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The outlook: Higher taxes in 2012 but opportunities in 2011

When it comes to taxes, most business owners are more focused on the short-term implications. What will the big 2011 (or 2012) increases mean?

Many of BGSA’s private-owner clients are talking with us about liquidity strategies in advance of the 2011 or 2012 tax increases.  Given the major tax hikes pending, many owners are comparing the prospect of high future income tax rates (45%+) to low current capital gain rates (15%). The conclusion for many is to consider a range of options, including a liquidity event in 2011.

Here’s how the math works.

First, assume that you own a company, generating $5 million in operating profit, which you pay yourself at the end of each year. You founded the company with a nominal cost basis, and built it up to the current levels. Then, let’s say your long-term growth rate is the same as that of the overall economy, which is 3%. Next, let’s model a sale at an average multiple of five times operating profit. Lastly, let’s apply an annual discount rate of 20% for our forecast, given the normal uncertainties of the future for small- to mid-sized companies in the current economy.

Annual Outlook Report: Workforce
Hiring remains a major challenge in packaging, with 78% struggling to fill unskilled roles and 84% lacking experienced workers. As automation grows, companies must rethink hiring and training. Download the full report for key insights.
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Annual Outlook Report: Workforce
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