April 2009 | Volume 3, Issue 1
Reduce, Reuse, Recycle, Get Results
In These Economic Times, Green Practices Pay
If saving 30 percent on utility costs sounds good, it’s just a start to what can be accomplished by integrating green practices into your business. Many small and mid-size companies have implemented green practices within their organizations and have reaped the rewards without large upfront investments.
Companies often begin the green transition with small steps. An employee may suggest recycling paper and / or aluminum or buying recycled office products. From there it often leads to changing light bulbs and / or installing motion detectors. The Reduce, Reuse and Recycle sustainability mantra has become synonymous with good business practice.
Utility companies are a business owner’s best friend in regards to finding ways to reduce energy consumption. One businessman who worked with his local utility company to help his business reduce energy consumption, is Tom Bowman, President of Bowman Design Group and founder of Bowman Global Change. Bowman adopted the Reduce, Reuse and Recycle mantra early on. His green transition began when he contacted the local utility company, which replaced all the light bulbs in his 2,000 square foot facility with energy efficient ones at no cost to him. Had his company been larger, it would have qualified for a new lighting system or even skylights installed and paid for by the utility company.
Another company with a history of eco-friendly policies is Nomadic Display, a manufacturer of portable and modular displays. Nomadic uses eco-friendly materials in its manufacturing process and monitors how much waste it produces. President Pat Goeke reports that these practices help lower expenses. The continual analysis of internal processes to eliminate waste and improve efficiencies also has helped Nomadic reduce costs over the long term. Nomadic installed timers on its lights and motion-sensing switches to reduce electricity costs. These simple steps resulted in a savings of over 90k kilowatt hours of electricity in 2008 over the previous year’s use. This led to a 6 percent savings in utility consumption, a significant cost savings to any business.
Bowman and Nomadic also introduced other changes that helped reduce cost and waste. Bowman installed power strips which made it easy for him to shut down the equipment at night making it less likely equipment would be left running unnecessarily. Both Nomadic and Bowman took on paper, an insidious office expense that lurks in most companies. By installing a multi-functional printer and shutting down all the local printers, Bowman reduced paper use as well as electricity usage. Faced with walking to a centrally located printer, his employees changed their behaviors and only print documents when absolutely necessary. These small changes that Bowman initiated resulted in a 30 percent savings in his electric bill. At Nomadic, sending messages and filing electronically resulted in a 50 percent reduction in paper consumption and an annual cost savings of $4000.
Bowman, who also writes the column “Ask Mr. Green” for an industry publication, is committed to green and sustainable business practices. Employees at both his companies work from home three days a week. This change has reduced the employees commuting costs by 40 percent on gas expenses alone, not to mention the reduction in green house gases and their time away from families.
Reuse and Recycle
Choices to reuse and recycle are two immediate actions that will reduce a company’s waste management costs and help impact climate change. Companies like Covanta Energy offer an opportunity to be an environmentally responsible business and introduce green practices into your business model. Covanta coverts waste to energy. It offers an alternative solution to waste management for companies whose trash is currently deposited in landfills. Covanta’s environmentally sound combustion facilities turn waste into energy, which is then sold to utility companies that deliver it to its customers. It also recycles any ferrous and non-ferrous metals left over from the combustion process.
If interested in learning how your company can incorporate Energy from Waste (EfW) into your business model, contact NJMEP at 973-998-9801 or email us at firstname.lastname@example.org.
One New Jersey based company utilizing alternative waste management services is Lynch Exhibits of Burlington. The company, which produces exhibits and interactive experiences, operates a Lean Manufacturing facility. By sending its waste to a trash-to-steam plant in the Burlington area, Lynch waste management policies are able to complement its Lean business model. Lean and Green share many of the same objectives.
Reusing and recycling materials generated from its own manufacturing process helped Nomadic reduce waste. It has seen a ten percent reduction in waste costs as a result of reusing its scrap fabric as packing material as well as recycling its scrap aluminum, acrylic and steel. Nomadic purchases recycled and recyclable aluminum for its frames and uses recyclable polyethylene cases for its products. Another boost for the environment was when Nomadic replaced its solvent based inks with water based inks and it now only uses MDF boards that are a blend of pre-consumer scrap wood and post-consumer recycled paper materials.
