Manufacturers and distributors appear to be focused on growing in existing domestic markets. Nearly 41 percent of respondents said organic growth in an existing domestic market presents their greatest opportunity for growth in the next 12 to 18 months. The focus on domestic growth may be related to challenges finding talent or partners overseas who can help grow the business. “It’s often difficult to find someone overseas, where you don’t have relationships and contacts, to help you grow in that market,” says Jerry Murphy, partner-in-charge, Sikich Manufacturing and Distribution Services.
This doesn’t mean manufacturers should ignore foreign markets. Global expansion can help organizations hedge against maturing domestic markets and pressure from increasing competition.
R&D Tax Credits
Another resource that can help manufacturers increase competitiveness is the use of tax incentives or deductions. Manufacturers qualify for R&D tax credits if they’re developing a new product or improving an existing product. R&D tax credits typically equal 5 percent to 7 percent of manufacturers’ R&D expenses. That means a manufacturer spending $1 million on R&D could save approximately $50,000 by applying for the tax credit. This does not include R&D tax credits offered by more than two-thirds of the states.
M&D and Tax Reform
Many companies lack knowledge of tax reform. For example, 83 percent of small business owners say they don’t have a complete understanding of the impact tax reform will have on their businesses, according to a survey by the National Association for the Self-Employed. Organizations should meet with their tax advisors prior to year-end to understand their options and potential savings.
To learn more about the use of the R&D credit and tax reform for M&D, download our 2018 M&D Report.
