Jon Bassford is the founder and principal of Lateral Solutions, an operations management and consulting company specializing in the launch and management of internal operations for startups and small businesses. As an operations executive and consultant, Jon’s direct leadership has led to the successful launch of more than a dozen organizations.
His systems and procedures focus on utilizing cloud-based tools and software to launch integrated systems that reduce administration and allow founders and owners to focus on their core business. Jon Bassford and Lateral Solutions are trusted partners to ensure operations are launched and managed with full compliance.
Connect with Jon on LinkedIn.
What You’ll Learn In This Episode
- About ERC
- Few organizations that applied for ERC
- Associations that are perfect candidates for ERC
This transcript is machine transcribed by Sonix.
TRANSCRIPT
Intro: [00:00:02] Broadcasting live from the Business RadioX studios in Atlanta, Georgia. It’s time for Association Leadership Radio. Now, here’s your host.
Lee Kantor: [00:00:20] Lee Kantor here another episode of Association Leadership Radio, and this is going to be a good one. Today on the show we have Jon Bassford with Lateral Solutions. Welcome, Jon.
Jon Bassford: [00:00:31] Welcome Lee. Thanks for having me.
Lee Kantor: [00:00:32] Well, I’m excited to catch up with you. For those who don’t know, share a little bit about lateral solutions. How are you serving folks?
Jon Bassford: [00:00:39] Yeah, Lateral Solutions is a operations management company where we specialize in the launch and management of internal operations for startups, small businesses and nonprofits.
Lee Kantor: [00:00:52] So what’s your back story? How’d you get involved in this line of work?
Jon Bassford: [00:00:55] Sure. So, my my. I got started this I felt association work. Not necessarily intentionally. I am one of those people who went to law school, did not know what I wanted to do after law school, and I end up working for a legal organization. I was a member of law school and I started out in the membership programmatic volunteer management side of the house. And then as time went on, started taking on more internal operational roles staff management, budget management, building management, etc. And so when I was looking for a new role, I was looking for operational roles, and I got a great opportunity to work for a tech trade association that was a startup in service startups. So even though it was still an association world, it gave me a this this immersion into working for startups in the startup ecosystem. And it really allowed me to kind of grow my skills and experience while the organization grew. And from there it continued on a number of other operations roles and then became a consultant where it started out just with me launching and managing internal operations. And then as time went on, grew it to have an accounting staff and an HR staff to service more clients.
Lee Kantor: [00:02:10] So operations are one of those kind of unsung heroes of an organization, right, like that. It’s something that every organization has, whether they’re being proactive in, mindful about building it effectively and efficiently. Are there some mistakes you see when you enter a new client or prospective client that you’re like, Oh, here they are. They’re making these kind of basic operational mistakes that can so easily be fixed if they would have done some of these foundational things.
Jon Bassford: [00:02:36] Yeah, I think, you know, young organizations with a for profit or nonprofit run into a couple of mistakes. One is that starting out, sometimes they’re going to overpay for the work needed. I mean, I literally have seen an organization pay their corporate attorney who is being billed at 4 to $600 an hour, handle their business insurance, which is an administrative function. Right. It’s filling out forms and sending them back into an insurance broker. So one mistake is definitely overpaying for administrative tasks. The other one is having very junior knowledgeable people do some of these tasks that do take some expertise in nuance. So you got to have both ends of the spectrum there where they’re having really skilled, educated, specialized people doing administrative work. And then you have administrative people doing specialized work, right? So both ends of the spectrum. Another common mistake that I run into is a lot of times the CEO, executive director, founder or whatever believes that they know enough about operations, that they can handle it themselves. And look, nothing of a rocket science, right? I mean, with an education, enough experience, research, etc., you know, intelligent person can handle and figure out most things. But the problem runs into the fact that that’s not what a CEO or a director should be doing. You know, they should be focusing on the core mission, the core service of the organization, and making sure that they’re driving profits and revenue. And so it always ends up happening. Is these operational matters fall to the wayside. And I can’t tell you the number of times that I’ve come into a situation where they’re paying me and my organization far more to clean up the mistakes and to clean up their books and HR, etc., than it would have cost them to hire us from the beginning. And that CEO or the other people involved want to save their time as well.