Buyers Selecting Products Based on Environmental Policies
Introducing responsible environmental practices into a business is not only good for the earth but it is good business practice and may assure a business’ success going forward. In our interview with Tom Bowman, he cited the recently published study “Climate Changein the American Mind” conducted by George Mason and Yale Universities. The study indicates that 33 percent of Americans said they reward companies that are taking action to reduce global warming by buying their products, while 24 percent said they punish companies that are opposing steps to reduce global warming by boycotting their products.
The study reported that 40 percent of Americans said they intend to both reward and punish companies more frequently in the coming year. Accumulated, this figure rises to 48 percent – nearly half of the country –who say they are willing to reward or punish companies for their climate change-related activities. The primary barrier preventing most Americans from punishing companies that oppose action on climate change is simply knowledge—sixty eight percent said they don’t know which companies to punish.
Following this logic, Americans don’t know which companies to reward either. Taking this one step further, “Any company that commits to implementing climate change-related activities and successfully incorporates it into its marketing strategy will likely be viewed favorably by the consumer market force” Bowman points out.
Nomadic Display educates its customers on the value of its products in regard to climate change by updating them as it introduces new environmentally sound materials. The company has recently added an Environmental Policy page to its web site. Vice President of Marketing, Gwen Parsonsreports, “Nomadic is now asking our vendor to requote all of our cartons in standard kraft. Currently our cartons are made with “bleached white” corrugated paper. While it is better looking, it is twenty five percent more expensive and the bleaching process is horrible for the environment. We want our customers to know we are doing our part.” Nomadic is an excellent example of how a company can introduce eco friendly materials into its business model and educate its customer on what it is doing.
The Big Picture
Bowman first became interested in climate change and environmental issues when he was hired by the Marilyn Koshland Science Museum to develop exhibits—to translate very abstruse scientific ideas into playful ideas. His work in this area led him into the world of climate change. Now Bowman speaks on the subject and its relationship to business. His writings have been published in the journal Science.
Bowman believes everyone can make a difference and should be motivated to do so because the conservation of money, materials and energy are the same thing.
He points out that companies need to begin by setting a baseline, by measuring its carbon footprint, noting its utility usage and waste removal. To implement a green plan Bowman recommends, “Beginning by making small behavioral changes and moving on to projects that require a small investment and then finally by tackling those that require a big investment and produce long term results. When implementing a green business plan, companies that set high goals, ones that cause people to think outside the box, have the most success. When a company only considers the easy steps those steps are often postponed as day-to-day business comes first.”
Remember, no matter where your company is on the sustainability continuum each step is important. If the future of the earth is not what motivates you, then consider the fact that it may motivate your customers.
Green manufacturing is new for many companies, so you are not alone. NJMEP is here to assist you and has the capability to implement environmental regulatory compliance projects and other green manufacturing strategies.
To learn more about green manufacturing call us at 973-998-9801 or visitwww.njmep.org.
Lean Strategies for the Office
Faster Order Turnaround, New Office Design and Improved Processes – The Lean Way!
New Jersey companies are excited about the benefits reaped from participating in the 2008 Lean Strategies for the Office workshops presented by NJMEP. Lean Strategies for the Office workshops are designed to help companies streamline administrative processes with existing resources while eliminating “non value-added” activities. Overall, NJMEP clients report the workshops have successfully cut an average of 20 percent of the time, effort, or costs associated with their processes.
These unique workshops incorporate the classroom and simulations to drive Lean practices home. Eager participants report bringing home knowledge that enabled them to reduce order turnaround by 30 percent. The workshops also helped them redesign new office spaces that resulted in a user friendly and efficient office environment as well as revamp a key production tool—the Production Folder, the source for all job communications.
CFO Jeffrey Simon’s objective for attending Lean Office was to streamline the paper work process at Scott Kay, a highly innovative jewelry manufacturer that produces special orders as well as stock items. Simon knew eliminating as many non-value processes as possible would translate into faster response time for the customer. To initiate the transition process, Simon called a meeting to brief department heads on the Lean processes and how it would help them meet the objective of streamlining workflow. He empowered the department heads to reexamine intra and inter department communications. “Over a four to six week period, we were able to identify the bottlenecks, eliminate them and refine the administrative process. The changes resulted in reducing the turn around time for a custom order from fifteen days to ten days—a 30 percent savings!” Simon brags. “Implementing Lean Office was so successful, in January, we started working with NJMEP to apply Lean Principles to the production side of our business,” reports Simon.
