Civitas Strategies Coaching Metric Basis of Estimate As of September 1, 2023
| Topic | Description | Estimated Value | Basis of Estimate | Source(s) |
|---|---|---|---|---|
| Taxes Mitigated | The amount of self-employment/corporate and/or income taxes that could or will be reduced using recommended tax strategies (that is the amount of taxes saved, not the total deduction amount) | $7,603 | We selected a sample of actual tax cases from four states including both family and center care providers that represented a variety of typical cases. Using the strategies recommended for the sample, participants who had an adjusted gross income ranging from $35,000 to $85,000 would have saved, on average, $7,603 in reduced self-employment/corporate and/or income taxes. Based on the sample this was a 21% average increase in profit for the business. | Representative Sample of Tax Cases Conducted in 2023. Civitas Strategies, LLC |
| Tax Risk Reduced | The estimated amount of monetary risk reduced by correcting or identifying known “red flags” for a US Internal Revenue Service Audit. |
$9,548 | The selected tax cases in our sample had an average of four red flags per case that were mitigated for a correspondence or field audit. Based on the IRS audit data from 2020, within the typical total adjusted gross income range for selected providers ($35,000-$50,0000) for all types of audit, 84.5% of those flagged were assessed additional taxes. The data also show an average assessment and fee of $5,300 per case plus $6,000 in accounting fees. Combined, the risk/cost is about 11,300 * .845 = $9,548 | Compliance Presence | Internal Revenue Service 2023. US IRS https://www.irs.gov/statistics/compliance-presence |
| Human Resources and Legal Questions | Helping business owners navigate complex, high stakes human resources and legal issues such as personnel conflicts. | $7,716 | Most cases addressed dealt with potential liabilities from lawsuit. The average claim per the US EEOC in 2022 was $73,485 (typically most HR cases are based on a discrimination claim of some form). Per a study published by Hiscox Insurance, businesses face a 10.5% chance of an HR-related suit. If that chance is multiplied by the average claim, the monetized risk is $7,716. |
Charge Statistics (Charges filed with EEOC) FY 1997 Through FY 2022. US EEOC. https://www.eeoc.gov/data/charge-statistics-charges- filed-eeoc-fy-1997-through-fy-2022 The 2017 Guide to HR Lawsuits. Hiscox Insurance. https://www.hiscox.com/documents/2017-Hiscox- Guide-to-Employee-Lawsuits.pdf |
| Benefits Planning | Guiding child care business owners in identifying the most appropriate benefits packages, typically retirement, for their operation and family. |
$2,400 | Typically, a consultation on this topic is related to retirement or other benefits with a heavy emphasis on the impact for their taxes, business revenue, and personal income. This is akin to a traditional financial planning limited engagement. In 2021, the average cost for this type of consultation was $1,800 to $3,000. Using the mid-point results in a saved fee of $2,400. |
AdvisoryHQ, B. (n.d.). Average Financial Advisor fees in 2021 | Everything You need to know – AdvisoryHQ. https://www.advisoryhq.com/articles/financial-advisor-fees -wealth-managers-planners-and-fee-only-advisors/# Typical-Financial-Planner-Fees |
| Business Formation and Structure | Helping the child care business owner review their current business structure, assess if a different one is a better fit, and articulating all the steps needed to change and also operate the new structure. | $1,185 | In 2022, typical hourly fees for similar consultations were $73 to $400 per hour. Taking the mid-point (i.e., $237 an hour) and multiplying it by the typical engagement of 5 hours yields a value of $474 of savings per case. |
Black, M. (2022, January 6). Business Startup Costs: How To Calculate And Budget. Forbes Advisor. https://www.forbes.com/advisor/business-loans/business -startup-costs/#:~:text=Professional%20Consultants%20 (%2475%20to,%2475%20to%20%24400%20per%20hour. |
| Advisement on Business Debt | Helping child care business owners navigate selecting and/or repaying a business loan including EIDL loans. | $7,671 | In 2022, typical hourly fees for similar consultations were $73 to $400 per hour. Taking the mid-point (i.e., $237 an hour) and multiplying it by the typical engagement of 1 hour yields a value of $237 of savings per case. Additionally, in most cases, we are helping child care businesses understand the difference and benefit of going from higher bank loans to lower cost SBA loans. For an SBA 7 (a) SBA loan, the highest rate (typical for the size and credit history of our child care businesses) as of August 17, 2023 was 15% and for a private bank, 17%. Over 7 years on a $50,000 loan this change would yield a difference of $7,434 in interest. When added to the saved consultation fee, the total value is $7,671. |
Black, M. (2022, January 6). Business Startup Costs: How To Calculate And Budget. Forbes Advisor. https://www.forbes.com/advisor/business-loans/ business-startup-costs/#:~:text=Professional%20 Consultants%20(%2475%20to,%2475%20to%20% 24400%20per%20hour. Berry-Johnson, J. (2023). Average business loan interest rates in 2023. LendingTree. https://www.lendingtree.com/business/rates/ |
| Business Infrastructure | Supporting child care business owners in identifying their business infrastructure needs (such as an accounting system or regular review of cash flow) and creating a practical plan to implement it. | $356 | In 2022, typical hourly fees for similar consultations were $73 to $400 per hour. Taking the mid-point (i.e., $237 an hour) and multiplying it by the typical engagement of 1.5 hours yields a value of $356 of savings per case. |
Black, M. (2022, January 6). Business Startup Costs: How To Calculate And Budget. Forbes Advisor. https://www.forbes.com/advisor/business-loans/business -startup-costs/#:~:text=Professional%20Consultants%20 (%2475%20to,%2475%20to%20%24400%20per%20hour. |
| Succession Planning | Assisting child care business owners in understanding the need for succession and continuity planning and helping them develop a course of action. |
$38,725 | A 2021 study in Harvard Business Review found that companies with no or poor succession planning typically lose 20-25% of value. Additionally, based on an independent assessment of Civitas Strategies data collected on provider taxes, the average small center gross receipts in 2019 were $172,113. Using the mid-point percentage from the HBR study of 22.5% and the average small center gross receipts from the sample collected from our work in New Jersey, a typical business would save an estimated $38,725. |
Fernández-Aráoz, C. (2021, April 13). The high cost of poor succession planning. Harvard Business Child Care Provider Tax Returns for 2019 as Collected During the Civitas Strategies PPP Technical Assistance Project in New Jersey. Civitas Strategies, LLC Review. https://hbr.org/2021/05/the-high-cost-of-poor- succession-planning |
| ERTC and FFCRA Credits | Helping providers understand their program eligibility and how to pursue the credit. |
Total estimated credits + 20% in saved fees |
Actual estimated credits are used. Additionally, 2% annualized interest was added per year to reflect the effective rate paid by the IRS. Wherever estimated credits were unavailable, a 12-month rolling average of actual credits was used. For preparation fees, the average is 15% to 25% of the total credit, so the mid-point of 20% was used. |
Seppala, E. (2023). The Small Business Owner’s Guide To ERC Fees. Merchant Maverick. https://www.merchantmaverick. com/erc-fees/ https://www.irs.gov/payments/interest |