfied customers will tell 15+ people they’re unhappy, but 72% of customers will share a positive experience with 6+ people
    • 65% of buyers find a positive experience with a brand to be more influential than great advertising
    • By 2020, customer experience will overtake price and product as the key brand differentiator

    Takeaway: Improving CX can boost your bottom line.

    The human touch is still important

    • 71% said employees have a significant impact on their experience
    • 59% feel companies have lost touch with the human element

    Takeaway: Make sure tech complements (not replaces) personal service.

    For more staffing industry customer experience insights, check out the full CX infographic.

    Need a mobile-frst website?

    Want help implementing the right tech to serve customers the way they want?

    We’re just a call or email away. Connect with one of our marketing educators to learn how we can help you improve CX – and deliver even better service in 2019.

    Click here to download the article in PDF format.

  • Friday, January 11, 2019 4:06 PM | Denise Downing (Administrator)

    What’s the first thing you think about when you hear, “New Year”? Is it resolutions? The ball dropping in NYC? For all the recruiting and staffing professionals out there, it just might be thoughts of finishing up W-2s, Affordable Care Act reporting and year-end-tax filings.

    If you’re one of those individuals, have no fear. With these tips and methods, you’ll be well on your way to having the most successful year-end ever.

    1. Know the Timeline

    Having a clear, visual representation of your timeline can really help boost your chances of success. Start by writing down deadlines for tax filings such as W-2s, 1095-Cs, 940, T4, and other important required documents. Create a calendar of important dates and make it available to your team via Google Calendars, an actual calendar, Microsoft Outlook or any other calendar that visually shows these important dates. Keep in mind that in some cases, there is a deadline to get the form to the employee and a different date to file with the government agency – be sure to map these out on your calendar.

    2. Make a Plan

    Having a plan is never a bad idea. Reflect on year-end experiences from prior years, what went horribly wrong? What worked well? What processes are you and your team unsure about? What do you need more information on? What has changed since last year? Has anything changed about payroll that will impact tax reporting? The time to discuss and plan is now!

    Here’s a few questions to think about as you work on a plan:

    • How will you audit the forms? Try Selecting a sampling of employees that fit scenarios you want to review. For example, if you’re reviewing 1095-Cs, look for employees that are full time, part time, were enrolled in insurance, declined insurance, started mid-year, worked all year, salaried employees, hourly employees, etc. Reviewing W-2s? Look for employees that worked in only one state, worked in multiple states, worked all year, worked part of the year, paid salary wages, participated in 401K, had pre-tax deductions, employees with new deductions or pay types, etc.

    Identify and document the list of employees you want to review

    • How do we plan to print and mail forms to employees? Are we printing in-house or looking to outsource? If mailing in-house, do we have paper, envelopes, etc.?
    • Do we need to e-File, or can we mail forms to the government agency? What vendor do we plan to use to help e-File?

    Create a task list and ensure each team member participating in the year-end activities understands the critical role they play.

    3. Act Now

    “Deadlines give us the sense that we are really on our way and that we will achieve the goal – soon!” – John Patrick Hickey

    • Start reviewing forms early. Once W-2s are available for review; simply generate data in Weekly Process for Q4, then run the available W-2 reports to see your forms.
    • Know the available resources. Ensure you have the knowledge you need, when you need it!

    Bonus: Treat yourself!

    Once you’re all done, treat yourself. You worked hard and deserve something nice. Whether it’s a last-minute trip, buying something for yourself or maybe even just a small work party, treat yourself – you deserve it!

    Click here to view the full article on Avionte's website.

  • Thursday, December 27, 2018 1:38 PM | Denise Downing (Administrator)

    Many organizations are struggling to fill open positions. It takes them weeks or months to fill just one job. The skills shortage often gets the blame. Because there are more jobs than people to fill them, leaders have come to expect that hiring will be a time-consuming challenge.

