TracTax from The ProfitPoint Group - TracTax in the Providence Journal

February 4, 1999
By RUSSELL GARLAND
Journal Staff Writer

Tom Busch's first hurdle in selling his company's TracTax software is informing businesses that a tax credit for training their workers exists.

CUMBERLAND -- More than a year ago, Tom Busch developed something he thought would launch his small software company in a new direction.

It was a computer program to help employers get a state tax break.

With thousands of companies eligible for the new jobs training tax credit, Busch figured he had a winner.

There was only one problem. Most employers didn't know about the credit.

Before he could even pitch his software, he had to sell the tax break. Busch thought that was the state's job.

"We don't have the bottomless pockets to do the marketing for the state,'' he said.

Lots of small-business owners find that the market for a product was not what they expected. But for Busch, the experience has been particularly frustrating. If more companies used the credit, not only could he sell more programs, but more workers would be trained. Everyone would benefit.

Busch, who is 43, started his own company in 1985. He had spent more than five years with a Massachusetts software vendor, the former McCormack & Dodge, which made its name selling a packaged accounting software system.

While Busch was at McCormack & Dodge, the company grew from a few hundred employees to several thousand. "I was there in the heady days when it was a lot of fun,'' Busch said. "There was a lot of growth. Everybody worked tremendous hours.''

He was often on the road, running training courses, installing software and troubleshooting.

But the company got too big for his taste. "As they grew, it became more regimented, it wasn't so free-form,'' he said.

Busch was tired of the travel and wanted to give customers long-term technical support. His employer's philosophy at the time was to support them for a few days to a week.

He set up his own business to assist companies using products sold by his former employer, which was bought by Dun & Bradstreet around the time he left. Busch said his Phase II Consulting "piggybacked on them much as they piggybacked on IBM.''

At first, he worked with a salesman who had a separate business selling contracts for long-term support of Dun & Bradstreet software. "Then I said, gee, why do I need him. I can do that.''

Busch started by working out of his house in Natick, Mass. He moved to Rhode Island in 1987 to be closer to New York and New Jersey, where most of his customers were. "Plus, I sail,'' he said. He wanted to be closer to the water.

He began providing technical support for personal computer software as well as the Dun & Bradstreet product that runs on mainframe computers. Working with another consultant, he developed his first software product, which made the Dun & Bradstreet software more flexible. Customers included Pitney Bowes, Gallo Wineries and the Rockport Co.

Another software product Busch developed, called COACH (Chart of Accounts Conversion Helper), helps companies that are merging consolidate accounting systems. He said the software is being used by CareGroup, a Boston-based hospital network.

Two years ago, Busch changed his company's name to Phase II Technologies, and then to The ProfitPoint Group to indicate that it does more than consulting. The company has two full-time employees, including Busch, and two part-time. Annual sales are about $325,000.

One of Busch's long-term plans is to sell tax software to companies in Rhode Island and other states. The jobs training tax credit software, TracTax, is his first effort. "We've really looked for niches and developed software to fill a niche,'' he said.

After the tax credit was enacted in 1996, the Northern Rhode Island Private Industry Council approached Phase II about the need for software to help employers comply with its requirements. The council considered hiring Busch as a consultant to develop the program, then decided it didn't want to be in the software business, said Donald S. Smail Jr., president and chief executive. Busch decided to develop the software on his own.

The purpose of the tax credit is to improve the skills of Rhode Island workers. Companies can qualify for a $5,000-per-employee credit for training costs incurred over three years. But the credit requires lots of documentation. TracTax is designed to simplify this.

One of Busch's customers, William H. Harris, a Warwick fur company, uses the credit to recoup some of the costs of training young people to repair and reconstruct fur coats, a dying art. Controller Bob Habershaw said he has plenty to do besides the paperwork necessary to qualify for the jobs training tax credit.

"If you don't do it right, it gets bounced back to you and you don't get the credit,'' he said. Phase II is very good at helping his company avoid these problems, Habershaw said.

Busch, who has used the tax credit for his own company, said the tax break has vast potential for other businesses. "There's a gold mine of training that's already happening if they would only turn it into a tax credit,'' he said. "My opinion is the state's not doing a very good job marketing it.''

Before a company can qualify for the tax credit, it must apply to the state Human Resource Investment Council. Last year, the council received 98 applications from 51 employers. Of those, 95 applications were approved to train a potential 9,070 employees. Total cost of the training was $13 million, almost twice the $6.7 million in the previous year.

Tracking the actual number of tax credits received is difficult because the credit can be applied against several taxes, not just the corporate income tax. Often, shareholders are the beneficiaries and the credits are taken on personal income tax returns, according to the state Division of Taxation.

In 1997, the most recent year for which the tax division has reasonably complete returns, 27 personal income tax filers claimed jobs training tax credits totaling $66,123. The division has not computed the total amount of credits claimed on corporate returns.

The numbers support Busch's point that there is a vast untapped potential. Rhode Island has about 30,000 employers.

Dennis L. Bouchard, the human resource council's director of programming, said the tax credit generated more applications than expected in the last two years. He said his organization is working to get the word out to more companies.

Meanwhile, Busch is doing what he calls "guerrilla marketing'' by promoting the tax break and his software through speaking engagements and newspaper articles.

If he could start selling more jobs training tax credit software, Busch said, he would not have to depend so much on work involving mainframe computers, which he said is "a dying business.''

"It would be a springboard for other development,'' Busch said. "I think it would just spiral in and of itself, and grow into a more comprehensive system that would help business in a lot of different ways.''

HELP
Rhode Island's jobs training tax credit offers employers a $5,000-per-employee credit for all kinds of training. The credit must be taken over two years, but the $5,000 limit covers a three-year period. Only $1,000 of the $5,000 can be based on an employee's wages and benefits, the rest must be for other training costs. The credit is limited to half of the qualifying expenses. To qualify for the credit an employer must apply to the state Human Resource Investment Council. The council's telephone number is 222-6700.

Reprinted with permission of the Providence Journal.

		Providence Journal: Business