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The recent outcome of the Sullivan v. Sleepy’s LLC et al. civil case, and the Massachusetts Supreme Judicial Court’s (SJC’s) interpretation of the Mass General Laws has clarified how employers are required to pay commissioned retail employees.

On May 8, 2019, the SJC issued a unanimous opinion that, under Massachusetts law, salespeople who are paid solely on draws and commissions are entitled to separate and additional overtime and Sunday pay. Prior to the SJC’s decision, retailers had been hanging their hat on two opinion letters issued by the Massachusetts Department of Labor Standards (DLS) over ten years ago that suggested employers did not need to make separate and additional overtime and Sunday payments to 100% commission employees, provided that the employees receive an amount equal to at least 1.5 times the minimum wage for all overtime and Sunday hours worked.

The SJC’s decision has marked the end of paying non-exempt, retail employees on a commission-only basis in Massachusetts. State law entitles these employees to separate and additional overtime payments, beyond draws and commissions, of at least 1.5 times the Massachusetts minimum wage (currently at $12.00/hour); and premium pay for Sunday work, also equal to no less than 1.5 times the minimum wage. The court also explained that employers are barred from retro-actively repurposing, or renaming, draw and commission payments as overtime or Sunday payments.

The SJC’s decision is already impacting Massachusetts retailers and other companies that pay on 100% commission/draw basis. Now that it’s clear that draws and commissions cannot substitute for other wage and hourly entitlements such as overtime and Sunday pay, employers must carefully examine their pay policies to ensure compliance. Additionally, they are now obliged to recalculate and pay the amounts their employees are entitled to in overtime pay before a lawsuit is filed — failure to do so could have a significant financial impact. Under the Massachusetts Wage Act, sales people not paid for the shortfall prior to filing suit are entitled to automatic treble damages plus attorney fees.

For more information regarding the most recent developments in Massachusetts Overtime Statute and the implications it may have on your business, please contact us.

For over 100 years, attorneys and CPA’s have worked side by side. Few professions share such a long-standing working alliance for the good of their clients. So, how similar are we?

Both professions are made up of a highly educated and skilled workforce.
Both professions have very strict education and testing requirements to gain entrance.
Both professions are highly respected and trusted by their clients and the community.
Both professions form deep, long-lasting personal relationships with their clients – sometimes lasting generations.
Lastly, both professions are facing short- and long-term partner succession challenges.

Like all businesses and professions, those in senior leadership roles are not getting any younger. With over 7,000 people turning 65 every day, the challenges for succession planning have never been greater. While the statistics vary, a large percentage of equity partners in both law firms and accounting firms will be eligible to retire in the upcoming years – and many already have.

It is no surprise that the impact of retiring equity partners in both professions will be great. The so-called “brain drain”, decreased interest by future equity partners, and client relationship transitions will all lead to a “perfect storm” of leadership transition difficulties for firms specializing in both professions. For many firms, there is also the tendency to be nearsighted as they struggle with the day-to-day operational challenges that come with working in client services. So what can firms do now?

Senior partners need to be transparent and realistic about their retirement plans (assuming there are no agreements requiring mandatory retirement).
Firms must train future leaders not only in technical skills, but also in relationship management, business development, general firm operations, and leadership skills.
Firm leaders must champion the process, embrace its realities, and celebrate its opportunities.
Senior partners need to “push work down” and delegate partner responsibilities early.
Senior partners should share and introduce their professional networks to others, often and early.
Firms need to track and plan financially for future partner retirements and the resulting financial obligations over the next 5 to 10 year period (at minimum).
Firms need to evolve their compensation models to encourage transition over a period of years, not months.

None of these goals can be accomplished quickly. Employee and client loyalty are the top priorities to keeping a firm sustainable, able to meet its retirement obligations, as well as providing for the future benefit of its emerging leaders. Those future leaders, however, need to know what is in front of them – so transparency is critical.

At DiSanto Priest & Co., we have counseled many professional firms on succession planning. In fact, our own succession plan is always front and center in all of our partner discussions. We have successfully retired many partners over the last ten years and continually plan for future successions to follow. Click here to learn more.

