The Child Care Business Podcast

Season 2, Episode 5: How the Employee Retention Tax Credit Affects Child Care Providers, with Gary Romano

April 20, 2022 Procare Solutions Season 2 Episode 5
The Child Care Business Podcast
Season 2, Episode 5: How the Employee Retention Tax Credit Affects Child Care Providers, with Gary Romano
Show Notes Transcript

We are live from the 2022 National Shared Services Technical Conference presented by Opportunities Exchange in Austin, Texas!

In this podcast, we talk with Gary Romano. Gary is the president and CEO of Civitas Strategies, LLC, where he works with nonprofit leaders and entrepreneurs. He’s also an author and has published two books. One is “Small But Mighty,” which helps entrepreneurs launch and grow nonprofit consultancies, and the other is “Lean Recruitment,” which describes how to cost-effectively recruit talent. 

Listen as Gary shares his expertise on the employee retention tax credit, including why it's so significant for those in the child care industry, the background on this credit, who is eligible and that providers can retroactively apply for the funds!

To learn more about the services offered by Civitas Strategies to child care businesses, email Gary at gary@civstrat.com, or visit www.civstrat.com!

Speaker 1:

Welcome to the childcare business podcast brought to you by pro care solutions. This podcast is all about giving childcare, preschool, daycare after school and other education professionals, a fun and upbeat way to learn about strategies and inspiration you can use to thrive. You'll hear from a variety of childcare thought leaders, including educators, owners, and industry experts on ways to innovate, to meet the needs of the children you serve from practical tips for managing operations, to uplifting stories, transformation, and triumph. This podcast will be chalk full in insights. You can use to fully realize the potential of your childcare business. Let's jump in.

Speaker 2:

This is the childcare business podcast, and this is a first of its kind , um, guest that we've ever interviewed in person. And I'm sitting here with , uh, Gary Ram Romano and Gary , uh , is the president and CEO of Savita strategies, LLC, where he works with nonprofit leaders and entrepreneurs. Uh, he's also an author. So looking forward to talking a little bit about that, and he's published two books , uh, one is called small, but mighty, which is designed to help entrepreneurs launch and grow now on profit consultancies. And the other is lean recruitment, which describes how to cost effectively recruit talent. Um, you know, today Gary's gonna talk a little bit about , uh , his expertise on employee, on the employee retention tax credit. And we're actually here in Austin, Texas for the opportunities exchange shared service conference , uh, got connected with Gary through , uh , the conference hosts. He's gonna be talking in one of the sessions and , uh , just based on that content thought he would be a great guest for our podcast. So , um, Gary, welcome to the show. I'm glad to be here. Excited to be are glad to be the first in person you're doing . Like it's like maybe we're getting past the last couple of years and things are getting back to normal. I, I think this particular conference, like many of 'em has had to go to virtual conferences the last year or two. So everybody's excited to be back in person. It's kind of like a family reunion walking through the vendor hall, like everybody's seeing each other in person for the first time. So I'm excited to have you here in person as well. Um, had a chance to chat with you a little bit before we started recording Gary, but I would love to, you know, maybe talk a little bit about your background. I wanna get into some of the topics that you guys are gonna be talking about here at the conference and the things that you're passionate about with your organization, but can you talk a little bit about Savita and what you guys do and how you got started? Absolutely. So I founded the firm 13 years ago now and , um, you know, I saw a niche for public serving organizations, right? So those that are mission driven , whether they're profit or nonprofit who needed high quality help in terms of strategic planning, HR work , um, capacity building those areas. And , um, we've actually split into three different areas over the years. Um, early on, we started doing a lot of evaluation work, cost, effective evaluation, because as we know, that can be a huge rate. Limiting factor for organizations is how to afford independent evaluation. That's that's effective and, and helpful for leadership. And so we found it , I guess it was about six years ago now , uh , luminary evaluation group, which , uh, Allison lorocka now heads up as president CEO. And so that became an independent firm. And then more recently we started up Cita strategies early start, which is our arm. That's just focused on business issues when it comes to childcare . And it's born out of work that we started back in March of 2020 helping childcare providers, access stimulus, and then that grew into you helping them do , um, rapid cycle go goal based coaching , uh , an approach we developed , um, to help them remain stable or as stable as possible through the pandemic and, and start to be ready to emerge. So were you guys already doing work in the childcare industry Premar 2020 ? Was that like a , a now natural progression for you to lean into our space a bit because you already had clients in the space or did you just identify that opportunity early once COVID hit and started seeing some of the headlines and things happening in the industry more the former than the latter? So I go back to doing work at the systems level in childcare back to 2005 . You when , and I worked for a different consultancy and , um, my first experiences were in a large national project that the WK Kellogg foundation had , um, which was , uh , a massive effort to really create zero to eight systems. And so I was engaged in TAing , um, certain locations and helping them scale , um, and then continued in the area. Um, and I'd say over the years, about 60% of our work was in childcare specifically , um, with the other areas, being other public serving areas, such as, you know, college access and those sorts of things. But, you know, in terms of the more recent work , um, it all started when one of our connections , uh , who at a , a large family foundation, New Jersey had reconnected us. We had worked