If you have ever thought that you are too small or not ideal to apply for government assistance, think again.
Dominick Davi, co-owner of Greenway Products and Services, discovered just how helpful government assistance can be as the pallet company planned to open a new location in the Mid-Atlantic region. Through various state and local programs, Greenway secured more than a million dollars in assistance. One of the smartest moves Davi made was to work with a business growth consultation who knew how to navigate the government grant and economic development maze to find the right funding solutions.
Davi hired Abbott Consulting Group for its expertise in evaluating, negotiating and securing government assistance from federal, state and local programs. Steve Abbott, president of Abbott Consulting Group, sat down and discussed the process with Pallet Enterprise. He explained why hiring the right expert can make all the difference when it comes to developing a new plant or upgrading a facility. There is more government assistance out there than you may realize, and it can be a huge benefit when it comes to growing your business.
Pallet Enterprise: Take me through your process with Greenway. How did you help Greenway find the right government assistance?
Steve Abbott: So, the process is pretty straightforward. Once we’re introduced to a client, we basically go through a 15-minute pain points discussion. We explore the company’s goals and what it hopes to achieve over the next 36 months. Then we match our clients up with the programs that are available. Sometimes a company can grow in the place where it already operates. Sometimes, there are huge benefits in opening a new location or moving to a new state. In Dominick’s case, Greenway moved from a facility in New York and consolidated operations in New Jersey, and then wanted to grow south by opening a facility in probably Maryland or a nearby state. Once we had a snapshot of Greenway’s plans, we reached out to state and local economic development groups and began a process of negotiating the best deal we can. We usually play one state off of the other. The whole process usually takes 45-60 days.
Pallet Enterprise: What are some of the common misconceptions you find that business owners and entrepreneurs have about government grants and assistance?
Steve Abbott: Many business leaders think the juice isn’t worth the squeeze. They think the assistance isn’t worth the time and effort. Sometimes it may not be worth it for them to drop everything and focus on a grant or tax program. But that’s where we can come in and do the heavy lifting. Honestly, I think that most business executives don’t pursue these programs because they are too busy and these opportunities are not on their radar. We can manage this process and work on getting the best deal so that the company owners or top executives can focus on opening up the new location or expanding the business.
Pallet Enterprise: Is this a no-risk proposition to just explore the opportunity? Do companies pay for an initial consultation?
Steve Abbott: Not at all. There’s no fee for us to come in and do our forecast and analysis. That entire part of the process, it’s without fee. It’s only if they decide to then move forward, we get paid a project start fee, and then everything else is paid when the client receives the incentives. We try and make this as simple and straightforward a process as possible. There’s literally no financial risk to investigate the opportunity. Our letter of agreement comes with a guarantee, if in 24 months you don’t get twice the value of what you paid us as a project start fee, we’ll refund it. We’re all about making sure that when we sit down and get to work that there is going to be fruit on the table for everybody, and that’s the goal of the entire process.
Pallet Enterprise: What are some of the different types of programs that are out there? You mentioned grants and tax credits. What are some of the pros and cons of those different approaches?
Steve Abbott: It’s very, very state-specific. You can have the state of New York that has three different types of programs that are typically available. One is a tax credit for new jobs and for new equipment. The other is an outright cash grant. And the third is low-cost hydropower. Connecticut, for instance, gives you a forgivable loan, and so does the state of North Carolina. There are four major categories: low-cost power, forgivable loans, tax credits and outright grants. It is based on the number of people you hire and the economic impact brought to the region.
Pallet Enterprise: How do tax credits work? What are some of the big advantages of a tax credit versus a full-on grant?
Steve Abbott: Usually tax credits are based on the number of new people you plan to hire. The government certifies annually that you have hired and employed those people. And then you get a credit that rides along with your state return. Typically, states do that over multiple years, usually a five-to-seven-year period.
When it comes to grants, the phrase, “Cash is king,” always comes into play. I think for the most part business owners prefer any kind of cash that comes into the business before tax credits. Tax credits tend to be kind of a safety net that states use.
We always try and go after as much upfront cash as possible to help offset costs. That being said, the first question, or one of the first couple of questions we’ll always ask our clients is what’s your forecasted tax liability? Do you have tax liability? Because I can get someone a million-dollar tax credit, and if they don’t have liability or they were only able to offset it $15,000 a year, that million dollars isn’t really doing too much for them.
In some states, you can sell tax credits. These credits can be purchased by taxpayers to reduce tax rates in 30+ states and through select programs.
Pallet Enterprise: Do you offer services to help companies pick locations and to evaluate infrastructure?