Lee Kantor: [00:04:40] But when you mentioned like kind of both ends of the spectrum, if you aren’t kind of a knowledgeable about all this stuff, it’s hard to discern what is the thing that I got to have my lawyer do and what is the thing I can have my admin? Do you need somebody that at least kind of knows the lay of the land so they can point and say, okay, that’s something that can easily be handled by admin and this is something that you better hire an expert because if you screw this up, that’s going to have ramifications for years to come.
Jon Bassford: [00:05:08] Yeah, absolutely. And that’s why Lateral Solutions really offers a range of services. So we’ll do everything from being your. Outsource Operations team. From the start, I have literally had a few clients come to me and say, We’ve incorporated in Delaware now what? And so we get in their bank account, set up their business insurance, their books, set up their HR payroll, etc. We set up all the administrative functions for them, which normally can be done in 30 to 45 days. I say normally because sometimes it depends on the an officer of the organization to sign forms and that sort of stuff. And there can be some delays. But we also offer services like co advising, you know, for an organization that’s not quite ready to take that leap, but they need that trusted advisor who’s there to hold their hand, direct them so they’re not making costly mistakes, but also not spending an arm and a leg for just the advising.
Lee Kantor: [00:06:09] Yeah. So that’s why I can see, especially if there’s a change of leadership or an organization that’s plateaued or is frustrated, to have you come in and just kind of get the lay of the land to let them know, hey, you know what, if we share this area up, you might be on the new trajectory. I think that that’s critical, especially if you don’t have somebody on the team that can do this kind of stuff.
Jon Bassford: [00:06:31] Yeah, a lot of times, you know, we are reached out to by individuals who just lost our director of operations. Right. A lot of times it’s probably more of a an office manager who’s been elevated a little bit and been handling accounting and HR and maybe don’t really have that background or that skill set. And so they’re when they when they lose that person, like, okay, now’s a great time to reassess. Let’s figure how, you know, how much time we’re spending on internal operations, how much time should we be spending, and are there better ways to do it?
Lee Kantor: [00:07:05] Yeah, absolutely. So part of the reason you’re here today is to educate our listeners about a program called Employee Retention Credits. Can you talk a little bit about first what what they are, number one, and number two, where the opportunity is for so many associations?
Jon Bassford: [00:07:25] Yeah. So the employee retention credit is part of the CARES Act. You know, this is all part of COVID relief measures that Congress passed back in March 2020. And what it is, is it’s a payroll tax credit. And without getting too granular with everything, there’s basically four ways to qualify for this. And, you know, part of the problem with I.R.S., it’s also referred to sometimes as RTC, the employee retention tax credit. They both mean the same is that again, this launched in March 2020. But the the the time period that you can qualify for this runs all the way through 2021. And so there has actually been nine updates by the IRS on who to qualify, who can qualify and how to qualify. And every time they’ve done one of these notices, it’s expanded these parameters. The perfect example of this is when I.R.S. first launched. If you got PPE, you were exempt from applying to I.R.S. After some time, they said, No, no, let’s not make it an exemption, but it will discount the amount of credit you receive. And so going back to the question of what this is, this is a payroll tax credit. This is not an income tax credit. This is not a loan. There’s no forgiveness. This is a credit against the payroll taxes that you have paid across these periods. And so this is why it is a perfect opportunity for associations, because it it is not a it’s not an income tax credit. Right. Like when they filed nine nineties, they don’t pay taxes. And so this is still a credit that they can get.