Why You Need a Disaster Recovery Plan

Having a comprehensive Information Technology Disaster Recovery Plan (DRP) is central to your business operations. No matter what industry you’re in, there’s no escaping the fact that conducting business has evolved into a technology-centric venture. Your IT network is the center of business operations and without a robust, optimized, and secure IT infrastructure, you will not be able to compete in today’s marketplace.

Time is money and the cost of a downed network – in lost productivity, customer responsiveness, and reputation – is significant. Therefore, implementing a DRP is critical to business continuity. When disaster strikes, having a detailed written plan that outlines the steps to get your business up and running will prove invaluable in times of crisis.

IT networks are vulnerable to disasters, both natural and man-made. Natural disasters can include events like hurricanes, tornados, floods, blizzards, and lightning strikes. Man-made disasters can include events such as cyber-attacks, terrorism, electrical fires, and water pipe bursts. Given there are a number of developments that can seriously threaten your business’s ability to operate normally, it’s imperative you develop a DRP.

While your customers will be sympathetic at first when disaster strikes, they are unlikely to wait for long periods of time before they begin looking at competitors to meet their needs. If you don’t yet have a DRP drafted for your business, the time to begin developing one is now. There are many websites and resources that provide DRP templates such as www.disasterrecoveryplantemplate.org. You should also consider utilizing an Information Technology (IT) consultant with experience in developing DRPs.

Formulating a DRP

There are many factors that determine how comprehensive a DRP will be – including the company size, human resources available, and budget. Businesses should perform a cost-benefit analysis to determine how extensive their DRP needs to be to meet their business and customer needs.

Establishing and implementing a DRP requires the support of upper management. The tone at the top of the organization is central to communicating just how important the DRP really is. To begin developing an effective DRP, a team of key employees (which should include members of upper management and IT) should collaborate, brainstorm, and perform a risk assessment to determine the types of risks and disasters that are most likely to occur which would impact daily business continuity.

A thorough DRP does not just cover one type of disaster that could occur; it should cover all the most likely disaster scenarios that could impact your business and should outline a recovery plan for each of the scenarios. For example, responding to a hurricane disaster where the physical office could be impacted by flooding, wind damage, and power failure will be very different than responding to a cyber-attack.

When a disaster occurs, the DRP should clearly identify the individual or individuals who have the authority to activate the DRP. The names and contact information for each critical individual or vendor that is responsible for executing the various aspects of the DRP should be included in the plan. If a key person cannot be reached in an emergency, a backup individual and their contact information should be listed in the DRP. Since an emergency can occur at any time and time is of the essence, it is vital to maintain updated contact information for key parties at all times. Training key employees responsible for executing the DRP is also extremely important.

A DRP Checklist

There is not just one DRP that will work for all types of companies. Each DRP should be unique and specific to a business’s set of circumstances. Below is a list of some items to consider including when developing a DRP.

Purpose and goals of the DRP.
Diagram of the entire IT network.
Updated inventory listing of all critical IT assets (hardware and software).
Description of the elements in place to prevent certain disasters from occurring, such as generators and surge protectors.
Description of what the business does and the tools in place to detect possible issues before a disaster occurs such as antivirus software, network monitoring tools, and regular employee training.
Likely disaster scenarios and the plan for an orderly recovery for each scenario.
Define the recovery time objective or the maximum amount of time allowed between the disaster taking place and when normal operations and service levels are resumed. This will vary depending on what each business is willing to accept.
Location of backups.
Comprehensive off-site data backup procedures including the procedures for regularly testing backups.
The frequency at which backups are performed. Data should be backed up with enough frequency that any potential data loss is not deemed unacceptable to the business. If no more than 4 hours of data loss is acceptable for a particular application, then backups should be conducted for that application at least every 4 hours.
Clearly list the recovery priorities, i.e., the most critical business continuity systems that need to be up and running first.
List of software and systems that will be used to recover from the disaster and any useful/helpful information related to these.
Name and contact information for those who will be tasked with implementing and executing the DRP. Be specific in terms of who is responsible for identified tasks. Backup personnel should also be clearly identified in case the individual in the first position to respond is unable to do so.
List any vendors that will be used in the disaster recovery efforts and how to get in contact with them.
Contact information for law enforcement, first responders, property managers, and other critical parties should be included.
Description of how communication with employees will occur.
Description of how communication with customers will occur.
Possible relocation site if work cannot be conducted in the normal business location and directions on how to get to the relocation site. Careful consideration should be given to the location of the alternate site since you don’t want to select a location that would also be impacted by the disaster.
Document history which includes dates the DRP was revised, what was revised, and by whom.