Steve Abbott: We do some of that. We don’t get into the hardcore details of doing an analysis on what site-specific location would be better than another site for the company. But we do help identify specific areas for better incentives. For example, Maryland has tiers and zones, and each area is tied to different incentives. Obviously, areas where states need jobs are more likely to offer more assistance or incentives.
Pallet Enterprise: If somebody was going to call you and have a conversation, what are some of the types of questions they need to be thinking about ahead of time? What are some of the documents they need to have available to share with somebody like yourself?
Steve Abbott: The biggest focus of the of the initial discussion explores your growth plans. I want to know how the business leader sees the business growing and changing over the next 2-3 years. How many people are you looking to hire and add? What about location or facilities’ growth? A prospective client may provide a capital expenditure plan, for instance.
Pallet Enterprise: When you were working with Greenway, were there any particular unique challenges that the company had, anything special to overcome?
Steve Abbott: Greenway initially struggled with identifying a specific location and site. One of the values that we can bring to the table is that we can get economic development involved to a level that they will become almost the representative “realtor,” if you will, for the company. The economic development in Maryland took a very active role in helping to secure the facility and the site that Dominick Davi ended up leasing.
Pallet Enterprise: Are these types of financial incentives available for expansion projects or just new plant locations?
Steve Abbott: Yeah, these government incentives are available when you’re growing and expanding. Jumping industries just really quickly, we have a client in Long Island, Nassau County, and we started working with them about six years ago. They had about 250 employees in Long Island, and over the past six years they’ve basically doubled their size. This company has grown organically and through acquisition. Every 12 months, we’re reaching out to the state of New York basically saying the following, which is: “We have the option of continuing to grow in Long Island, but that’s not necessarily where we have to grow. We could easily decide to open up a facility in New Jersey, Maryland, Pennsylvania, or wherever. We want to continue to grow in Long Island, but to do that, you guys need to help us offset costs.” We’ve offsetted millions of dollars of cost for them to grow in Long Island.
Pallet Enterprise: When you look at what Dominick did, what did you learn about the pallet industry? Because a lot of pallet guys think that governments just see pallet companies as nuisances. And if they’re in some parts of the country, that may be true. But I’m just curious about your thoughts on how governments view pallet companies from an economic development perspective.
Steve Abbott: Dominick and I had that conversation, and it’s funny you said that. The first time that we met, he said, “I don’t know that there’s an opportunity for me.” I told him that you are in the manufacturing sector, and states love manufacturers. Now, localities may not absolutely love that whole thing, and Dominick and I talked about that reality. One of the reasons we chose the location is that we knew that local government needs jobs and economic growth. In the end, it was just a fantastic project, and it worked out extremely well.
Pallet Enterprise: What happens if you’ve started to expand and things go poorly and you are forced to shut down the location?
Steve Abbott: For instance, I have a client in California, and they were in the software gaming industry. And initially its product was extremely well reviewed, well thought out. Along came a couple of other platforms that basically drove them out of business in a period of about 12 months. But they had four or five years of good growth, and then all of a sudden, boom, that was it. The reality is that most of these programs are structured so it’s almost on a pay-for-performance basis. Hire the employees, pay the employees, and at the end of the year, you get a tax credit. Well, for four years, that’s exactly what this client did. No one’s coming after the owners, the deal got canceled. Where you do run into problems is when you receive assistance and suddenly move quickly before the deal reaches its full term.
Pallet Enterprise: What states do you work in?
Steve Abbott: Although we will work in any state, there are some states that are way more lucrative than others. There’s no question that Maryland is fantastic; California is amazing. New York is great; Pennsylvania is okay. It varies state by state, but we’ve worked in North Dakota, South Dakota, Idaho, and everywhere in between all the way up to Maine. Each state has different program; the state of Washington, not as robust as the state of California, for sure.
Pallet Enterprise: There’s been a lot of stuff in the press about people leaving states like New York and California. So, to hear that California is a great place to start a business, that kind of surprises me.
Steve Abbott: California is a great state from an incentive standpoint to start a business. Regulators in California have realized that they have to incentivize companies to be there at this point due to the high wages, insurance, rent and taxes. That being said, if a client’s already in California and needs high-tech workers and engineers, it’s a great state from an incentive perspective.
Pallet Enterprise: What strings or extra paperwork burdens come with government assistance?
Steve Abbott: It’s not invasive or abusive or anything other than what you would almost typically be filing already. If you get a tax credit, you would file quarterly wage reports, like most companies already do. Governments don’t have the staff to micromanage purchases or how you use assistance money. States are focused on adding jobs and keeping them.
Editor’s Note: For more information on government tax incentives and grants for small businesses, contact Abbott Consulting Group for a free assessment at 203-955-1234 or visit www.abbottincentives.com.