Jon Bassford: [00:09:18] And secondly. You know, with the qualifications for I.R.S.. Associations are ripe candidates for it. And I can kind of jump into a little bit here what those four basic qualification areas are and why I believe associations are the best fit. Even though associations across the board really are not applying for this and quite frankly, 400 billion that is 400 billion with a B dollars was allotted by Congress and only a fraction of this has been applied for IRC is just now kind of really getting some steam I think partly because. Accountants and people in the know about this type of stuff got burned out with PGP and the IDL. You know, managing those operations and filing those for their clients doesn’t really fit their business model. And with all the changes that affected that came along with I.R.S., they just haven’t stayed on top of it. So there are four basic. Ways to qualify for IRC one is being a startup. It’s pretty straightforward. If you began operations, not corporate, they began operations including having employees after February 15, 2020, and you average less, less than $1 million in revenue per year. So across 2020 and 2021, you qualify for the the startup qualification and that is actually the lowest amount you can qualify for because it only covers your employee counts in Q3 and Q4 in 2021. But if you qualify for startup, does that mean you have to? So you should always if you qualify as a startup, you should also assess the other ways of qualifying to see where you’ll get more money.
Jon Bassford: [00:11:08] Because the next three qualification areas I’m going to mention, they run from Q2 2020 through to three 2021. So we’re a startup, only has two quarters of qualifying these other ways have six quarters you can qualify, which obviously will maximize the amount of credit you can get. And the other thing good about I.R.S. is that it’s all quarter based, and with these other three, it’s all cumulative. So if you tell me that it’s not all or none, right? So if you qualify for one way for two quarters, two quarters for another way in one quarter for the third way, it all adds up. It builds up. They don’t cancel each other out. It just all adds to the quarter you qualify for and the amount of credit you’ll receive. So there’s three qualifying areas that run across these six quarters. The first one is a gross receipts reduction, which is what the IRS called it. So basically lost in revenue. And it it is substantial. And I think this is the area where there’s a lot of misinformation because I think when accountants are telling clients they don’t qualify, it’s based upon this financial reduction. And it is hard to do so when you’re looking at a quarter by quarter comparison between 2019 and 2020. So so comparing Q2 2019 to Q2 2020, did you have a 50% reduction in gross receipts that substantial? Not very many businesses and organizations can lose 50% of their revenue quarter by quarter and stay in business. But it gets a little softer.
Jon Bassford: [00:12:43] When you compare 2019 to 2021, it’s only a 20% reduction. So I always. Recommend that my clients look at the financials, even if top of their head they’re like, There’s no way we increase in revenue across both years. We didn’t have any reduction. You never know where. You just might have had a light quarter on your books in 2021 and you meet one quarter of that financial reduction. So that’s you want to keep an eye on that. Again, you’re going you’re going to add each of these quarters up and qualifying up. So that’s that’s that’s number one. Number two is supply chain issues. Again, this is something that’s not going to really affect most associations, but for for businesses that rely on buying goods and selling goods. Supply chain issues were were definitely hit throughout COVID, but I’ll brush over that so it doesn’t really apply to associations. The third way to qualify in this group of three is full or partial shutdown. Now the IRS says that or estimates that 70 to 80% of all companies in the US qualify. And it’s really based upon this criteria that most of them fall under that. And this is the area where I believe that majority of associations qualify as well can have an association background. I’m very well versed in the type of operations that they put on, the type of events, etc. and there’s no doubt that associations qualify under this. So for a full and partial shutdown, full or partial shutdown, I should say, sounds draconian, right? You had to stop operations.
Jon Bassford: [00:14:15] You had to lay people off. You had to stop delivering your goods and services. But again, looking at these notices that the IRS has put out to to clarify these various rules. You can quickly see that. It’s not that harsh for this qualification. And in fact, it’s pretty straightforward. The rule basically is, is that due to government orders, no state, local, federal, no travel, no events, no one person this. No one person that. Government. Covert orders. Affected your organization’s ability to deliver its goods and services from its normal course? More than 10%. So what does that mean? The best example that I can give is restaurants. Every expert I’ve talked to, every article I’ve read. Agrees that this is a prime candidate for full and partial shutdown. So my area restaurants I think were had no indoor dining for four or five months, then went to 25% and 50%. And when they did that, let’s just say a restaurant in day one of these shutdowns built a patio out front. Replace every table and chair. So they lost no revenue. They want they replaced it all from indoor dining to outdoor dining. But they also increased their takeout sales by 30, 40% because that’s what people did during COVID. So not only do they not lose money, they increase their revenue. Every expert agrees that this restaurant qualifies for full or partial shutdown because it changed the way it delivered its goods and services. Now think about all the different industries at that time. Effects. Schools move to remote learning. Now move over to associations.