Download the DRP Checklist here.

Testing and Updating your DRP

Simply having a DRP is not enough. Testing the DRP in a simulated environment is vital to ensure the plan will work as intended. Testing is also beneficial to employees who will be tasked with implementing and executing the DRP because the more comfortable they are with executing the DRP, the smoother things will go in an actual emergency. The frequency of testing will vary based on the needs of your company but should occur at least twice per year. One thing to note is that having a test fail is not necessarily a bad thing because it will alert you to an issue that can be corrected ahead of an actual real disaster event.

Once developed, written and tested, the DRP should be reviewed and approved by key members of upper management and any feedback from upper management should be incorporated into the DRP as deemed necessary.

A DRP is a living document and can’t just be developed and filed away. An outdated DRP is almost as bad as not having one at all. It is important to conduct risk assessments annually to consider new vulnerabilities that could impact the business and to take into consideration any new IT tools that can be used to further reduce downtime or make the business less vulnerable to disasters. Any changes made to the DRP should be tested, staff should be notified of the changes, and training materials should be updated. We live in a world of constant change and this requires key employees to update the DRP at least once a year.

Safeguarding your Business

All employees should know where to locate the DRP and have a copy available to them at all times. In the event of a disaster, employees need to clearly understand their roles and responsibilities and also know who to contact so that incident response can begin. Key employees who will play a role in the execution of the DRP should be given a hard copy and an electronic copy of the most recent DRP to be filed away in their homes or some other off-site location.

In a competitive business environment, your company simply can’t afford the significant downtime and data loss which can lead to lost revenue, lost customers, and other significant expenses. While all disasters can’t be avoided, their impact can be minimized with an updated and tested DRP in place.

Increasing Fee Pressures

At one time or another, every Attorney, CPA, or business professional has received push-back from a client who is less than happy with the amount of fees charged for services. Professional service providers gain expertise as a result of years of training, experience, and ongoing education, all of which translates to passing on tremendous value for clients. Sometimes, however, communicating the value of services to a client can be a challenge. There is a saying, “If you think a good lawyer is expensive, wait until you see how much a bad one can cost you!”

Fee pressures have become increasingly intense, particularly as a growing portion of consumers have decided to utilize online companies that provide an array of commoditized, lower-cost professional services. However, clients that use these online services don’t know what they don’t know, and sometimes a conversation with a legal professional can uncover an issue that, left unchecked, could develop into a significant legal or financial problem. For example, during an in-person consultation, a client might casually mention a business practice that could expose him to huge legal or financial liability; or a client could refer to her new business location in a different state, where she has not properly registered or started paying the required taxes. Getting clients to come in for a consultation can often persuade them that the services of a professional are necessary. But many clients still insist on keeping their costs as low as possible.

Communication Is Key

What is a professional to do?

The most important thing you can do, of course, is to communicate in an upfront and transparent manner about your fee structure and the anticipated costs to your client. Whether you bill by the job or by the hour, utilize retainers, monthly fees, or some other billing method. Clients should have a clear idea of what to expect when they receive your bill. In addition, describe the value they will receive from paying your fees, such as personalized and attentive service.

There are steps you can take to keep your clients’ costs reasonable while still providing quality services. This can be accomplished, in part, by keeping your own expenses down.