with them in the past and, and their executive director wanted to hear a little bit more about the P P cuz . I was a person who was getting out there and saying, look, this is imperfect, but this is what we got. Got it. And this is, this is March, 2020. This is March, 2020 . Yeah. And this is Barbara Raman, who is their then ed . And who's just a giant New Jersey as it is in childcare . And at the end of the conversation, it was my 30 minute spiel. Barbara said, well, you know, we're most concerned about , uh , family care providers and centers in marginalized communities in New Jersey. They're not gonna be able to do this. They don't have the time. They don't have the effort. This is confusing. Could you do TA we've done TA programs in the past. I was like, sure. So that was TA just for the audio technical assistance. Yeah . Sorry . Technical assistance. No . Perfect. So tech you've done technical assistances. And so she asked, can you help and assistance meant , can you help them fill out the loan applications? That's right . Can you help them access the funding? Okay, exactly. And so that was a Thursday, they had an emergency board meeting the following Saturday 9:00 AM. The following Monday, we were meeting with the local childcare reer resource and referral agency , uh , which is the Essex county one, which is just a , a great organization , um, and started plotting how we can start working together to spread the good word. And then Barbara recruited , uh , I believe it was four other private funders. And so we ended up doing this work in three counties in , um, in New Jersey. And again, it started out with a P P P we moved into the employee retention tax credit families first leave. And then also we created that rapid cycle coaching approach , um , towards the end of 2020, when there was no money and the providers were still suffering. And we started saying, well, look, can we aggregate what other providers were doing successfully in the pandemic and create a hierarchy, right. So we can go through it and say, are you doing this? Are you doing this? Are you doing this? These are things that we're seeing, we're building resiliency. And we know they could work cuz other providers like you are doing it. And um, that system then got the attention of the state of Texas. So we're now doing statewide efforts , uh , in Texas, in Virginia, in as well . So similar work that you guys were doing in New Jersey when you first started , uh , work up there, but yeah, certainly in Texas on a much bigger scale. Yeah. Everything's bigger in Texas. Exactly . So even, even the initiatives in childcare are bigger in Texas. That's right. Do you just really quick , uh , you know, there's a few topics I wanna talk about. I wanna give you, you know, you know, platform to share some of the things you'll be talking about even at this conference, but when you talk about PPP and then you talk about the employee retention tax credit and some of the government funding that's been available, you know , I think sometimes when people, you know, hear the term funding, it all gets lumped together. There's COVID funding. And then now there's the build back better plan. And we've done such with some of the leading groups kind of advocating for our industry, you know, in DC in terms of funding, but are , are they different? Was the P P P and the employee retention tax credit totally different. So providers had the ability to apply for both of those pots of funding or did they go hand in hand ? And it's a great question. And you know, probably more of a lengthy answer than you , you might want, but I think it explains how we got here, please. So originally both were stood up in March, 2020 and the E RTC, the employee retention tax credit was actually an alternative to the PPP. And so for a variety of reasons and I could go into it, but I won't bore the audience. Um, at the time it wasn't as good a deal. And so because of the short nature, remember this was back in the heady days when we thought it was gonna be a V recovery, right . And we'd be over this in six weeks. And my wife who's a scientist was laughing at me. Um, you know, but we did believe that at the time. And so the PPP was a better deal, which was, as we know, a forgivable loan mm-hmm <affirmative> , um , and the employee retention tax credit was less popular because it wasn't as good a deal. The only times we referred people to, it was certain nonprofits we worked with were nervous about taking any loan, espe , even a forgivable one, if they didn't know how it was gonna be forgiven, right . Cause in those early days just perception that it was a loan. And when you tag the loan term to it, I , I heard that said is free money. And so that's what you're saying. Exactly . So, so we would refer them to the employee retention tax credit. The , the big change for the E RTC was December 27th, 2020 , which tells you how I spent my 20, 20 Christmas vacation <affirmative> . And what happened was that, you know, the, the president signed a new tranche of , uh , stimulus funding, but also adjusted the EER TC in many important ways. And the two most important things he did was one, he said, well, you can have a P P and a EER TC. So originally it was one or the other, okay . The rules are, you can't do both at once. Right. Which makes sense. Right. We're paying Ryan out of the PPP. We can't then say federal government, can you pay 'em again? Right, right. But other than those times, you can now use the employee retention tax credit. The other thing that changed was they allowed you to go back retroactively. And this is huge. So we talked to providers and they'll initially say, so you're talking about a program that ran from April, 2020 and ended September 20, 21. Why are we talking about this? Mm-hmm <affirmative>, we're talking about this because you can retroactively apply for the funds. So you have up to three years currently under federal law to apply for the funds. So this is a , uh , an incredible source of funding that you can get. And this is not, this is a refundable tax credit, which is a nice way of saying they give you money back the federal government. And what you get back at the end of this is, is one of those rainbow colored IRS checks, just like any other refund check and quite literally that's it, there's no forgiveness. There's no depend 60% of it on this 60% of it on that, or 40% on that. None of those things, this is cash. Wow. Which is a huge, hugely powerful opportunity for