Business or pleasure?

I've been lucky enough to work with lots of small businesses over the last few years. Most are ticking along, having their ups and downs but providing a reasonable 'lifestyle' income to their owners. A few have sadly failed or their owners have moved on to other things and some have thrived or built up substantial cash reserves. So what sets the high flyers apart? Why have they outperformed their peers?

Well there are obviously a number of factors here - business acumen, resilience, their chosen sector etc. I would like to focus on one thing that I have observed from businesses I have had direct experience of working with. Without exception, the businesses that thrive and grow live within their means. They are prudent in the good times as well as the bad times and the owners only draw out a modest income which the business can afford. At the other end of the scale I have seen successful, profitable businesses where the owners have drawn out more than the business could afford to support their lifestyles. Again, these have invariably ended in tears.

So how can this be managed? In our consumer society the demands for income are great - big mortgages, unexpected domestic bills, rising inflation, expensive children. I'll come back to the children later! Having your own business there is a temptation to call on the business for cash when there is a domestic need. In my view, that is not a sensible approach. It is better to have a set budget for personal drawings from the business (wages, dividends etc) and only exceed this when the business performance justifies it. Treating yourself to a bonus every now and then for good results is an incentive to knuckle down and focus.  Taking cash whenever you like is a recipe for failure.

A good advisor can help business owners to stay on track and live within their means. I have to admit, we don't always succeed but it won't be for lack of trying!

Back to the children. An empirical study of millionaires in America which included small business owners,  looked at the factors which contributed to their wealth. Obviously the starting point is having a reasonable and regular income but two interesting characteristics which emerged were having a relatively modest lifestyle (ie not 'keeping up with the Jones') and giving their children the confidence and skills to be financially independent from an early age. So once their children finished their education, they made their own way financially rather than calling on 'bank of mum and dad'.

http://www.base52.co.uk/

Time for YouTube

Company video time. We are on Facebook, we are linking in and we are occasional tweeters and bloggers. So time now to embrace YouTube and add some content about our accountancy practice. But what to do?

Firstly some research. YouTube is the second most used search engine after Google so it is a great way of increasing exposure for a business. Not much on there from accountancy firms though. Most from the US as you would expect. Some having quite a formal, corporate feel. Some using wobbly cameras and Powerpoint slides. One memorable one showing a firm of auditors doing a really bad (and quite lengthy) rap. Then to the UK. Not much video content even on the web sites of the largest UK firms. One or two smaller firms with quite awkward looking accountancy types talking about their firms in little sound bites. All felt a bit scripted and formal.

So my producer and director is my son James who is involved in video production at his University television channel. He is quite clear about the brief. 'It needs to be snappy and punchy as people will switch off after about 90 seconds'. 'It needs to say a bit about who you are, what you do and how you help your clients. The personality of you and your firm needs to come across. That's it.' It was all very painless. The results have been uploaded to YouTube and we will add to our website shortly. Initial feedback has been positive and I am hopeful this will be a new way of engaging with prospective customers.

www.Base52.co.uk

The man with the bag's Budget for business?

I have to own up to something. I didn't write the budget summary on our website and I was not glued to the telly listening to every word of George Osborne's  budget speech last week. ('The man with the bag',  as my mum calls him). This may upset some of my clients and I admit to having some guilt about this.


The day before the budget if I bump into a client they often say something like, 'Busy week for you Fred?'. I'm thinking, 'Why's that, do they know something I don't?'. 'What, with the budget announcement, you must be up all night analysing everything and preparing your newsletter?' Well, we did send out a newsletter but it was written by a tax specialist on our behalf and I read the synopsis on the BBC website in the evening. Very sorry, but I think its good to come clean about this.


I am of course interested in the contents because it does affect our clients and the advice we give them.


I'm going to pick out a couple of things that affect small firms. First there is a tax 'simplification' measure which means that from April 2013, small firms (less than £77k annual sales) can produce their accounts (and tax returns) on a cash basis rather than on an accrual basis. This could be beneficial for firms where customers take a while to pay up - they will only have to account for tax on cash received rather than invoices raised. First impression is that it could add a bit of complexity as accounting standards will be out of line with the cash accounting method. Also difficulties of changing from one system to another as firms move through the turnover threshold. Lets see how it goes...


Second thing is...wait for it....another new loan scheme for small firms announced by the Government! Hooray...the FSB has given the scheme a warm welcome. Lets see if the banks play ball.


Now I'm off to read the small print...


www.Base52.co.uk

Animal magic for the office

My daughter knows I like business books and bought me one from the 'One Minute Manager' series last Christmas.

'One Minute Manager Meets the Monkey' shows business managers how they can stop picking up 'monkeys' from their staff. The premise behind the book is that when you take over the monkey (which might be a problem, task or project) its then up to you to look after it. It jumps from your staff member's back to yours. You might even find then that your roles reverse and your staff member will then look to you to give them updates on how you are getting on with the monkey. Before long you have a pile of monkeys in your in tray and you are the 'block' to your team making progress. Giving your team more responsibility and encouraging them to look after their own monkeys can help them to develop and free up your time to do your own work.

