1. Are there any issues with the Guild, a 501c3 non-profit organization, purchasing a for-profit business and maintaining the Guild’s non-profit status?
Mack Magee (MM): Answer: No. A not-for-profit may own a for-profit subsidiary. The subsidiary must file the appropriate tax forms to pay taxes on its earnings. The actual profits generated by the subsidiary can be donated back to the parent company by a vote of its board of directors. Alternatively, Heartwood may join the Guild and operate as one of the not-for-profit activities given its educational mission. Currently, conferences and community building workshops generate contributions to the Guild’s general fund which are used to help run the Guild.
Will Beemer (WB): A 501c3 non-profit can have a for-profit subsidiary (like a museum can have a café) but the likely plan is to fold the Heartwood curriculum into the Guild educational umbrella and close the current S-corporation.
2. Does the Guild have the resources to purchase a profitable S corporation at the fair market value – or is Will being generous?
MM: Answer: Yes, the Guild does. That said, to assure there is sufficient cash flow, the Guild will be purchasing Heartwood over time.
WB: The current purchase price being discussed is under $100,000, but still negotiable. With a capital campaign and other resources, the committee exploring this, and the Guild Board, feels it is financially feasible.
3. Will there be courses other than timber framing offered? How will we be able to maintain the focus on timber framing?
MM: Answer: Yes. In the board’s current plan and budget, the board expects to access all of Heartwood’s catalogue of classes and to offer those in the future at an appropriate time. The board also believes that it may be in the Guild’s/Heartwood’s interest to offer classes in other crafts related to or used by timber framing companies such as stone masonry and metal working.
The Guild’s primary mission is timber framing education and education in related crafts and building topics. The Guild’s conferences offer many seminars in timber framing related fields without any loss of focus. Heartwood’s main educational mission will continue to be timber framing and the bulk of the offerings will be timber framing classes.
WB:There are opportunities to offer other courses besides timber framing that have traditionally been part of the Heartwood schedule. This would be desirable to maximize the use of the facility and overhead costs, and would add to the profitability of the program. There would be no reduction in timber framing related offerings, and would probably be an increase in such courses on a professional level.
4. If the purchase doesn’t include the property, would this actually result in a permanent Guild home, a place where the Guild ‘magic’ could happen?
MM: permanent Guild home, a place where the Guild ‘magic’ could happen?
Answer: Yes. The “magic” to which you refer happens at every community building workshop we conduct. Heartwood in its current location will be place that will feel like home until the decision is made to relocate. The “magic” will follow the Guild and Heartwood.
Would the Guild have the option or obligation to buy the real estate property from the Will & Michele at some point?
MM:Answer: Yes. The sale, the price and the form of the sale has yet to be defined. The board believes it makes sense to get your input before finalizing the details of sale, but the current plan is to lease the physical facility with an option to buy it at a price set at the time of the lease.
WB:"Permanent" in the sense of the Heartwood business name becoming associated with the Guild, but not necessarily the current facility. The Board and committee feels the programs and associated staff should become established and successful before exploring the build-out and purchase of real estate. The Guild would have a short-term (2 year perhaps) lease of the current property with an option of first refusal to purchase.
5. Would the TFG office/home shift back to the East?
MM: Answer: No. The board (and we believe our members) are happy with the Western office in Bellingham and with the quality of the services generated from that office. Our office staff will be supporting Heartwood administratively in a number of ways.
The Guild is currently incorporated in AZ – to save on corporate audit fees - with an office in WA. Would these additional costs be incurred with a shift back to the East?
MM: Answer: Yes. If Guild operations are run from MA (in other words, the Guild is a foreign corporation in MA), then the Guild will be required to meet MA state laws regarding audits for not-for-profit organizations. This is one of the issues to be considered in making the decision whether Heartwood will be a subsidiary or become one of the Guild’s activities like conferences and workshops.
WB:No foreseeable need for the Guild office to move from Bellingham and incorporation can stay in AZ, although I'm not an expert on these legal and tax matters.
6. Will the focus continue to be educating all types of craftspeople or will there be a focus on professional timber framers working in shops?
MM: Answer: Yes. At this point, the board believes that educating craftspeople (or those interested in crafts) and educating professionals in timber framing is the core of its mission. The board has no intent to offer education is CNC machining and other high technologies. Clearly, the Guild does not have the financial wherewithal to build or purchase the facilities and equipment which would be needed. Additionally, none of our members have asked for or recommended that the Guild pursue such a mission.
Will the Guild having a hands on educational base help support the apprenticeship program curriculum?
MM: Answer: Yes. Heartwood has conducted a month-long training class in timber framing. In some ways, this functions as a pre-apprentice training class. Working with the ATC to develop and provide the education modules for Guild apprentices. journeyworkers and professional timber framers is one of the obvious natural synergies of this acquisition. Having a facility available to the ATP during much of the year will undoubtedly increase the ease and flexibility of planning the training sessions, consistency of the materials, tools and trainers.