Jon Bassford: [00:16:13] Now what are some key components of associations? Live events, trade associations, trade events, those pretty much got shut down for 2020. And given the size of them, a lot of them probably couldn’t happen in 2020, 2021 either, depending on where it was located. So you have the big events of these associations, trade shows, conventions, conferences, etc.. But you also have to keep in mind. The more local and regional stuff. Many organizations are built around chapters which have chapter meetings and chapter events in person, social events in person because of government shutdowns. Pretty much all of that had to stop in 2020 and some of it in 2021. Again looking at the trade association route. Look at lobbying. Lobbying drastically changed. Congress and government buildings were shut down for a long period of time. So again, the full or partial shutdown. Isn’t that you had to stop doing these things completely, but you had to change how you did them. If you normally did it in person, you had to change the virtual. If you normally did this type of marketing, you had a change of this type of marketing. When you look at all the notices from the IRS, the way I describe what is trying to do with a perfect shutdown is recognize and understand. That these government orders had a dramatic impact on how our businesses and organizations conducted their operations. And what it’s doing is rewarding companies who were creative, who adapted. Kept their businesses making money, kept their organizations in business, and kept people employed. That’s what it’s there to do.
Lee Kantor: [00:18:08] So when you’re working with an association and you bring this up to them and obviously, you know, in an ideal world, their own CPA or accounting firm would be proactively telling them this. But as you describe, that’s not not always the case. But when you’re working with this association, can you come in and and kind of assess the situation and do a turnkey service where you’re like, okay, this is what I see. This is where the opportunity is, and now we can apply for this. Or like, what is your relationship in this matter? Is it just you telling them, Hey, this is something that your accountant should do? Or is this something that your company, you know, takes the ball and does it on their behalf?
Jon Bassford: [00:18:51] Yeah, very good question. So like you said, there’s two parts to this. The first part is the education. Educating people on what IRC is, what the qualification areas are, and how does that apply to their organization. That’s the first step. And now that you and I are talking about this, you’re going to see everywhere you go ads and start seeing IRC places now that we’ve talked about this. But the problem a lot of them are making is they’re just sending people links to pre qualify. And so without educating people on these various qualification areas and breaking it down for them so they understand how it affects their business, they’re going to go through these pre qualification forms and just. Mark No, because they’re going to go into it with a mindset that I don’t qualify for this because my CPA said I don’t or I didn’t lose revenue. Whatever it is, whatever that preconceived notion is, they’re going to go into it with that. So we help break that down. So we do one on one calls, webinars, etc., and we’re offering this education to organizations, business owners, associations for free. Now, the second part of this is the actual filing. So we have partnered with the second largest IRC filing company in the US. I believe to date they have filed for over two and one half billion with a B credits for small business and nonprofits.
Jon Bassford: [00:20:21] And it’s a really straight, easy, straightforward process. So typically what happens is we do a one on one call or we do a webinar with with an association or their association members. And after we educate them and walk them through the process, we send them our qualification link. Now, if they have their numbers ready, their financial reduction number is ready, they have their employee counts ready. And they kind of have that that narrative painted out in their head as to how they apply for the full partial shutdown. The questionnaire takes anywhere between two and 4 minutes. It’s very quick and easy, very straightforward to to just assess which course the organization is applicable for, for the credit, where they qualify for the credit. Once they do that, then we they will receive a estimate on the amount of credit they will receive. And an upload link and all that they do from that point of view is to upload their detailed payroll journals. I recommend that they do it by paycheck date. It can be as large as quarter based, but it’s got to show every check date in that, every employee, the salary amount, the taxes, etc. because it’s got to be those details as well as your 941. And for most, most people, they’re using some kind of payroll system where these are very basic reports that you can download with with a button and just you upload those for the course in which you qualified.