providers. And that's specifically where you're saying you can go back retroactively, even though it ended in September of 2021, that is the employee retention tax credit. That's correct. And so can you talk about like eligibility requirements, cuz this is a big, you know, I think one of the things that we've really been hearing so much in our industry is the role that government funding, you know, not only historically has played in our industry, but what role it's play now and then potentially what role that's gonna play moving forward as centers, you know, had the light has shined on our industry. We talked about this a lot, the need for centers to be sustainable in their communities is so essential to our economy. And so part of that is, you know, obviously looking at business metrics. So we're , I wanna talk a little bit about that. How a business needs to look at their, their revenue and make sure they're covering their cost of doing business pay themselves. I know you're a big advocate of making sure providers are setting aside salary for themselves, making sure they're reducing expenses, all the, you know, the, the, the foundation things that a strong business should be doing, but also there's money available from the government. So in terms of like eligibility for the employee retention tax credit, the E RTC, I think is how you refer to it. What are the eligibility requirements? And I know this is a big part of what your organization does. Can you talk about eligibility requirements and then how you help providers actually access those funds? Absolutely. So the L eligibility is twofold. So first this is just for w two employees. So unfortunately if you have a 10 99 contractor, if you're a sole proprietor, this doesn't work, right. So we often will then talk about families first leave as another opportunity. But if you have w two employees, they cannot be related to the, the owner or the owner, right beyond that it's open season. Right. And what happens is there is a set of triggers. The federal government has created. And, and I'll go through those in a second. But those triggers basically say, gosh, Ryan, during, during the pandemic, your business suffer, and this is for any small business. So under 500 employees. So, you know, it's not just a childcare one , but they say, look, you know, you suffered under the pandemic. You kept people employed. You had W2 payroll still mm-hmm <affirmative> . And because of that, we want to give you some money as an encouragement that you continue to keep people employed. Cause it's cheaper to give you this , these funds then just to have people unemployed and you know, the, the triggers. And this is where, you know, when you ask the question, how do we help them ? We help providers go through the three big steps and the first one is going through those triggers. And you know, what I often say is this is like E P but easier people get very scared when they hear tax credit. Do I call my CPA? Do I do this? It's actually a payroll based system. So the first step is you self-certify. So this is often bewildering, cuz we'll get providers who will say where's the application. There's no application. You need to look at one of those triggers and say a, you know, document in some way that you met the criteria, trigger. Number one is you were closed , uh , for a period of time due government order. So that's an important one that has to be a must, not a should. So it couldn't be like we had one health department that said you really should close for a while . Unfortunately it doesn't count. It has to be, you need to close from a period of time. And we saw that in some of the states, for example. So New Jersey had an order for nine months where I'm sorry, that was , uh , social distancing. They had an order for three, four weeks where they had to close. Everyone had to close, well, bam eligibility right there. As soon as you can show that government required closing. So for those like essential centers that stayed open to provide care to essential workers, they would be as an example, excluded from this. If they were, even though everybody else shut down, they stayed open to provide care. In some ways, I don't know if it's the right way to describe it, but that that's gonna work , work against them as this goes . Maybe , maybe . So lemme talk about the other triggers and , and all you need is one trigger and they could vary . So you could say I had a trigger this trigger in June and this trigger in July, the second trigger is revenue. So you had to show that. So 2019 is our base year before the world ended, right? And you have to go quarter by quarter and you compare or 20, 19 to 20, 20, 20, 19 to 2021 in 2020 , you're looking for a 50% or greater reduction in revenue to trigger it. And then it keeps going with 20%. So if you could imagine in quarter 2 20 20 , let's say you had, you know, had half the money you've even made in 2019, you've hit the trigger. But then the next quarter, let's say some relief funding started kicking in and now you're 25% down from where you were in 2019. Well you still get to keep it . Okay. And it keeps going. And the last quarter, even the last quarter is you get it for free . So even after you recover, you still get one, one quarter that you get to use in 2021. It's just a flat 20% reduction from 2019. So that becomes a way that if you did stay open for those emergency workers, if you still show that revenue drop that it's another way to get triggered in it. However, what we found was that was a real problem with some of our, you know, head starts . Some of the other agencies that did get funding start coming in from the government. And they're like, well, heck we're we're now getting penalized. So another trigger came out in 2020 that the government allowed partial cessation of business. So this is sounds bad. Yes . Not I'm you're gonna have to define this one. Yeah . Yeah. So what it means is that your business model took a hit to an extent where you didn't have to close, but you did have to fundamentally change your business model and increase costs. And again, this is from a government, an order. So a must government order, not a should. So the example the IRS gives is they're looking for a 10% reduction in the capacity to produce goods or services. So the example they give is a restaurant restaurant has 10 tables , um, because social distancing regulations that come in from their local government or state government, it can be either they have