WB: The intent is to have all levels of courses offered, with particular focus on entry-level training for those who want to work in the timber framing trade. This is what Heartwood has focused on in the past, but now we will be able to fine-tune a significant part of the curriculum to meet the Guild's apprenticeship guidelines and the timber framing companies' desires in new hires.
7. Will there be a need for additional management?
MM: Answer: Yes. Will and Michele have successfully run Heartwood for many years. As reported by them, neither worked full time for the business of Heartwood. The board believes that the Guild can produce and conduct even increased training with no more than the two part-time people. The Guild office will handle most of Michele’s traditional activities and the office may need additional temporary help or part-time help to cover all of the responsibilities. This is yet to be determined. Regarding the work Will does, the board believes that this is a part-time role, just as it is for Will. Of course, someone must be hired or contracted to do this work.
Would management help teach the classes as Will has done?
MM: Answer: Yes, though this depends upon the skills of the person hired to act as the director of Heartwood. The board does not think it is a necessary condition for Heartwood success, however.
WB: The Bellingham office would manage the registration, finances and clerical duties. A Director would be sought to take over the development and implementation of the courses and projects at the current Heartwood facility, and may help teach. This could be a part-time position to start, and perhaps eventually full-time if involved with other Guild projects, and would probably require residence at Heartwood during the April-October season. . Will Beemer would stay on as instructor and advisor to the new Director for the foreseeable future. Existing Heartwood instructors, past and present, would continue to teach.
8. Will there be any additional costs or liabilities to the Guild with the acquisition of Heartwood?
MM: Answer: Yes. As the board expects that it will be purchasing Heartwood over a period of time, there will be a capital cost for the purchase each year for an as yet determined number of years. The board has a committee focused on the planning and budgeting for Heartwood, on which Will sits by the way, and it has determined that Heartwood can generate enough income to cover its operation and the capital cost. All costs for running Heartwood will be new, of course, but they will be budgeted and paid for out of the revenue of Heartwood. Regarding liabilities, Heartwood also has liabilities that the Guild does not currently have and some that the Guild does. These liabilities will be managed through insurance and perhaps through organizational structure.
WB: Yes, there will be some additional costs and liabilities as with any expansion of programs. Some related insurance, legal and accounting costs may be expected, but some can be underwritten into exisiting Guild policies. This would be an asset sale, not a stock sale, so no Heartwood liabilities would be transferred.
9. Is the Guild confident this will be a revenue positive effort?
MM: Answer: Yes. If the board determines that it will not be revenue neutral, the board will not move forward with the acquisition.
What research has been done to confirm that this will not be a financial drain on the Guild?
MM: Answer: The committee developing the plan for the acquisition and for its budget going forward has looked very carefully at the classes schedules and revenue, the operational costs, and the potential for growth. Additionally, the committee has reviewed other like institutions, their catalogues, and their fee schedules.
WB: Under the direction of Steve Lawrence we have done an thorough analysis of past Heartwood and future (projected) revenues out to 2024, and are confident that this will be a revenue positive in all years.
10. How will this affect the relationships that the Guild has established with other schools such as Rocky Mt Workshops, Econest, Fox Maple, North House, etc?
MM: Answer: The board expects that the acquisition of Heartwood is only additive to its educational efforts. Support and cooperation with other businesses and entities will continue regardless of the Heartwood operation. Heartwood has operated successfully for years while not threatening the success of these other organizations; it will continue to do so.
WB: The Guild is in the education business and this endeavour is an expansion of its mission. We believe that the Guild assuming the Heartwood name and assets is better than another for-profit entity coming into the mix as competition to others currently offering workshops.
11. Will the Guild be paying rent to the Beemers?
MM: Answer: Yes. The board expects to lease the property from either the Beemers or their LLC or whatever entity established by them for this purpose.
WB: Yes; the rent is based on the number of days classes are held
plus the cost of facility overhead and maintenance, including insurance, taxes and utilities.
12. Is the Guild considering the purchase of the assets or will there be a stock purchase for the Heartwood business?
MM: Answer: Board expects to purchase the assets over time.
The Weekly Guild Notes letter moves from a conversation about Heartwood School to a conversation about building an Eastern Guild facility. Why not start with the facility?
MM: Answer: No financing is available to the Guild to do this. The board believes that through successful operation of Heartwood not only will it build the internal confidence to seek funding for a real estate purchase, it will generate the income which will provide financial institutions confidence in the Guild’s ability to make payments for such a facility, and successful operation of Heartwood will allow the Guild to seek grants, even capital grants, which will help the Guild to raise the funding.
WB: Asset sale, not a stock sale. The feeling of the committee and Board is that the purchase of property and building of a facility is too much of a risk and investment at the present time, and its better to establish the program and its supporting staff first.