    Another group of companies is having a different hiring experience. These organizations fill their open seats with relative ease and speed, even though there aren’t enough qualified people to go around. What makes these organizations different isn’t their reputation, location, work environment, or pay and benefits. It’s how they’ve chosen to address the talent shortage. They’ve overcome three common obstacles that slow down fast hiring.

    The Real Problem

    While the global talent shortage is an ongoing reality, it’s not the real problem. The skills shortage is merely a challenge that can be solved by a better process.

    The critical problem — the only one you can control — is having the right kind of hiring process. The right process taps into a sufficient pool of talent and efficiently moves candidates toward hire.

    To fill jobs quickly with top talent, your hiring process must overcome these three obstacles.

    Obstacle #1: Tapping into a candidate pool that’s too small

    If you asked employers why they can’t fill jobs, over a third will tell you they’re not getting enough applicants, or they’re getting no applicants at all. Yet, only 10 percent of these employers use untapped talent pools.

    Faster hiring requires mass: You must build a critical mass of candidates to select from. Building mass requires tapping into overlooked pools of people.

    To determine if your organization is tapping into a candidate pool that’s too small, take these three steps.

    1. Review the eight talent streams - There are eight streams of talent (see my image above). Each stream provides access to unique people. Compare these streams to how your company acquires candidates.
    2. Determine which streams lead to successful hires - Review your organization’s hires over the past six to 12 months. Note which streams these hires came from and which streams didn’t produce any successful hires.
    3. Assess which streams are being underused or overlooked - Every talent stream should be producing candidates, some of whom become quality hires. Those that don’t are underused or overlooked.

    Obstacle #2: Employing interviewing methods that are inaccurate and slow

    During typical interviews, candidates are on their best behavior. As a result, interviews are often a poor barometer as to who will fail or succeed in a given role. Some “newer” interview methods, such as behavioral interviewing, have only made the process longer. Hundreds of books and articles have been written on how to beat behavioral interviews. These books and articles demonstrate simple methods for telling interviewers exactly what they want to hear.

    Interviews cannot be a conceptual exercise. They must allow you to see proof then-and-there that a candidate can do the job and do it well.

    Take time to evaluate the speed and accuracy of your interviewing methods by reviewing each step of the process, evaluating the effectiveness of techniques used by interviewers.

    Answer these questions.

    • Does the interviewing technique consistently uncover irrefutable proof about a candidate’s fitness for the job?
    • If “no,” how can we replace or eliminate that technique to get a better result?
    • If “yes,” what can we do to streamline this technique and still get the same consistent irrefutable proof?

    Obstacle #3: Failing to build and maintain a prospective employee pipeline

    When a seat opens suddenly, the amount of activity it generates can feel overwhelming. Without an active talent pipeline, a frantic dance ensues. Managers have to handle extra work as the company tries to find suitable candidates. Days later, schedules have to be coordinated for phone screenings and interviews. Work piles up, good candidates take other jobs, and nerves fray.

    Maintaining a pipeline of ready-to-hire prospective employees eliminates the dance. When jobs open, there’s no rush, panic, or chaos. Instead, hire from your overflowing pipeline.

    Assess your organization’s pipelining strategies. Starting with the most critical roles in your organization, answer these questions.

    For each role, how many people are ready to hire right now?

    For any roles where there aren’t people ready to hire now, where is the pipelining process failing? For example, are there viable candidates who are stuck at the interview stage? Is there a lack of suitable candidates to interview? Is recruiting failing to generate candidates? Use what you learn to address those process problems.

    Speed is no longer a competitive advantage; it’s now a requirement for doing business and hiring quality employees. The importance of having talented people exactly when they’re needed makes fast and accurate hiring a strategic imperative.

    Scott Wintrip is the president of the Wintrip Consulting Group. He was named to the Staffing 100 by Staffing Industry Analysts in 2011-2016 and was among the first class of the Staffing 100 Hall of Fame in 2017. He can be reached at scott (at) ScottWintrip (dot) com.