to roll four of those tables in the back. That's a 40% reduction. Now, if you noticed they didn't ask how many people showed up for lunch, how many people showed up for dinner? Because what they were trying to get away from was, well, what if they just don't like your re right, right. So they said , well, what's an empirical way to judge capacity. Right. And , and impact. So for our childcare providers, we do the same thing. And what we say is, so for example, in New Jersey, there was a nine month regulation around social distancing that affected, close to a 25% reduction in capacity. Mm-hmm <affirmative> that means literally if you're in the state of New Jersey, you're eligible. Yeah. I was gonna say, that seems like a trigger that most centers would be able to, you know, be eligible for at least based on my understanding and listening to people all over the country. That's right . And this is where it becomes like really exciting because you start to talk to providers and they go, well, I can't do revenue. Cause I got federal funding. I didn't get this. I , you know, I got this. Well, did you ever reduce capacity? Oh yeah, I did. Right. And so when you talk about being open for essential workers, like for example, in the state of Texas, the providers who had to keep open for essential workers had to also do social distancing mm-hmm <affirmative> that dropped their capacity. So suddenly bam, they have eligibility. And that was the huge change because you know, again like entire states could now be eligible for that period of time. They have these government orders saying you must the, the last , um, trigger, which is also a really important one came out in August, 2020. So right near the end of the program maybe is July. And what it was was that they said, look, there are all these businesses that started operations. And that's a key word after February 15th, 2020. So, so brand new centers, is that what you mean? Started brand new centers. Okay . And so it could be, for example, so we had a number of providers who said, I started to ramp up the world ended. I didn't open until 2021 you're eligible. Cause you started operations afterwards. Now this isn't, I opened a new center under my same company. You know, it has to be a distinct entity. Got it. That you're starting. But what it means is, you know, we've seen a lot of startups in the pandemic. So if you do, if you are eligible, then what they do is they give you quarter 3, 20, 21 and quarter 4 20 21. I know I said the program ended, this is the one statu in the statutes . This is the one exception, statutory exception is this, this recovery startup as they call it. So this is another one where, you know, and the only other criteria is you had to make under a million dollars in revenue in a given year. Okay. For those that startup segment. Yeah. So I mean, it's, you know, no offense hard to find a childcare provider who has made over a million dollars in the pandemic, especially that's what's starting up. Yeah , that's right . That's right. So, you know, when we find that providers started up after February 15th, 20, 20, you know, there's a high likelihood, they already have two quarters forget about any other trigger, but those two quarters instantly are granted to them , make them eligible. And , and then do you guys, so like with that program and the available funding, is it, is it a situation like you keep referencing quarterly? So are these, is this tax credit? Like the check they receive quarterly for the quarters that they were affected or are they looking back now if , if you're eligible retroactively and it , and it's a lump sum for the entire period of time that you qualify for, how does that work? So it mechanically is quarter by quarter . Even if let's say you , you qualified for every quarter. Right? So I was talking to a provider last week who qualified for all the quarters she can qualify for, but you have to apply each one quarterly. Okay . So what's, what's happening behind the scenes. The mechanism that they're using is your payroll taxes. So specifically the credit flows through your social security tax that you pay as an employer. Why did they do it this way? I have no idea. I've talked to a couple of staffers of , uh , members of Congress have never gotten an answer. They're not sure whatever this is what we have. Right. So what happens is, and so by the way, that's an important point because if you're a nonprofit provider, they often say, I don't pay taxes. You pay payroll taxes. If you have a W2 employee, you're paying payroll , you pay payroll taxes. You're social . Exactly . Yeah . So what happens is every quarter, if you have W2 employees, you know, you have to form do a form 9 41. That's your quarter, quarterly payroll tax report to the federal government. The mechanism you use to get the credit is the form 9, 9 41 . You do, what's called a 9 41 X, which is an amendment to your 9 41 . Basically what you say is, you know, quarter 4, 20, 20, I didn't know I was eligible. I now do. Um, I want to change the entry of my 9 41 that says qualified wages for this tax credit. And then how much money I should be getting it totals down. The government reviews it. These have to be hand reviewed, like any other amendment. And so it does take some time. This is not quick money, but once they review it, they'll send you a quarter by quarter of those checks. Got it. And so when you say it takes time, like just what you guys are seeing right now, what's a tip from the time it's all been filled out. I just filled out my 9 41 and submitted it turnaround time for that to work. What , what do you guys do ? It could be anywhere from six to nine months now it's getting better. Um, the current administration brought in a lot of temporary workers that you may have heard of in January. I think it was 8,000 for of the IRS. And one of the reasons was to keep these things flowing that the E RTC in particular, because it's become so popular. Cause this is the only way you can get money. Right. And so they've now we've seen a distinct uptick in the reviews and approvals and the checks going out. In fact, I had one provider who had pinged me two weeks ago and like the very, and I said, be patient it'll come. She's like, did I do , do , do something wrong? Nope . Taking their time. Very next day. She got her checks. Okay. And so that's encouraging, you guys are seeing that that timeline is getting shorter. It's depressing. Yeah. But the , but the, you E R TC is still , um , bucketed back to it ended at the end in September, 2021. So as you guys look forward, have you heard anything about there being a timeline where they're gonna stop allowing providers to go access this and what level of urgency, if you're talking to providers, would you say, Hey, now is the time don't delay? Is that, is that part of your message? Yeah . I mean, I always say, you know, do it while you can't. So right now it's under the same statute of limitations that you have for any 9 41 change or any tax change tax form change, which is three years. Okay . I honestly, when they ended it, so they originally, it was supposed to go to the end of 2021, ended it early. And I'm , I'm not saying this with any political judgment. I'm just saying point of fact , um, Congress ended it early to reallocate money for the infrastructure bill. And at that time I was very much afraid that they would then change the statute of limitations that there wouldn't be this kind of long tail to accessing the money. They never did. <affirmative> now at some point, will Congress go back and say, whoa, whoa, whoa. We're seeing this money still go out. Let's let's end it. That may happen. There's no word I have of that happening. I want people to freak out and say is scary saying it's ending tomorrow . No, I'm not. But what I am saying is if it were me, I would do it sooner than later. Right. Is once you're in, you're in line. Yep . Versus not being in line. And then if, gosh , forbid, you know, at some point when , when people are looking for money , um, for other , um , efforts that they end up, you know, curtailing this. So I would say sooner than later, but you don't have to panic and say, I'm gonna drop everything and do it today. Fair. But yeah, like you said, it's available now. It is a year from now two years from now. We might not be able to guarantee that's the case. So it's worth the time and energy are , do you guys run into Gary , like in the work that you're doing any sense of, like what percentage of providers are taking advantage of this? Like, is it a , I know you're here in Austin and you're gonna share this message and you're , you know, we're working to get the word out because we're all kind of , um, have , uh, interests in helping providers be more and more sustainable as a business. Is this a small fraction of providers that know about this and are tapping into it? Or is it a large portion or what's your, what's your sense of that? It's, it's a small portion. And, and to be clear, it's not just providers, small businesses. Right. You know, I did a , a couple of articles that I was a source for, for Forbes on , um, on stimulus funding. And I kept trying to get them do something about the RTC. And I think because it sounds complex, they BA they baed. So the word word hasn't really gotten out there on it. You are seeing increasingly, and , and this is a little saddening, especially in the states where we're working to do this for free for providers. You're seeing a number of outfits who are now charging 20% of the credit, which could be S sizeable , um, to process it for you. And so we're starting to see a little bit more interest because there is this profit motive, getting people out, sharing the information like, you know, I know there's one provider we know or consulting organization we know of in particular, that's reaching out to providers now and saying, you could be eligible for 20% of the credit. We could do it for you. Um, you know, so that's both troubling and heartening. I do wanna see access and certainly it's a free market, but if you can get help for free it's of course preferential. Um, but we're seeing still so many providers have never heard of it. So many small businesses have never heard of it. You know, part of the challenge was you didn't see it in the media, like you did the PPP, right? Um, you hear employee retention tax, read it , your eyes glaze over. Right. And people go, oh my gosh, that sounds scary. Talk to my CPA. That's not for me. Right. And then you talk to your CPA. If you have one and your CPA says not my job. So this is all handled, as we said, through the 9 41. So unless your CPA does your nine 40 ones, he or she is gonna send you to your payroll company. So, and that's, what do, Hmm . Right. We say, go call up, you know, paychecks or whatever the Gusto they'll process it for you. Um, and, but the pay , but the, you know, Gustos and the other payroll companies of the world, they're not making huge amounts of money off these changes if they charge you a nominal fee at all. Right. And so for them, it's not a big money maker . They're not pushing it. Most of the time, Gusto is an exception or they are pushing it. But for the most part, they're not. So what you end up with is kind of silence around it. When you hear things that sounds really confusing as you heard it, isn't that confusing, you know? Um, it does , you , you know, it's of course always better if you can help have, and not having help, but at the same time, you know, this is not brain surgery. Yeah. It just needs a guide. It sounds like somebody that can like unlock that initial door and explain, Hey, it's available, it's here. There's a couple of simple triggers that would make you eligible. So is that part of what I mean, not part of, but is that the role that your group plays with individual providers then is, Hey, we will actually be your guide through this process, not only bringing awareness, but then you help them identify the triggers, help them identify what's the documentation that you need to submit and walk them through that. And then maybe a follow up to that just really quick area is like, what should a provider is ? So if I'm a , if I'm a child care owner and, and I work with you, what should I expect in terms of like, what, how does Savita what's the benefit to you? Is it just the relationship and future business opportunities? Is it funding for you? Is there a percentage that I expect to pay of what comes in? How , how does that work? Yeah . Just so a provider could be clear on like, what should I expect if I talk to an organization? Oh yeah. I mean, that's absolutely fair. So there's two levels of support that we're providing. One is absolutely free. So one of the things that we've gotten a lot of compliments on, and, you know, I turn a over it , as I say it, cause I don't, you know, I don't wanna be Boal , but we've been, we've received a lot of compliments on creating guides and workbooks that