Reducing Operating Expenses

Some firms have lowered their own overhead by decreasing their physical footprint in high-cost metropolitan areas, or leaving these areas altogether for nearby, less expensive, locations. Firms can also use space more efficiently. According to one source, 26% of attorneys have office space exceeding 1,000 square feet per attorney (that’s larger than many apartments!). Reducing administrative costs by re-evaluating staff needs and/or outsourcing tasks when practical and automating procedures such as time-tracking and invoicing may provide additional savings. Some other cost-cutting measures could include renegotiating lease terms and shopping around for savings on travel, insurance, technology, and even office supplies.

Clear and transparent communication with your clients about fees and taking measures to regularly examine how your operating costs can be reduced may still not make your client happy to receive your bill, but it should provide a greater opportunity to meet a client’s expectations.

DiSanto, Priest & Co.’s Art Lambi, CPA, MST, was recently invited to appear on GoLocalProv’s “Business Monday” segment on April 1. The appearance was due, in part, to DiSanto, Priest & Co.’s recent ranking as Accounting Today’s “4th Fastest-Growing Firm in the US”. Host Josh Fenton interviewed Lambi about DiSanto, Priest & Co.’s growth and success and where the firm is headed in the future.

The interviewer covered wide-ranging topics such as Artificial Intelligence (AI) and its impact on accounting, to the Small Business Group services at DiSanto, Priest & Co. that are specifically designed to assist Rhode Island’s small businesses. Lambi commented, “We recognize that every dollar is important to a Rhode Island family-owned business.”

Click below to watch the entire interview.

Massachusetts Data Breach Notification Law Signed

On January 10, 2019, Massachusetts Governor Charlie Baker approved new legislation regarding data breach notification that will significantly impact businesses that own or license personal information about Massachusetts residents. The new data breach notification law introduces new requirements and mandates for notifications in the event of a data breach. According to the new Massachusetts law, titled Chapter 93H of Massachusetts General Law Part I, Title XV:

“(A) breach of security is the unauthorized acquisition or unauthorized use of unencrypted data or, encrypted electronic data and the confidential process or key that is capable of compromising the security, confidentiality, or integrity of personal information, maintained by a person or agency that creates a substantial risk of identity theft or fraud against a resident of the Commonwealth.”

Among one of the most important facets of the law is the requirement that breach notifications state whether the individual or company maintains a Written Information Security Program or “WISP”. The law states, in part:

“Every person that owns or licenses personal information about a resident of the Commonwealth shall develop, implement, and maintain a comprehensive information security program that is written in one or more readily accessible parts and contains administrative, technical, and physical safeguards…”

The Impact on Businesses

This means that your company, whether it be one-person, an SMB, or an enterprise, must have a WISP to comply with the law. If your company suffers a security breach and does not have a WISP, the penalties could be severe.

One of the benefits of having a WISP is that it promotes better security awareness among employees. When employees have been trained to comply with WISP, there will be another line of defense against the all-too-common and increasingly expensive scenario of data breach attacks.

Resources to Help You Comply with the Law

Check out the links below to help you develop and implement a WISP policy for your organization and be in compliance with the new law:

(Warwick, Rhode Island) – March 20, 2019 — DiSanto, Priest & Co., a premier accounting firm serving a wide range of businesses, business owners, and high net worth clients today announced it was ranked No. 4 on Accounting Today’s Fastest Growing Firms in the U.S. 2019, a ranking of the 20 fastest growing national accounting firms. DiSanto, Priest & Co. grew 32.74% in 2018 to an estimated $15 million in revenue.

“Being named a fastest growing firm is a true honor for our entire DiSanto, Priest & Co. team,” noted Emilio Colapietro, Managing Partner. “We believe that our commitment as an independently operated professional services firm to the Southern New England marketplace, coupled with our focus on privately held businesses, our industry specialization, as well as our continued investment in our people and technology, have allowed us to be successful as is evidenced by this recent ranking. We remain dedicated to delivering superior client service with a personal touch and are most thankful for our clients’ continued loyalty and confidence in our firm and team.”

DiSanto, Priest & Co. has consistently been ranked as one of the top New England-based accounting firms according to Accounting Today. Additionally, DiSanto, Priest & Co. has been recognized as one of the Best Places to Work by Providence Business News for seven years in a row as well as receiving The American Institute of CPAs’ 2014 Public Service Award for Firms in recognition of its charitable work in communities throughout Rhode Island and Massachusetts.