Jon Bassford: [00:21:50] From there, our partner will analyze the analyze your payroll. Analyze your your qualifying quarters and work to maximize the amount of credit that you receive. From there, it is simple as they will bring you bring back to the client the final number after this analysis and present a contract to them. So our partner offers this service in one of two ways. It can be completely contingent upon receiving the credit to where you pay nothing until the credits received, in which case they charge 15 one 5%. A A client can opt to pay an advance and they charge 10%. Now, obviously, if something happens and that credit is ever received, the IRS rejects it for whatever reason. Maybe they had back taxes or whatever it may be. They will obviously refund that that that fee, but does give those two options. And most of my clients are just opting for the 15% because the IRS right now is taking anywhere between two and six months to make the payments. And why carry that load? Another very important thing about I.R.S. is that it’s actually real money. And my clients are shocked. We’ve now helped over over 35 companies qualify and have about another 18 processing. Our goal is to help over 500 companies get back over $100 million in IRC credits.
Lee Kantor: [00:23:19] So is there a sweet spot in terms of number of employees? Like when does it start? When does it stop making sense? Like if you have five employees, is that enough? Or if you have two employees, does that even matter? Like, would you even bother? Or is it you have to have 50 or 100 or hundreds of employees for this to make sense?
Jon Bassford: [00:23:39] Yeah, that’s a very good question. So the answer is yes, it makes sense for everybody. And here’s why I say that. We’ve had a few people because they had no these are these are for profits. So for for profits, majority owners and their family members are exempt from the employee count. So we’ve had a few people who the core employees were owners and family and had a few part time people, even an organization like that, where they have no full time people who are qualifying because the owners don’t count. They still have gotten 3 to 5 grand. And again, this is with the with conversation with us and the forms and the uploading. You’re talking 15 to 25 minutes. So if you take that out to an hourly rate, you’re still talking 6 to 10000 an hour, right? So so no one’s no one. Most people don’t make that make that an hour. So even if you have very few people, I just help the association where it’s just the executive director again because it’s not he’s not an owner, right. It’s non profit. He got 12,000, you know, a small state association that probably has a budget of 3 to 500000, you know, gets an extra 12 grand in their bank account. That’s huge for them. Now it also can be large. So 1 to 1, one employee to 100 employees is the sweet spot that we play in.
Jon Bassford: [00:24:59] And here are some numbers. We’ve helped an organization that had about 7 to 9 full time employees I say about because they had some part time, etc. They’ve got 150,000. We helped the small property management company get 212,000 with a government contractor firm that had 29 employees, got 586,000. So generally I say that if you have 25 or more employees, you’re looking over 500,000. If you’re over 50 employees and you you probably qualify for at least four or five quarters, you’re looking at over $1,000,000. And the reason why I say our sweet spot is 1 to 100, because when you hit more than 100 employees, the rules do change. So there’s no limit on how high you can go. But when you switch to 100 or 500. You only can qualify in 2021, which is harder to qualify for than in 2020. So it’s reducing them again now it’s reducing the amount of qualifying quarters from 6 to 3. When you go 500 and greater. It’s still only in 2021. But it’s not all employees. It’s only employees that you paid who were not working. So yeah. Any and all companies and organizations, regardless of size, absolutely can qualify for RC. It just stores different parameters depending on that size.
Lee Kantor: [00:26:24] Well, if somebody wants to learn more, have a more substantive conversation with you or somebody on the team, what is the best way to get ahold of your website or LinkedIn? What’s the best way to get ahold of you or.
Jon Bassford: [00:26:35] Yeah, I’ll get to. So. So the easiest way is to email us at info at think dash lateral. Or obviously you can go to our website, think ao.com and we do have an IRC page on there with some videos with a form where you can put in your information and we’ll get back to you a.S.A.P. So those are the two best ways to get ahold of us.
Lee Kantor: [00:26:59] Good stuff. Well, John, thank you so much for sharing your story, doing important work. And we appreciate you.
Jon Bassford: [00:27:04] Thanks for having me.
Lee Kantor: [00:27:05] All right. This is Lee Kantor. We’ll see you next time on Association Leadership Radio.
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