are very accessible for providers. And one of the things we're trying to do is not put anything behind paywall . So if you go to CS, so Charlie Sierra CS early start.com right now, which is the Cita strategies early start set . You can find the guide for how to do this absolutely free 24 7, download it, find all our materials on there free. Um, so that's one thing. And we've had providers who have said, I got the guide and I was able to do it like this. Wasn't really all that hard. Right ? I did it now . It's not for everybody. And you know, in states that we're working. So right now in Texas, Indiana, Virginia, we were working on it in New Jersey. So if you're a New Jersey listener, I would probably help you anyway. Um, we are providing free services. Now we're doing that because we're getting federal stimulus to do that. Got it. So we are not doing this retail, like we're not gonna charge you 20% and you know, do that. But in those states, we are getting compensated by the state, you know, or against federal government coming through the state , um, to do this work. So for the providers, it's absolutely for charge . Excellent. So they're getting government support to participate. And the government saying, not only are we gonna support you with this , these funds, but we're gonna support organizations that are helping you access 'em that's right. Which is amazing. And this is really sizable when we talk about the 20% that some firms are charging you, it can add up. So, so the credit, the way it works is a little bit different in 2020 than 2021 in 2020, you get half of the first 10,000 each employee made during the, for all the eligible periods. So in other words, you can get up to 5,000 an employee. Okay? Right. So if you do the math, that adds up pretty quickly in 2021, it got crazier and the federal government to encourage people to use it. It , so now you can get up to 7,007,000. So 70% of the first 10,000 made per quarter. Wow . So if you think about it, right, let's say you have , you're an owner, you have a center director and they're making 40,000 because the math is easy for me a year. Well, if you were eligible all three quarters to 2021, that's seven plus seven plus seven that's $21,000. Coming back to you is cash for that one employee. Well , just that one employee. So as you can imagine, like, you know, in the state of Texas and you know, alone, we've done 30 million as of January one. Right? Wow. Um, in New Jersey, I think we did, I wanna say like 18 or 19 million in a very relatively short period. So there's a lot of money here. Mm-hmm <affirmative> and you know, and part of what we are seeing is a situation. Cause this goes back to what you were saying about sustainability, right? Cause we do have some providers you were , and gosh, you know, I'm already getting a bunch of money from the state through ARPA funds. Should I do this? And what we are seeing is with the increasing costs associated with labor, which is your primary cost , right. You know, that better than I do of , you know, what's happening is a lot of the ARPA funds that are coming down are almost neutral. Right? We're putting that money out as we should. Right. In bonuses, in temporary pay increases, which is wonderful. It's wonderful for you as the owner. It's wonderful for the people who work for you. If you're a sole proprietor, it's wonderful for you too, cuz you can pay yourself. Right. But what we're not seeing is providers going back to where, where they were. So what I mean by that is, you know, there's not a provider I know in the country, that's not true. There's one I can think of who is a delightful person. And I don't know how she did it, but she got through some really rough times and still preserved her reserve. And so what we saw was two things. One reserves went away. If you had reserves, regardless, whether you had reserves or not consumer credit card debt went up because you started to float things on your credit card, which is what you need to do as a business owner, get it , you know, maybe your idol , you took out an idol and you have that debt too. Right. So with the ARPA funds, you're staying open, but you're still not getting head to where you were of that stability. So we're finding that these funds are then able to bring stability. So I had a provider just two weeks ago where I was talking about the same concept. You know , she said exactly that she said, Gary , I still have debt. She said, I can't wait to get this money because then I could pay off my debt. And I'll finally be back where I was in 2019. Yeah. And which is kind of what the , it , the idea is, Hey, let us help you absorb everything that's happened in the last couple years and how it's impacted your business and get back to the reserves you had or the debt free , you know, balance sheet that you had created with all that hard work and to kind of get back where you were. And that is how they can use the funds. Aren't earmark for, you have to spend it on this or you have to use it on this. Like if you're eligible, those funds are then you know, yours to use, however you need to and want to that's right. I mean, like when we talk to nonprofits, I often say these are unrestricted funds. Cause nonprofits know how hard they are to get. When I talk to for profits, I always kid around about like, you know, if you wanna put into your business, you can pay down your debt if wanna have The Bahamas vacation of your dreams. You could do that too. Not that I'm encouraging that, but my point is to show the flexibility. Yeah . It is a cash refund. Once it's in your account, nobody can tell you what to do with it. Yep . So you have tremendous flexibility. So we, we know cuz we help with accessing ARPA funds in the states, we're working in that there are limitations to the ARPA funds and what they could be used for construction being a prime example. You can't do it well, these funds can. Right. So if you wanna build that extension yeah. You can't use ARPA funds, but you can use these funds and then maybe use your ARPA funds to and build it up. Yeah, that's excellent. And then you guys have also found like through the work that you've done and I know I wanna be respectful of your time cause I know you're , uh , a , a main speaker here and you've got your sessions , um, through all the work that you guys are doing on, you know, these tax credits on the PPP early on, you've also identified coaching opportunities as a whole, right. For the industry, meaning you