About:

DiSanto, Priest & Co. serves as a business advisor for today’s leading privately-held companies, with teams dedicated to serving the manufacturing, distribution, retail, real estate, construction, professional services, technology, commercial fishing, and precious metals refining industries. As a firm purposely built to serve privately-held businesses, it provides the full array of tax planning, tax compliance, assurance, accounting support, and wealth advisory services to the owner-operators of those closely-held entities. Learn more at www.disantopriest.com.

The implementation of the Tax Cuts and Jobs Act in late 2017 has significantly impacted the way companies depreciate their assets. If you own real estate or a business, or if you operate in the real estate or construction industries specifically, you need to learn more about the recent, potentially major changes to the depreciation and expensing rules for business assets.

Section 179

Section 179 of the IRS tax code allows businesses to deduct the purchase price of qualifying equipment and/or software purchased or financed during the tax year. For tax years beginning after December 31, 2017, the allowable IRC Section 179 deduction has almost doubled from $510,000 to $1 million. The maximum asset spending phaseout has also increased from $2.03 million to $2.5 million.

Under the former tax law, qualified improvement property was not eligible for Section 179. However, under the TCJA all leasehold improvements, provided they are made to the interior portion of nonresidential rental property after the building has been placed in service, will be eligible for immediate Section 179 expensing. Any improvements to a building’s interior qualify if they are not attributable to the enlargement of the building, any elevator or escalator, or the internal structural framework of the building. Before the TCJA passed, certain types of building improvements did not normally meet the definition of qualified improvement property because they are improvements made to a structural component of a building. However, under the TCJA the qualifying property for Section 179 expensing has been expanded to include the following improvements to non-residential real property: roofs, heating, ventilation, air conditioning, and fire/alarm protection systems.

Bonus Depreciation

Prior to the TCJA, bonus depreciation was limited to 50% of eligible new property. However, the TCJA reform extends and modifies bonus depreciation to allow businesses to immediately deduct 100% of eligible property placed in service after September 27, 2017 and before January 1, 2023. When 2023 hits, the amount of bonus depreciation will decrease by 20% per year until the end of 2026. Qualified improvement property, which now includes restaurant and retail improvements, as well as tenant and building improvements, has been added as eligible property. Eligible property has also been expanded to include used property, which is a significant and favorable change from previous bonus depreciation rules. Additionally, the TCJA eliminates the requirement that the original use of the qualified property must begin with the current taxpayer. This means that businesses can take bonus depreciation on assets that are acquired from a previous user, as long as the current taxpayer did not previously use the acquired property and the property was not acquired from a related party. The TCJA also added qualified film, television, and live theatrical productions as types of qualified property that are eligible for 100% bonus depreciation. In addition, there is no limit to asset spending in a given year and no limit on the deduction amount that can be taken.

Things to Remember

Businesses must keep in mind that not all states allow bonus depreciation, and therefore, the deduction may need to be added back to income on the respective state return(s). Also, businesses do not have the option to select specific items for the deduction. In a given year, taking bonus depreciation on one asset requires the company to take bonus depreciation on all assets that fall into that respective asset class.

Looking Ahead

The TCJA will help businesses with cash flow issues in particular, because it could potentially reduce their taxable income in the year of the deduction, therefore lowering their tax liability. However, even if your business is not experiencing cash flow issues the TCJA can still be a boon. The TCJA is the biggest tax overhaul since the Tax Reform Act of 1986 and these specific depreciation and expensing changes can have a profound effect on your business taxes. You do not want to miss an opportunity to expense 100% of certain assets and improvements, especially if you are in the real estate or construction industry.

To learn how you can achieve the greatest benefit for your business today, contact John J. Rainone, CPA/MBA, CCFIP at 401-921-200 or jrainone@disantopriest.com.