I enjoyed this book so much that I bought another one in the same series - 'Gung Ho'. Gung ho is a chinese phrase meaning, 'Working together'. It was also adopted by some US army units during the second world war. So where do the squirrels, beavers and geese come in? Well, each of these animals show different traits which when applied in the workplace can help to develop high performing teams. Are you still with me? Lets start with the squirrels. They work hard, rushing around all day gathering and burying nuts and seeds. Why do they bother? Well, this is the key. It's in their interests to do so - it's worthwhile work. Thats the starting point for an effective team. They need to feel their work is worthwhile and understand what difference it makes within the overall work of the firm. Goals should be set by the team rather than being imposed and values should should inform how the work is delivered and how the team work together. On to the beavers. Beavers work in a coordinated way with no apparent leader. They all respect each others' contribution and work towards the common goal. The goal is challenging but achievable. Finally the geese. The geese honk and cheer each other as they work towards their goal. A culture of praise and recognition helps motivate team members to try their best.

So that's it. Get the monkeys off your back, show the industry of squirrels, the teamwork of beavers and support each other like geese and the world's your oyster. Did I mention the oysters?

http://www.base52.co.uk/

Getting off the treadmill...

We've all heard the saying that business owners should work 'on their business, rather than in their business'. Yeah right, that's fine I'll just go in and do a few strategy days this week, ignore all my e-mails and calls, ignore the urgent client work in my in-tray, leave the staff to fend for themselves and I'll do strategy. Sorted. Well, maybe not. The idea is great, but the practice when bogged down in the reality of day to day business issues, is more challenging.

The answer I think (and hope, because that's what I'm doing) is to have a plan. My plan, to implement over a period of a few years is to make the business work perfectly well without me. My first step has been to appoint a practice manager. A few months in, I wonder how we ever managed without one. All the work I used to do relating to our financial administration, client engagement, contract renewals etc etc is now covered by our Practice Manager. So that means I've now got all this free time when I finish early or do strategic stuff? Well no, actually I've been busier than ever . It has been our silly season though so I guess without this change I would have either sunk under the pressure of work or some things would just not have got done.  So what's next? Well, phase 2  of making the business work without me is to gradually pass on most of the technical work I still find myself doing. That will take time, better systems will need to be set up, staff will need to be trained but with a plan and the right team in place it can certainly happen.

So when that's done I should be left with more time for business development and looking at ways to provide a better service to clients. I may even be able reduce my hours and work a normal 40 hour week rather than 60 or 70 hours. So I'm on the way, I have a plan and I'm going for it. Strategy days and smaller in trays here I come...

www.Base52.co.uk

Networking working...

I'm in a 'hard' networking group where the main objective is to build trust with your fellow members so they can pass you referrals which leads to new business. That's great  - it works and the benefits are clear and measurable. I have also gained other benefits from being in the same group which are less tangible but have helped enormously with my business development. I have a network of like-minded business owners who I can ask informally (or formally if they act as our suppliers) for advice and support, I have to think about how to market myself and my business and I meet a steady stream of visitors who are potential customers. But with networking it can sometimes be the unexpected which delivers the biggest benefits.




One of my best networking 'surprises' came from someone I met at a corporate event I went to several years ago which was hosted by a bank. I met a chap there who worked in a specialist area of accountancy and business support. We didn't talk about work on the day but exchanged cards and stayed in touch afterwards. Every few months or so we would meet up for a coffee or a meal and chat about our businesses. Paul always made it clear I could call him any time for informal advice about his specific area of expertise. Initially,that's just what it was - informal advice. There was no hard sell, just advice, given freely with no apparent expectation on his part of anything in return. A real 'giver's gain' ethos which I really appreciated. Gradually, we started to work together on a more formal basis and Paul's firm helped out some of my clients and contacts. More recently he introduced me to one of his colleagues who is a principal at one of their London offices. We are following a similar path of occasional meetings and informal exchanges. Step by step we are starting to work together on joint assignments. For me and my firm the potential benefits are immense. Our small practice now has a growing link with a top 20 UK accounting practice. That helps us punch well above our weight and came from a chance meeting at a corporate race day. Now that's networking working...


www.Base52.co.uk

Decisions, decisions...

A recent study has found the secret of true happiness. Apparently its all about following your gut instinct, making your mind up and being satisfied with the choice you have made. People who make decisions on this basis are called 'satisficers'. At the other end of the spectrum are 'maximisers'. They agonise over decisions and are terrified of making the wrong choice. Even when they have chosen a course of action they then stress about whether they have made the right decision and waste time and energy thinking about what might have been.

So that's easy then. Follow your gut and stay happy. Yes well, but I guess that depends to an extent on how effective your 'gut' is. If your instinct is right most of the time things should work out well in the longer run. But what if it's not? It could be a downward spiral from one lousy decision to another.

My first thoughts are often a bit 'off the wall' and its only when mulled over and bounced off a few wiser counsellors that the eventual more sensible options take shape. I find that the older I get the more I dislike making poor decisions. Maybe that makes me a 'maximiser' but I don't feel unhappy or lack commitment (which is another trait of maximisers). Gut feel is also not terribly collaborative. What if your gut suggests a different path from your colleagues or workmates? Unless your persuasive skills are very strong you may end up unpopular, lonely, or both. Collaborative decision making is partly about reaching consensus but also about trying to achieve the right decision - maximising one might say? So each to their own I think. The initial 'gut feel' can often be right but there is no harm in my book with a bit of mulling, consulting and dithering before the final decision is made.

www.Base52.co.uk