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Exit Strategy & Human Asset Value

Each potential new owner will have the same central question: “Can he or she manage the business from Day 1 without the current leader?” The answer to this question not only drives the transaction’s value, it can stop the transaction all together.

In addition to wanting a strong leadership team in place to outlive the transaction, the new owner will look carefully at the company’s employment practices, making management problems and employee issues the number one reason potential acquirers walk away from the negotiating table.

Business owners intending to sell their companies need to pay particular attention to five key areas, which, if mismanaged, can negatively affect the value of human assets in particular and the company itself:

  • Use of the “exempt” classification
  • Payment for overtime work
  • I-9 documentation
  • Employee handbook and or policy adherence
  • Use of independent contractors

Currently, mistakenly classifying employees as “exempt” generates more wide-sweeping litigation than any other HR error. Misclassification creates class action lawsuits with their inherently large number of plaintiffs and substantial payout potential.

When it comes to hourly employees, business owners need to pay overtime when it’s warranted – every time – and they need to document timecards carefully. The litigated cost of back pay, penalties and fines generally amounts to three times the actual expense of compensating the overtime when it occurred.

Business owners need to maintain completed I-9 forms for each employee each time they hire someone. Then, the I-9 must be maintained years’ after the employee leaves the company.

Employee handbooks’ and/or written policies must address compliance with HIPPA, FACTA, EEO and Sexual Harassment at a minimum. Mandating a drug-free workplace, another handbook item, also helps lower Workers Compensation costs. One can learn a lot about management of a company by reviewing these items. And if they are written wrong it can provide you to a road map of finding risk and liability, which can reduce Capital Value tremendously.

Documenting the business need, classification and confidentiality requirements pertinent to the company’s use of independent contractors will help business owners minimize legal risks as well.

To Greater Success

James B. Cichanski
Founder, President & CEO
Flex HR, Inc.

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About Flex HR, Inc.

Flex HR is an unparalleled service that simplifies the maze of human resources tasks and demands into a repeatable, predictable, scalable, and sustainable process. We are the middle market, single source solution for HR and payroll outsourcing.

In support of a client's initiatives, we uniquely combine the expertise of our executive level HR professionals with state of the art management communications technology, all managed through our Customer Centric Center. Our Customer Centric Center is staffed by HR and Payroll professionals, who have the single goal of providing the most responsive management of your HR administration. The extraordinary combination of expertise, technology, and responsiveness combines to form a powerful asset that may be leveraged to position your company to compete and win.

With overwhelming changes in HR compliance, it is virtually impossible for mid-size companies to maintain necessary expertise in-house. Our platform allows management to have control, without co-employment leasing. Flex HR is a world class HR management system that cares about your employees, and is price affordable. Your company and employees can enjoy the benefits of HR services previously only available to large companies.

For more information about Flex HR, please visit www.flexhr.com or call 770-814-4225.

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