Have you noticed that we need passwords for just about everything these days? Passwords are required for everything from online banking, healthcare patient portals, work software applications, online credit card management, and shopping, to social media. With our personal and sensitive information residing in so many online locations, and an increasing number of hackers at work, strong password management is critical to protecting your online security. We’ve put together a list of some tips you can implement today to keep your login credentials as secure as possible.

Don’t write down your username and passwords

We’ve all done it ourselves or have seen others do it, such as keeping sticky notes with username and password information stuck to a monitor or kept under a keyboard. We’ve all been tempted at one point or another to manage our passwords this way, but it’s just a bad idea. It’s an insecure method for maintaining sensitive information; you don’t want anyone untrustworthy coming across this information and then using it. If you decide that you absolutely need to write your passwords down just to remember them all, we recommend you keep them locked in a secure location.

Use a password manager

Most people have numerous passwords for many accounts which can make it a challenge to keep them all straight and, quite frankly, remember them all. There are many secure password managers (such as 1Password, LastPass, and Dashlane) that can help you generate complex passwords as well as securely store all of them. Depending on the password manager selected, your encrypted password vault is kept either locally on your computer/device, or it is stored in the cloud. These password managers typically require you to remember one complex password to access the password manager. Your password manager is only as secure as the password you create for it, so you should select a long complex password or passphrase. There are many password managers available and they are becoming increasingly popular. We recommend you research the various types of password managers available and then discuss your options with an information technology professional to determine whether a password manager is right for you.

Be careful what you post on social media

Social media platforms are great for sharing personal information with friends, but they can also potentially expose your personal information to hackers. We love to post things about our favorite sports teams, our birthdays, our children’s birthdays, or share our pet’s name. It may seem harmless to share this information on social media, but hackers who are looking to crack passwords can look to these posts to help them figure out your passwords.

Use complex passwords or passphrases

Don’t use things that are widely known about you when selecting passwords. Also, avoid using common words and never incorporate your social security number into a password. The most secure passwords are comprised of special characters, upper case letters, lower case letters, and numbers.

Many people are starting to use a passphrase as their password. A passphrase can be something like, “My CPA is the best there is!!!” As you can see, a passphrase can be easy to remember, while also being more secure, as they incorporate spaces and are longer than the average password. As a rule, the longer (at least 12 characters) the password/passphrase and the more complex it is, the more secure it will be. Another positive of having a complex password/passphrase is that you won’t need to change the password as often.

Don’t use the same passwords or variations of the same password

Since it seems like we have passwords for everything, it can be tempting to use the same password for everything. This is not a best practice because once someone figures out your password, they can try to access your accounts on other websites that you frequent. If your passwords are the same, or very similar, it becomes all too easy for hackers to access your various accounts.

Change your passwords

The longer you keep your password the same, the higher the chances are that someone will be able to guess what it is. Also, if a hacker does discover your password, changing your password regularly prevents them from continuing to access your account. At a minimum, consider changing your passwords periodically for your more critical online accounts, such as online banking.

Don’t save passwords on your computer or electronic device when prompted

From time to time, while visiting a web page, you may be prompted to have the web browser save your login credentials for convenience reasons. While initially, it may seem like a great time-saving idea to have the computer or electronic device remember and autofill your login credentials, it is not a best practice. If a hacker accessed your computer or electronic device, they could very easily log in as you and access your personal/sensitive information. If login credentials are saved on your computer or electronic device, be sure to remove this information prior to disposing of, donating, or selling your computer or device.

Don’t let anyone watch you log into your accounts

Your login credentials should always be kept confidential. If people are around when you want to log into one of your accounts, wait until you are alone and in a secure environment before entering your login credentials.

Avoid using public computers

When accessing personal and sensitive information, use a device that you know and trust. When you utilize a public device, you have no way of knowing whether that device is truly secure. As an example, a public computer could have keylogger software installed on it which can monitor and record each keystroke typed on a keyboard and provide the information to a third party.

Use two-factor authentication when it is offered

With two-factor authentication, you need more than just a password to gain access to account information. It adds a second layer of security by combining something that you know (like a password) with something that you have (like a cell phone or ATM card) or something specific to only you (like a fingerprint or voice print). An example of two-factor authentication is an ATM. To access accounts at the ATM, you need your bank card as well as your PIN. Some banks are even using voice biometric technologies to verify user identity for added security. Due to the added layer of security that two-factor authentication provides, it is being offered more frequently and we recommend taking advantage of it whenever possible.

