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R&D Tax Credit Study Could Be Worth Thousands Per Hourly Rate

May 5, 2020

value-timeOur prospects and customers often say, “The juice has to be worth the squeeze.” In the case of the R&D Tax Credit, not only is the juice often worth the squeeze, but the rewards are sweet. Every hour spent on an R&D study may put more after-tax money in your bank account than anything you or your staff have ever done.

We are business people just like you – we don’t waste our time and we certainly won’t waste yours with costly mistakes. If the business case for doing an R&D Tax Credit doesn’t make sense, we will be the first ones to tell you. 

And, with the COVID-19 pandemic and other issues making their mark, many companies are actively looking for capital to fund the on-going operation of their business. The R&D Tax Credit can be a critical source of needed cash.

Here are a few examples of the many case studies that directly prove, dollar-per-hour, the value of doing an R&D Tax Credit study with Black Line Group.

Software – Customer Satisfaction Score: 10 out of 10

This company has revenue of approximately $13 million and began partnering with Black Line Group in 2018. Studies for the 2015-2017 tax years resulted in amended returns with 2018 filed on a timely basis. When investigating the ROI study of the R&D Tax Credit, the Owner/CEO, CFO, Project Manager, and additional staff spent a total of 38 hours working with Black Line Group to complete the project. The four-year tax savings that resulted from a 38-hour investment of time turned out to be more than $950,000—or about $25,000 per hour.

The tax savings were reinvested into additional development resources to accelerate the roll-out of customer-requested capabilities and system architecture enhancements. These investments will help the company grow faster, be more competitive, and increase profitability. For the 2019 tax year, the company expects to spend 20 hours on the study—with more streamlined and specific reporting—and save more than $15,000 in taxes per hour spent.

Manufacturing – Customer Satisfaction Score: 10 out of 10

As a 10-year client of Black Line Group, this manufacturer has revenue of $29 million and files its taxes annually on a timely basis. With well-established reporting capabilities, total time invested in pursuing the R&D Tax Credit averages 20 hours per year with tax savings equaling to just over $6,500 per hour spent.

This company continues to reinvest its tax savings by hiring additional engineering talent and investing in existing staff through on-going education, training, and programs that keep morale and employee retention high.

Manufacturing – Customer Satisfaction Score: 10 out of 10

This five-year client of Black Line Group spends an average 30 hours per year preparing for the R&D Tax Credit study, with an hourly tax savings of over $7,600 per year. These savings have been reinvested in the business to fund a small acquisition, purchase additional equipment, and hire additional staff. This proactive strategy has been a significant catalyst in helping the business grow faster, be more competitive, and enhance profitability.

Software – Customer Satisfaction Score: 10 out of 10

This software company has revenue of $7.9 million, and Black Line Group began working with them in 2018. The 2016-2017 R&D study resulted in amended returns with 2018 filed on a timely basis. The CEO, CFO and support staff combined to spend 49 hours investigating the ROI and working with BLG to complete the study that resulted in tax savings of more than $305,000—or over $6,000 per hour.

The savings were reinvested to hire additional business development and software engineering resources that allowed the company to accelerate the rollout of new capabilities and win new business. With its reporting capabilities now fine-tuned, the company expects to spend less than 20 total hours for 2019 saving over $7,500 in taxes per hour spent

A Simple ROI Equation

Let's consider what a typical company makes net after taxes for every hour spent, and contrast that with an hour spent pursuing the R&D Tax Credit – you can then judge for yourself where you feel an hour of time is best spent. Consider the following scenario:

  • A manufacturing company with $20 million in revenue (115 employees with a revenue per employee of $175,000) and a net profit before tax of 7% ($1.4 million). 
  • Assuming an S-Corp with pass-through income to the owners’ personal return and a combined federal and state tax rate of 30%, the company is left with a net after-tax profit of $980,000. 
  • Assuming 1,600 hours per year worked per employee, that equates to $5.33 per hour in net after-tax profit.

This scenario begs the question… Would you rather have your team working at a net after-tax rate of just over $5 per hour, or would you rather make $5,000, $10,000, or even $25,000 per hour with an R&D Tax Credit study?

Are you really too busy to pursue an R&D Tax Credit study with Black Line Group? You’ve got nothing to lose and a lot to gain by connecting with one of our R&D Tax Credit experts. Reach out to us today for a complimentary consultation.

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