also provide services above and beyond the things we're talking about. So I , I would love to give you like maybe a quick platform to talk about like the coaching role that you guys play. I know you referenced this early in our conversation. I've read a lot about the evaluation process you guys have created that I think has been really impactful for your customers as well. Can , can you talk a little bit about that side? Absolutely . And how you support absolutely . As well . You know , as I mentioned, you know, back in the last quarter of 2020, everyone was suffering and there was no money we put together, what's evolved into what we call the thrive pathway, which is a very simple coaching system. And basically there's a list of best practices. And for each one we recommend going down the line for providers, cuz these are ones that we found from providers. Those centers and family care have been important for their stability and growth and with each one of them . And again, you'll find this free, including the thrive pathways entirely on our website. So it's just out there and the materials are as well for each one of those things. There's an easy to use workbook or guide . So for example, first thing we start with is budget. So many providers are flying blind. This is heavy turbulence, right? You want the radar, you want everything you could do to help fly that plane. So start with a budget. So we have a so simple workbook on like, how do you develop? And I mean, by workbook, it's like three pages. How do you develop that first budget? And we say, okay , how's your cashflow ? Do you know what your cash flow is? Because that's the next most important thing. Yeah . And so we go down that list, including marketing other things, accessing these federal funds and say, have you done it? And if you have, it's very simple, next goal, do that thing. So it's not overwhelming. And what we found is number one, this has , has salient in terms of bringing stability to providers. Um, you know, I had one provider who I had heard of , um , just , uh , Friday , uh , it wasn't on the video. Um, but they were doing a video with some, some family care providers and , and this actually doubled her revenue. Wow . You know, and, and one of the things also in there is, you know, a review of your taxes and you know, that's a whole nother subject. Uh , the evaluation arm, as I mentioned, luminary evaluation group, Allison did an incredible assessment of 60 provider tax returns that we're able to get through this work and get their permission to use for research. And so there's even an easy, and again, this is free on the website and easy to use guide on how do you go through your schedule C and determine where you at risk, where should you maybe be doing greater deductions and taking you through that? So all that is up there. And you know, that system has not only been helpful in stabilizing businesses, but we also have found some QS systems using it as almost pre-coaching. So a lot of them , they wanna take a provider from point a to point B, but they can't do it until the provider is at point a. Right. So it's now out , we're kind of helping them use the system to get to point a, to get to that baseline that you can then build off from there. And I think, you know, one of the things I love just reading some of the content and kind of doing a little research on Savita and on, you know, this Lumin it's luminary, luminary, luminary , um, is I think you guys have learned and you speak to it right way that it's like, look, this isn't intimidating. It doesn't have to be this lengthy process. That seems so inaccesible to, you know, what , whatever we define small or medium size business owners, it's we can make it painless. We can make it easy. We can make it efficient and the outcome will be impactful. Like it will impact your business. I don't know if I'm like, like adding the wrong description, but I , is that how you guys view it? Like you wanna make it like , absolutely. Yeah. I mean, and that's, and that's our primary goal is, you know, I think part of the challenge you have in any small business and I've spent most of my adult life running micro businesses. So businesses with under 10 employees in , you know, most micro businesses have few really good resources because you have this bunch of business resources that are really meant for large corporations, a , a bunch that are really meant for larger , um , small businesses. Cuz remember the federal term , small business goes up to 500 employees, right? Yeah . In the childcare world, we'd be like, wow, you know , that's a four . Exactly, exactly. Right. But you know, we're talking mostly what's termed as microbusinesses and the resources for microbusinesses in general are not great. They're not, they're not meant for, right. Like, you know, what we see for other small businesses is hand this to your CFO. You'll get it done. Right. You are the CFO, you're the CEO. You're you're the center director. You're the you're teacher. Cause when people are out with COVID right, you're doing it all. And so what we're trying to do is design materials. And I should say everything we do is in English and Spanish and design materials where you can self execute . If you don't have a coach, right. You can go on our website, let's say you wanna figure out your cash flow , go on our website, take the work book. The idea is that it takes you step by step . Nothing's hidden. There's no like, and call us for step five to finalize it. Right. And get your checkbook handy, you know? But instead, what we're trying to do is get this out there so that the providers can either be helped or helped themselves through this because this shouldn't be something where we're, we're hiding this information. It's absolutely imperative for the sustainability of the sector. Yeah. Just like providers. I think it's getting to a point just like providers are gonna tap into their local licensing and resource and referral to like, just get information about how do I start a center. This type of conversation needs to be an essential part of that initial, you know, discussion as well as you're building out your business plan. And as you're, you know, kind of determining what are the important things that I need to do to make sure that what I'm about to embark on is gonna be successful. So it , Gary, just as we kind of wind up and, and um, you know, I know I have Bre are earlier, but I appreciate you sneaking some time. And you