Identity theft and data breaches have become increasingly common in our data-driven world. Our personal and sensitive information is very valuable and a natural target for theft. By utilizing the above best practices, you will be well on your way to protecting yourself and preventing a hacker from targeting you.

If you have any questions or would like to discuss any of these security recommendations in more detail, please feel free to reach out to us.

The Maker Movement Takes Hold

One hundred and fifty-two small, medium, and large manufacturers ranked their most pressing concerns in the areas of growth, talent, product development, and operations in a 2017 poll taken by Polaris MEP, a non-profit organization that guides RI manufacturers towards sustainable growth. The poll questions that received the most buzz contained phrases like “breaking into new markets”, “understanding new market applications”, and “meeting entrepreneurs with an idea that needs to be manufactured”. Clearly, RI manufacturers are approaching growth with an entrepreneurial perspective and are acutely aware of the risks of becoming stagnant and uncompetitive.

These topics are strongly related to the Maker Movement, which became popularized due to its focus on innovation, artistry, and collaboration. Originally spurred in the early 2000s by a “hacker” social culture and the advent of universal, affordable accessibility to technology, the Maker Movement has propelled DIY entrepreneurs to produce specialized quality goods in communal workspaces for niche consumer markets.

On the surface, this movement’s low overhead model represents a more efficient and diametrically opposed alternative to the centralized, heavily capitalized, mass-production manufacturer. However, as the Maker Movement has gained ground and attention, mutually beneficial relationships have been forged between traditional manufacturers and entrepreneurial start-ups.

On one end of the spectrum, Makers gaining market share find themselves limited in production capacity: ideal production outputs are too high for the small-batch nature of their original makerspaces, yet too low to consider mass-production in China or Mexico. Traditional manufacturers have high output capacity but are paying an opportunity cost in R&D with a slow and deliberate process.

Makers and Manufacturers Collaborate

Through collaboration, small and medium-sized manufacturing firms can revitalize their presence in the marketplace with fresh ideas, while offering Makers production capacity and fabrication. In an article published by Business Horizons Volume 60, Issue 6, “Social manufacturing: When the maker movement meets interfirm production networks”, authors Hamalainen and Karjalainen, describe their findings from researching firm-individual collaboration in manufacturing industries, citing innovation and insight to new maker markets as key advantages for manufacturers: “Our findings suggest that firms working with individuals can potentially reap multiple benefits, including fresh ideas, broader design support, and quick delivery times.”

Skeptical members of the private business sector might be persuaded by some big manufacturers that have taken a keen interest in the value of what today’s Makers have to offer. In 2014, GE invested in bridging the gap between the Maker Movement and the mass market by opening FirstBuild, a micro-factory for household appliances where innovators team up with the global conglomerate to create prototypes. Another example is Chevron, who supports STEM education by offering free access to its CAD software to makerspaces and local educators. Communities across the country have fostered the growth of the Maker Movement by offering space and educational opportunities to encourage creativity.

Hope & Main in Warren, RI, offers food makers: “…a low-risk opportunity to test, scale and develop without the cost and liability in equipping, managing and maintaining your own commercial facility”. In addition to kitchen space and educational support, Hope & Main have teamed up with The Food Resource Business Exchange, a one-stop-shop experience where members can partner with industry professionals to access the resources and services they need to grow their businesses.

Leaders addressing the challenge of rebuilding US manufacturing would be wise to learn from these examples. In a Brookings Institution article, Five Ways the Maker Movement Can Help Catalyze a Manufacturing Renaissance, Muro and Hirshberg write, “…[for] the nation’s manufacturing and technology industries, making is stimulating a new, more creative approach that is reinventing the sector and making it more competitive. Ultimately, the movement is one modest way to renew the economy with broad engagement and experimentation at a time of uncertainty and division.”

Sullivan v. Sleepy’s – Changes for Commissioned Employees