  • Thursday, December 27, 2018 1:35 PM | Denise Downing (Administrator)

    Talented people are bombarded with opportunities. So many that yours could easily be lost in the crowd. There’s a simple way to make your opportunities stand out: Package your jobs and assignments as if you’re marketing a product.

    I was reminded of this method when I was in the tea aisle of Whole Foods Market. If you’ve never been in their tea aisle, it’s a plethora of color, size, and shape. It’s quite a sight … and a potential sales nightmare for individual suppliers.

    Manufacturers have learned to compete in this cornucopia by packaging their tea in boxes, tins, and containers of all colors, sizes, and shapes to attract your attention.

    There was a woman standing in the aisle gazing at the wall of tea. As I watched her consider her options, I noticed that she was scanning the shelves, occasionally picking up a box or tin, checking out the back and then either placing the item in her cart or putting it back on the shelf.

    I watched a bit longer, curious about the system she had going. Eventually my curiosity won out and I approached her.

    “Excuse me, I hope I’m not intruding. I was noticing how you were looking at tea. I’m a consultant. My clients are always interested in how people make choices. I noticed you’re very particular with what you’re looking for. May I ask why?”

    “Well,” she started, “I’m bored with my current brand of tea. I’ve decided to try some new flavors and brands. Maybe there’s something better than what I was buying before.”

    “Okay, and how are you going to pick?”

    “Well, I like a robust tea so I’m looking for cues — pictures or words — on the front of the box that tell me it might be full-flavored.”

    “Okay. I noticed that when one grabbed your attention, that’s when you picked it up and checked the back.”

    “Right. The front of the box is what captures my attention. Then I look at the back to finalize my decision. Simple as that.”

    PREMIUM CONTENT: M&A Funders and Advisors Directory

    Tea Lady reminded me that packaging matters. How something is packaged either grabs or repels our attention.

    This is why good assignments jobs are often overlooked. They’re poorly packaged.

    To get the attention of top talent, you must think like a product marketer. Your packaging (ads, posts, and verbal communication) must quickly grab people’s attention.This is the “front of the box.” Only after you’ve gotten a candidate’s attention will the details matter (the “back of the box”).

    Take these steps to improve how you package opportunities.

    1. Next time you’re in a retail establishment, notice how product marketers package their offerings. Note the colors they use, the pictures they choose, and how carefully and sparingly they use words on the front of the box.
    2. Imagine your jobs and assignments were in a store competing with other opportunities. Each job is in a box, waiting for top talent to come down the aisle.
    3. Design the “box” with the jobseeker in mind. What pictures, words, and colors can you use to grab people’s attention?
    4. Test out a few designs with internal staff or an external focus group.

    What’s this look like in action? A firm with great opportunities was drawing in a trickle of talent. Using these steps, they created colorful images and short videos (under 10 seconds) of people sharing brief soundbites about how working with the firm has improved their lives. They used these same soundbites as the opening content for written postings and conversations with candidates. Today, the firm draws in a strong steady flow of highly qualified people.

    Your opportunities are important. Package them so that they stand out and get the attention they deserve.

    Scott Wintrip is the president of the Wintrip Consulting Group. He was named to the Staffing 100 by Staffing Industry Analysts in 2011-2016 and was among the first class of the Staffing 100 Hall of Fame in 2017. He can be reached at scott (at) ScottWintrip (dot) com.

  • Thursday, December 27, 2018 1:31 PM | Denise Downing (Administrator)

    Many staffing firms have experienced financial abuses inflicted on them by clients or VMS/MSP agents. Originally lifted from traditional purchasing contracts, these ideas are now widespread in staffing deals. The following are some of the worst financial abuses that you may encounter, along with nutshell summaries of how to fix them.