know, we, we met local time. 8:00 AM Austin. I know you flew in last night, you've got all sorts of , um, engagement. So I appreciate you carving out some time for us. If our listeners wanted to find out more. I , I know you've referenced the website a few times, but I just wanna give you an opportunity cuz our audience are , you know, the end of vis. I think that you, you guys work with you , it's directors, it's owners, it's people that are trying to open centers in our space, trying to sustain their existing centers through some of these difficult times. How can our audience find you if they wanna get more information? So I mean the website's a great source CS early start.com . Um, the other thing I would say, and , and I may regret this later, email me Gary ATIV Strat C IV St R a t.com . I'm always happy to answer an email. I'm a big boy, if it's a bad time. Cause sometimes people be like, I didn't wanna bother you if it's a bad time, a big enough boy, we'll set it aside to like to do it, but I promise I will respond. Um , nice . Yeah . And we'll put that information in the show notes as well. And I would encourage, you know, because if , if nothing more than getting information that you know, you as a local provider in your community in your state can then go share with other providers. If for any reason, this doesn't apply to your situation. Being able to tell some of your peers about it , um, there's money there there's, you know, grants, there's tax credits and there's experts that can help you with that. So , um, we'll put all that information in the show notes as well, Gary, and uh , appreciate your time. It was a pleasure having you on the show. Appreciate time . I'm glad to be here and glad to be the first in person episode. You'll always go down as the first I okay . Last bonus question actually. Yeah . Um , that I was gonna say, let me finish my thought. You're the , you will always go down as the first in person podcast interview for our show. So that'll, that'll stick with you if nothing else. Um, you're an author as well. So bonus question, I'm always curious, writing a book seems like one of the most complicated, difficult things for me, like the way I learn is not through writing it's in my head. And so to put thoughts from my head on paper is a challenge for me. How did that process start? Was it like, Hey, I wanna write a book and I have the talent, or did somebody say to you, Hey Gary, you should write a book about this. What , what was the, a little bit of both those things? So what had happened was there's actually three books. I, I feel bad cause I sent you an old bio finding your north star, which is our strategic planning process came out just a few months ago. That's also all three of them are on Amazon. Um , what happened with the first book was, you know, I would do this work, helping other consultants build their business, just pro bono. It was like, it was fun to me. I love entrepreneurship. And one day, one of the people I was helping said, you have a whole system. And I was like, well, let's have a deal. I'm doing this for free this coaching. And I'm gonna ask you to write down an outline of what you're the learning. And , um, it coincided with the birth of child number two. And um, I always, for both kids, I took the late night, early morning, depending on how you define it feeding. So my wife could actually get some rest and coinciding with that was a podcast I had seen with a person who was very prolific of really bad books, but it was very interesting to hear him because one of the things he said was look for thousands of years, books weren't written, they were told, right? And , and I'm a huge fan of classical history, right? But if you look at the IEA, the odysey, these were oral books, these were books that were shared orally and weren't written down for hundreds years . Right. And that was a huge C change to me. Cause I kept thinking, if I'm gonna write a book, I have to sit down and write it. And it was always a personal challenge to me. I was never a good student. I was always told I wouldn't be successful. I had a learn new disability. So it was one of those things where I felt like I'd want to do it. So there was this confluence of here's something I could share that would be valuable hearing the, this idea of being able to say it orally and, and also wanting this challenge for myself. And so I started using, I tried a bunch of different dictation , um, systems that's when I found was the iPhone, just the regular dictation. And so in those morning feedings, I would, I would have the outline in my son's room and I would just start dictating Molly eight and then went to sleep. And from that, I cleaned up the dictation. Right. And that became the book. And that was actually all how all three had been written was through dictation, dictation, meaning this is for my lack of knowledge, speaking it into your phone and it writes your words for you. Okay . And then cleaning it up later. Right. And what I found was for me and this, by the way, is how we write all our materials. And one of the great compliments we've gotten on our materials is they're so conversational. People have said, it's like chatting with one of your folks and that's because we literally write them that way. Right. We write them as if we're talking to you, instead of saying, I'm gonna sit behind the computer and say, how do you do the employee, a retention tax credit, but instead we dictate it and then we go from there. So it has a much more kind of relaxed, conversational tone. I like that. That's good. That's a good little in good insight for those aspiring authors or individuals, maybe like myself, that struggle to put thoughts on, on paper dictation. I like that. That's a little life hack right there. Absolutely. Um, so hopefully everybody kept listening to the end of the show because that's a nice little freebie at the end. And , uh, you know , again , uh , Gary Roman with Savita strategies , um, and luminary valuation group really appreciate your time. Thanks for being on the show. My pleasure. Thank you for having me. For course .

Speaker 1:

Thank you for listening to this episode of the childcare business podcast, to get more insights on ways to succeed in your childcare business, make sure to hit subscribe in your podcast app. So you never miss an episode. And if you want even more childcare business tips, tricks and strategies, head over to our resource center@procaresoftware.com until next time.