Small companies often think a “Lean Office really doesn’t apply to me” but once engaged in the learning experience the “a hah!” reaction snowballs. Sharlene Vichness, President of Language Directions initially attended the workshop to get a broader perspective on NJMEP’s capabilities. She wound up redesigning both the company’s office as well as her home space after realizing how much time was being lost as a result of the layout. Prior to the redesign, not only was her time lost but so was her client’s if they called with a question and she was unable to work efficiently to find the answer due to faulty office design. In addition to applying Lean thinking to her offices, Vichness, who helps companies overcome language barriers in the workplace, is looking for ways to apply her acquired knowledge to the custom training programs she offers.
For a manufacturer the Production Folder is a key component in the manufacturing process. Joe Agro Jr. of Auto Drill in Millington revamped their production folders as a result of the workshop. Although Joe, who describes AutoDrill as a non-traditional company, has not officially measured the impact of the changes, he and his team find things run much more smoothly.
The Mercadien Group, a CPA firm that works closely with manufacturing companies, had already implemented Lean Principles within its organization when Myron Gellman attended Lean Strategies for the Office last year. Gellman’s objective for attending the workshop was to learn how NJMEP could help Mercadien’s clients. “NJMEP is an unknown sleeping giant. It offers excellent programs with a lot of horsepower. Manufacturers in New Jersey need to be made aware of how NJMEP can help them stay competitive,” said Gellman.
Companies wishing to streamline their administrative processes can participate in workshops that are scheduled throughout the year. For a 2009 schedule of events visit www.njmep.org or call 973-998-9801.
Put Money Back in Your Hands with R&D Tax Credits
Now that you have completed the annual April 15th tribute to Uncle Sam, it is a good time to consider getting some of those paid taxes back in your hands with R&D tax credits. These credits are designed to help manufacturers recapture a portion of the monies invested in developing or improving products and processes. As a manufacturer, you may be unaware that many of your efforts to design your products qualify as R&D and may make you eligible for tax credits for expenditures associated with these activities. NJMEP can help you uncover and describe the activities that qualify and assist you in getting the appropriate tax credits.
Your company may qualify for extensive credits if your research expenditures meet the requirements. These R&D credits may be applied to taxes due or to future tax liability. They may be retroactive for three years in addition to the current year.
Companies that are not profitable may receive tax credits however they must hold them until they are profitable… for up to twenty years. Credits work differently depending on the whether the business is an S or C corporation or an LLC. Both Federal and New Jersey R&D credits are available. Federal credits are provided as either cash or credit whereas New Jersey only provides credit—50 percent of the determined Federal credit.
The act of problem solving is inherent to manufacturing. Many companies are not aware of how much they are doing that meets the Federal definition of R&D or are able to describe what they are doing in the appropriate terms to qualify for R&D tax credits.
Securing R&D credits requires understanding what the government is looking for and providing precise documentation that demonstrates how the company meets the Federal definition of R&D. Key components in identifying what constitutes R&D are problem solving and uncertainty. A company must be able to explain what the problem is—identifying the uncertainty, describe the process used to resolve the uncertainty and document the results. These three components make up the scientific process that determines what qualifies as research. The activities need to be well documented for the best results.
Although the process of applying for the R&D credits may seem daunting, it is well worth the effort. When we asked NJ manufacturers about the R&D tax credit and the impact it has on their business we received rave reviews for the program. Challenge Printings Company CFO, Larry Cinquegrana tells us, “Although the initial application requires some effort the benefit is well worth it.” One manufacturer that worked with NJMEP saw a savings of $100,000 over a four-year period.
Cliff Moodie of Control Products spoke with us about his experience with R&D tax credits and working with NJMEP. “Like many manufacturers, we regularly filed for the credits and had been happy with the results. Once we spoke with NJMEP, they opened up a much greater understanding of the tax code. NJMEP, with a team of engineers, brought so much to the table that had been missing. The process was easy for us, the engineers understood what we were talking about and knew exactly what they needed. We re-filed for three years of R&D tax credits based on the reports provided by them and received significant return from the process. I was happy to pay our accountant’s fee to re-file,” Moodie said. Control Products continues to work with NJMEP for the R&D tax credits. “Each year NJMEP returns to review the projects we are working on and prepares the documentation allowing us to apply for the current year credits. The staff is knowledgeable and the engineering reports document our activities. This makes it very easy for us to file for our tax returns and be assured we will get the maximum credits for which we qualify,” Moodie adds.