    Stale invoice forfeitures. This clause nullifies staffing firm invoices that are not complete, correct and submitted within 60 days after the assigned employees’ work, regardless of who caused the delay (even clients or VMS/ MSPs). Clients claiming stale invoice forfeitures get free work for administrative imperfections that actually confer a benefit on them (paying later instead of sooner). Meanwhile, staffing firms advance about 80% to 90% of the invoiced amounts to pay wages, burdens and other expenses while awaiting payment from clients.

    Fix: Reject the forfeiture entirely, or reduce the amount forfeited by a percentage approximating gross margin.

    “Pay when paid.” A feature of most VMS/MSP contracts, this clause absolves the VMS/MSP of liability for payments to staffing firms until clients pay the VMS/MSP. Staffing firms under VMS/MSP programs usually have no direct or contractual relationships with clients, so they have no way to collect from clients that refuse to pay. Because they have a very small stake (2% to 4%) in client payments, VMS/MSPs have little incentive to pursue collections on behalf of staffing firms.

    Fix: Require unconditional VMS/MSP payment, or require assignment of client receivables to the staffing firm (plus sharing of information and documents) after a specified number of days of client nonpayment.

    Interest-free financing of staffing invoices. This becomes more important as interest rates rise. Staffing firms aren’t banks, and there is no reason why staffing invoices should not be paid immediately or even in advance by deposits that clients replenish, as the PEO industry requires. Long interest-free payment periods not only cost you the use of your money but also reduce the clients’ incentive to pay you. It also leaves you with greater risks of clients’ bankruptcies.

    Fix: Allow interest-free payment for a short period, but charge interest on overdue accounts by the day after a certain time, retroactive to the invoice date.

    Volume discounts. Such discounts decrease clients’ rates as billings, hours, wages or employee counts rise. But the economies of scale assumed to justify the discounts may not exist; and there may actually be diseconomies of scale because of large-client servicing expenses — like on-site staffing, quarterly reviews, special reports, audits and free conversions.

    Fix: Reject the discounts or modify them with deferred annual rebates (which deter account termination), instead of discounts applied throughout the year.

    “Continuous improvement” discounts. An outgrowth of the “re-engineering” and “quality assurance” fads of the 1990s, these establish automatic annual rate reductions. In the competitive staffing market, these cumulative discounts soon turn accounts unprofitable.

    Fix: Reject this feature, or offset it with programmed rate increases. Rate sharing with client affiliates. This requires you to offer low rates to unspecified client affiliates (or even contractors) whose operations or locations might require much higher rates.

    Fix: Limit your rates to named entities, or rate other entities only with specific amendments.

    Preferential payment refunds. Bankrupt clients can legally require repayment of 90 days of already-paid staffing invoices. When clients pay staffing firms through VMS/MSPs, the VMS/MSPs required to make refunds to bankrupt clients must retrieve the money from the staffing firms. Preferential payment demands are usually settled for roughly 50% of the amount claimed. VMS/MSP contracts require staffing firms to refund 100% of the payments — and the VMS/ MSPs have little financial incentive to negotiate compromises with bankrupt clients, making these refunds twice as expensive for staffing firms.

    Fix: Require VMS/MSPs to assign the debt and bankruptcy claims to you, plus all supporting information and documents.

    “Most favored customer.” These clauses make you bill clients at the lowest rates that you charge any client, even if the clients agreed to higher rates.

    Fix: Apply the rate-matching obligation only to identical client situations, which don’t exist.

    Each of these unfair financial terms can be fixed with simple contract modifications. The first step — as with other kinds of abuse — is to tell the client that abuse is unwelcome. Then propose amendments to fix it.

    Written by George Reardon

  • Thursday, December 27, 2018 1:11 PM | Denise Downing (Administrator)

    Before placing an employee in a position to drive a client’s vehicle, staffing firms need to evaluate the insurance requirements and other contractual provisions they’ve agreed to. Provisions that would normally be acceptable for General Liability exposure can completely change the way Auto Liability coverage is intended to respond to claims involving non-owned vehicles.

    Claim Example: Your employee is transporting goods for your client in a vehicle owned by the client when they rear-end another car. Both the employee and the driver of the other car are injured, and both vehicles are damaged, as well as some of the goods being transported.

    In the absence of a contract that amends insurance provisions or includes indemnification language, the damages involve multiple insurance policies:

    • Bodily injury to the employee
      • The staffing firm’s workers’ compensation policy will respond, as the employee was injured in the course and scope of their employment.
      • The client company won’t be responsible for the injury to the staffing firm’s employee unless their negligence contributed for the injury – for example, failing to properly maintain the vehicle being driven. In that case, the driver could sue the client company and their auto liability policy would respond to the bodily injury claim.
    • Damage to the vehicle being driven or property within it
      • The staffing firm’s auto liability policy won’t respond. Damage to property that is in their care, custody or control is excluded.
      • The client company’s collision physical damage coverage will cover the damage to their vehicle from the crash, and either their property policy or motor carrier policy will respond to the damage to the property within the vehicle, depending on whether it’s their property or the property of others.
    • Bodily injury to the other driver and property damage to his or her vehicle
      • The employee (as the driver of the vehicle), the staffing firm (as the employer of the employee), and the client company (as the owner of the vehicle on whose business the employee was driving), can all be sued for the injury to the other driver and damage to his or her vehicle.
      • The staffing firm’s non-owned auto liability coverage will respond only on their own behalf. Employees are not insureds when driving non-owned vehicles.
      • The client company’s owned auto liability coverage will respond on behalf of themselves, the employee driving the vehicle (anyone that is driving a covered owned auto with the owner’s permission is an insured), and the staffing firm (anyone who is liable for the conduct of another insured is automatically an insured).
      • The client company’s auto liability policy will respond first. If their limits are exhausted, then the staffing firm’s policy will respond. Owned auto liability coverage responds on a primary basis while non-owned auto liability responds on an excess basis.

    Contractual provisions can completely change the way that the auto liability policy is intended to respond. Let’s now assume that the staffing firm has signed a contract in which they agree to add the client company as an Additional Insured on a primary & non-contributory basis to their auto liability policy. Let’s say they’ve also signed a hold harmless agreement stating that they will defend and indemnify the client company for any claims or damages arising from the negligence of their employees. Here’s the way this same example would play out:

    Damage to the vehicle being driven or property within it

    The staffing firm’s auto liability policy will still not respond, but the staffing firm may now be responsible for paying out of pocket for the damage to the vehicle and the property within it based on their agreement to pay for damage arising from the negligence of their employee.

    Bodily injury to the other driver and property damage to his or her vehicle

    The staffing firm’s non-owned auto liability coverage will respond on behalf of themselves, and the client company as an Additional Insured.

    The client company’s owned auto liability coverage will still respond on behalf of themselves, the employee driving the vehicle, and the staffing firm.

    The staffing firm’s auto liability will now respond before the client company’s auto liability policy in response to suits made against either party due to both the primary and non-contributory status agreed to in the contract, as well as the hold harmless agreement. Ownership of the vehicle doesn’t matter if you assume liability for another party to pay for bodily injury or property damage to a third party.

    Non-owned auto liability coverage is significantly less expensive than owned auto liability coverage, as it’s intended to apply on an excess and incident basis, with the vehicle owner’s policy being the primary response. If a staffing firm assumes the primary auto liability for their clients’ vehicles, they may jeopardize their ability to obtain coverage in the event of a loss. Consider the difference in how a carrier writing a $2,000 hired & non-owned auto liability policy would view a $25,000 liability claim versus a carrier writing a $150,000 owned auto liability policy for a fleet of vehicles.

    So, what does this mean for you and your staffing firm?

    Best practice for a staffing firm placing their employees driving client vehicles is to add either a carve out or addendum to the existing contract specific to driving exposure. This ensures that any hold harmless provisions don’t apply to driving exposures, nor any endorsements adding Additional Insured or primary & non-contributory status.