Mark Pecile, NJMEP’s R&D tax specialist, describes the credits as, “A substantial sum of money in the form of cash or credits maybe waiting in Washington D.C. with your company’s name on it. No one tells you its there waiting for you. Since most business owners may not be cognizant of the R&D program and its benefits they never claim the money.”
Studies indicate that companies that practice R&D tend to better survive in poor economic times. To ensure the stability of U.S. manufacturing, Congress established the tax credits in 1981 as incentives for companies to strengthen R&D thus insuring jobs. President Obama understands the significance of innovation and its relationship to retaining and creating jobs. The President has included the cost of making the R&D Tax Credit permanent in his budget proposal for fiscal year 2010. Previously the credit had to be approved by Congress every year. If the R&D Tax Credit becomes permanent, it will help companies in budgeting and planning their employee staffing from year to year because they will know that the credit will be available to them.
Companies that wish to lean more about securing R&D tax credits should contact us at 973-998-9801 or visit www.njmep.org.
A Required Vehicle for the Road to Retirement
Did you know that most businesses’ performance and value drops 15-30 percent for the first three to four years after a business owner retires?
Don Moore, Succession Planner and President of Decision Associates shares this hard hitting fact as well as other incentives to help you prepare for a better retirement future. After all, can your stakeholders afford to see that depreciation of the business? Can you?
We all know that at some point business owners ask themselves, “What is going to happen to my life’s work, my business, when I’m not in charge? Who will keep the business going after I choose to retire, or worst-case scenario, are forced to retire due to poor health or personal issues?” If you, as a business owner have yet to ask yourself these questions, then perhaps it’s time you did.
We asked Moore what are the exact questions business owners should be asking themselves if they are considering retiring or looking to protect the future of their businesses.
First and foremost, Moore suggests, business owners should ask themselves if there is someone who genuinely wants to run the business, perhaps a son or daughter or a current employee. Secondly, does that person possess the skills and knowledge to bring to the table in order to keep the business competitive?
The second part of that question may require a bit of thought because, as Moore explains, before you can identify if your potential successor has the appropriate skills and knowledge to fill your shoes, you need to determine what it is you contribute to the business. Ask yourself, “What will be missing when you are no longer there? Will the skills and knowledge that enabled you to build this legacy be enough to carry the business forward? Is the industry changing and if so, will it require the next generation of leadership to master new skills to assure the business will continue to be successful?
Although lawyers and accountants can determine what is required legally and financially to pass on the business, these professionals may not have the skills to evaluate the most important asset of the business – the people who work there. Business owners need to ask if their employees can sustain the company on their own without their guidance. Have these employees been successfully mentored to fill your shoes?
Once these questions have been raised, you may discover you don’t have all the answers but asking the questions is the first step to beginning the process of planning for the future.
Successful Succession Planning requires investing time and energy into assessing the current status of the company in the marketplace and where it will be positioned in ten years. It requires in-depth knowledge of the business owner’s contribution to the company on a day-to-day basis as well as at the strategic level. Only by determining what processes are in place, can one assure that the culture, products and service that made the company a success will continue in the future. Once the assessment is complete a blue print for moving forward must be created.
Moore adds, “Fifty percent of business owners plan to retire in the next five to seven years. Their options generally include selling or gifting the business to family, hiring a general manager or finding a buyer. Keeping in mind, buyers usually want a company in the top twenty percentile of an industry. Buyers are looking for a strong platform for growth. Succession Planning addresses the issue of, “ If your business isn’t there, how can you get it there?”
Having served as the emergency room doctor for many companies forced into transition, Moore highly recommends taking a different approach by beginning the assessment and blueprint/planning process early. He adds, “Succession Planning always produces better results when implemented before unforeseen circumstances force a transition.”
If interested in learning more about Succession Planning contact us at 973-998-9801 or visit www.njmep.org.