    Kurt Murray is a Principal at Assurance who focuses on mid-sized companies in the staffing industry. With over 20 years of experience, his primary responsibility is to provide cost-effective solutions and develop insurance programs that are individualized to a company’s specific needs. Kurt graduated from Northern Illinois University with a Bachelor of Science degree in Finance. He’s been a presenter at numerous staffing industry events and conferences, including TempNet, American Staffing Association, New Jersey Staffing Association and Staffing Services Association of Illinois.

    Click here to download the article as a PDF.

  • Friday, December 14, 2018 12:00 PM | Denise Downing (Administrator)

    I’m often asked where the best place to spend money on social paid advertising is: LinkedIn or Facebook?

    And I’m grateful for the chance to address it, because it’s no surprise that many staffing and recruiting firms intuitively think LinkedIn must be the winner.

    They often think this for a few common and understandable reasons:

    1. The perception that “LinkedIn is for business, Facebook is for fun.”
    2. “My recruiters and I spend all day in LinkedIn. It’s where we can find new clients.”
    3. “We can target our exact audience on LinkedIn.”

    Each of these perceptions has its share of truth.

    Let’s take the first reason – it’s true! LinkedIn is absolutely designed for professional exchanges, and Facebook, as we all know, is typically anything but. Why do we know this? Because Facebook has over 2.2 billion users, and you’re one of them. That includes CEOs, VPs, and hiring managers. Are they on LinkedIn too? Absolutely. They are using both.

    Facebook may be more for fun, but so is television. And PLENTY of new business is driven by television advertising. So, it stands to reason you can reach your target audience on both LinkedIn and Facebook, right?

    Which begs the question – where can you get more impressions and more conversions?

    There’s a confirmation bias among those in the industry that their audience spends time on LinkedIn. But the numbers don’t lie: The average LinkedIn user spends 17 minutes per month on the platform.

    The average Facebook user spends 20 minutes per visit! The monthly average? 600 minutes, or 10 full hours. Facebook users are captivated, many addicted to opening the app the way people became enthralled with TV decades ago. For the same reasons you see ads for ERP software during the Super Bowl, it makes good sense to advertise to decision makers on Facebook.

    The last reason is targeting. And it’s true! LinkedIn rolled out a Matched Audience service in 2017 where you can target an email list you upload to the platform, which is awesome. However, Facebook has had this for years, and their ability to target by demographics and “Lookalike audiences” gives us many great tools to work with for our clients.

    Where will paid advertising work best for your staffing or recruiting firm in 2019?

    Budget is obviously going to be a factor, and we consistently see a lower cost-per-click on Facebook compared to LinkedIn. Perhaps most important for many, you don’t have to make a five-figure investment to get started with the right Facebook PPC program. Facebook is an excellent cost-effective option, but to dive into the specifics, start a conversation with us!

    Submitted by Haley Marketing

    Click here to download the article in PDF format.

  • Friday, November 30, 2018 2:17 PM | Denise Downing (Administrator)

    This article is the first in a series designed to help staffing company business owners get a better understanding of the current M&A market and terminology. Although the term “multiple” is commonly used in business valuations, this article is intended to provide some additional clarity to the concept.

    Buyers (“Investors”) make decisions based on an anticipated return on investment. An investment in a diversified stock mutual fund over the past few years averaged about 9% per year, while a lower risk bank CD might have only averaged 2% during that same period. Risk is the key variable that separates one investment from another, and in turn, one rate of return from another. An investment in a business comes with a high degree of risk, thus investors require a relatively high return on investment. Investors make investment decisions balancing risk against opportunity.

    Multiples are shortcuts and probably have the most value when comparing companies in a similar industry. Mathematically speaking, a multiple is nothing more than the inverse of an interest rate – frequently referred to as a capitalization rate (“cap rate”). For example, a multiple of 4.0 = 25% cap rate (1 /.25); a multiple of 6.0 = 16.7% cap rate (1/.167); a multiple of 8.0 = 12.5% cap rate (1/.125) and so on. As multiples go up – cap rates go down. It may appear that buyers who are willing to pay higher multiples are willing to accept a lower return on investment. But keep in mind there are many other strategic, financial and economic issues that factor into business valuations.

    Key issues affecting valuations for all businesses:

    • Financial performance (primarily EBITDA and GP%)
    • Customer concentration
    • Owner dependence
    • Scalability/Growth Opportunity
    • Size of market
    • Strategic fit/Synergies

    Additional issues affecting valuations for staffing businesses, include:

    • % Revenue dependent on Vendor Management Systems (VMS) platforms
    • % Revenue dependent on H-1B visas
    • % Revenue dependent on 1099 contractors

    Dependence on any of the three issues above will cause many buyers to lower valuations due to a perceived added risk.

    The following table is an estimate of the current market (November 2018):

     Adjusted EBITDA  $1mil  $3mil  $5mil  $10mil
     Multiple Range  3.75-5.0  6.0-6.5  7.0-7.5  8.0-10.0+

    Data Source: Stony Hill Advisors transactions, other advisors’ published data, input from several large strategic active buyers in the market. These multiples are more representative of healthcare and technology staffing companies since they make up a large percentage of the transactions in the current market.

    Note about Adjusted EBITDA:

    Lower-middle market businesses (especially those with annual revenues between $10mil and $100mil) are valued based on a multiple of adjusted EBITDA (Earnings Before Interest, Taxes (on Income), Depreciation and Amortization).  EBITDA is intended to approximate cash flow (i.e. return) and cash flow is the return investors receive for their investment.  Understanding why the word “adjusted” is included in the definition is critically important to potential sellers.  Give ten CPAs an Income Statement and ask them to compute EBITDA and all will give you the same answer.  Give ten CPAs an Income Statement and ask them to compute adjusted EBITDA and you might get ten different answers – it can be very subjective. 

    Written by: Bob Maiden, Partner, Stony Hill Advisors

  • Friday, November 30, 2018 2:14 PM | Denise Downing (Administrator)

    Staffing Companies and individuals with unpaid NJ tax liabilities may be able to get a break on penalties under the Amnesty Program which is in effect from November 15, 2018 through January 15, 2019. The measure applies to all state taxes including gross income, corporate business tax and sales and use tax. However, it does not apply to unemployment type taxes administered by the Department of Labor.

    Why should I do this now?

    Because under this limited-time offer the Division of Taxation will forgive all penalties, and one-half of the accrued interest due at Nov. 1, 2018.

    The Good News for Staffing Companies….

    Employer withholding taxes as well as personal, corporate and sales & use taxes are eligible for the program. All penalties and one half of the interest due will be waived.

    Is there a hitch?….

    If a taxpayer is eligible for amnesty and does not take advantage of it, an additional 5% penalty will be added to the already imposed penalties and interest on the original tax liability.

    The Details….

    • NJ Amnesty will provide relief for 2008 –2016 delinquent individual or business tax return filers.
    • Requests for amnesty must be filed electronically
    • The Division of Taxation recently mailed a letter to all taxpayers who are known to have amnesty-eligible deficient and/or delinquent accounts
    • If you didn’t receive a letter and you want to participate, you will need to register or self-report through the Non-Outreach Portal
    • Federal tax liabilities are not included under the program

    Please contact us with any questions about the program or any Staffing tax and accounting issues.

    Written by: Pamela Avraham, CPA, Partner, Urbach & Avraham, CPAs which provides accounting and tax services to staffing agencies. Pamela may be reached at 732-777-1158 or pma@ua-cpas.com. Firm website is www.ua-cpas.com.

Click on the dates below for Staffing Online News archives from 2017 and 2018.  

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New Jersey Staffing Alliance
P. O. Box 518
Mount Laurel, NJ 08054
Tel: 973-283-0072
Fax: 856-727-9504

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