Saturday, 15 December 2018

Sell and deliver

We start off as technicians.

But pretty soon most business owners need to become good at selling. Being good at making your product or delivering your service isn't enough. You need to attract new customers and sell to them.

It's sometimes difficult to separate the selling from the doing. Whilst closing the deal a business owner might also be worrying about how they are going to deliver it. That's not a good thing if your anxiety is visible to the potential customer. They want total confidence that you have the capability to deliver. They are not too bothered about the 'How?'

There is a quote from Richard Branson which always sticks with me, 'If somebody offers you an amazing opportunity but you are not sure you can do it, say yes – then learn how to do it later'.

That's fine and is good sense if you have resources at your disposal to deliver on your promises after making the sale. For a smaller business, that can be a challenge. The smarter business owners will have some back up. Some additional resources they can call on at peak times to get a job done. They can also get stuck in themselves.

But every now and then, despite their best efforts they may not quite have the capacity to take on a new sale and meet the customer's expectations. However painful, the best policy then may be to say, 'No'.

That's incredibly difficult. To turn away business and an opportunity that may not come around again quickly.

I've seen the consequences of overtrading several times - where businesses take on more than they can manage. It can be catastrophic and even terminal.

So I think Richard's adage of 'Go for it' is right but tread carefully and make sure you can deliver on your promises.

Monday, 3 December 2018

What's the point in a 'Break-even' point.

Accountants learn about the  'Break-even' point whilst studying for their professional exams. 

Many though will rarely, if ever use it during their working life.

I think it's a useful and under-utilised tool however, particularly for start ups and early-stage businesses but also to established businesses who struggle with achieving consistent profitability

So what is it?

Well, essentially it is the level of sales or sales units needed in a period to cover fixed overheads and break even.

It is traditionally used in a manufacturing environment where the number of units which need to be sold to reach break-even is a critical measure.

It can be applied however to any environment where the cost components of gross margin are relatively uniform and directly related to sales volumes.

Let's look at a restaurant business as an example:

  • The  main 'direct' costs are drink and food ingredients (wet and dry stock) and the labour needed to prepare the food, greet customers, serve the food and drink etc
  • Let's say the labour costs are 30% of sales value and stock is 20% of sales value. So the gross margin is 50%.
  • Fixed overheads rent & rates, insurance, premises costs, directors' and admin wages etc are £20,000 per month.
  • So in this example 'break-even' sales are £40,000 per month. They generate a gross margin at 50% giving £20,000 'quantum' margin which covers the overhead.

So what?

Well getting to break-even should be be the driving force for the business. Every fibre of management's focus and effort should be to getting there and then forging above it.

The main levers are price - is there scope to increase these and still deliver good value and maintain ( or only slightly reduce) volumes, and cost control - ensuring buying stock is effective and payroll and staffing schedules are well managed.

If £40,000 sales per month are needed management should be asking, how are we doing on a weekly basis, or every day? What do we need to change?

The break-even point can be a powerful motivator for change. Once reached, the sales above this threshold are all profit. In our example, every £1,000 sales above the break even puts £500 on the bottom line. That's the happy place where  all businesses should aim to be. The business then has surplus profit for investment or additional return to the shareholders.

So some of the things we accountants learned in school - like discounted cashflow, internal rates of return and correlation coefficients may not see the light of day that much after our studies.

Break-even analysis though is something that I believe should get regular use in every business accountant's tool box.

Saturday, 1 December 2018

What kind of small business is yours?

Every small business is different.

It's shaped by the founder or founders' values and the experiences and learning picked up on its journey. So putting small businesses into categories is not easy. It can be helpful though in gaining an understanding of the owner's motives and goals. For professionals like accountants, that helps us to give the right advice and support.

My consultancy colleague, Stewart Peart and I have recognised three main types of small business. All mainly shaped by the owners and what drives them.

The three types of business are Lifestyle, Owner-Managed and Entrepreneurial.

A Lifestyle business does what it says on the tin. It is built around the owner's lifestyle. There is no great ambition of being the biggest or best. It's primarily about working sensible hours fitting around family and leisure, the owner delivering the service and probably no other employees in the business. Examples might be a self employed plumber, hairdresser, accountant working from home etc. The typical business structure might be a sole trader. The owner effectively 'is' the business.

An Owner-Managed business is perhaps a bit bigger in scale. The owner will still be closely involved and 'hands on' with running the business but their role will involve managing as well as doing. Typically there will be employees and the business structure might be a limited company. Examples might be a small retail outlet, a small manufacturing unit or a high street accountancy practice with a single branch

An Entrepreneurial business is something else. This is where the founder or founders are obsessive about growth and scaling up. They are prepared to take significant risks to reach their goals and put the business above everything else. It is not for the faint-hearted or risk-averse. Typical Entrepreneurial businesses will be multi-outlet or nationwide in coverage or international. The structure might be a limited company but probably with a more complex share structure to accommodate investors. Raising capital may be critical to achieving scale in a short timescale

Where does your business fit within these categories?

We've put together a short series of videos which expand on these business types and how to make them work

I hope you find them useful

Watch 'business types' video

Saturday, 24 November 2018

Back on the tools again

The aim of every business owner is to make themselves redundant.

Or it should be.

Over time the lucky ones, or perhaps the more organised and determined ones manage to delegate much of their activity to a capable and loyal team. Their role becomes more of being a guardian of the business. Making sure it still runs smoothly, managing growth and fixing problems.

Problems. Yes, inevitably they crop up. Stuff happens. Again, the savvy entrepreneur is selective about problems they get involved in. The tendency may be to roll up their sleeves and get stuck in if something is not working well. That may not always be the best thing. Giving the team the knowledge and the scope to fix things is a better and more sustainable long term solution.

Occasionally though something comes along which can't be left alone. Maybe a big systems failure or key staff leaving and client service beginning to suffer. In these most extreme cases the only solution might be for the business owner to get stuck in. Effectively to 'get back on the tools' again. The tools might be a paintbrush and roller, an Excel spreadsheet, an HGV or hairdressers' scissors. Whatever you need to deliver your product or service to your customers

At first it feels odd. You are a little rusty. Things have moved on a bit and you need to get used to some new technology or a new way of working. Then it starts to flow. You've still got it. This is fun! This is what I used to do. It's why I started this business. It's what I'm good at.

This is the time that the sensible business owner will pause and think about the longer term. Staying on the tools may be comfortable, familiar and rewarding. But it will take your energy and focus away from where it should be - developing and sustaining the business. So it needs to be a short term thing.

The day you start back on the tools is the day you should start planning to get back off them. Otherwise you might get stuck. Your business will stay small or you will start to burn out - doing too much of everything

For a short time it can be fun while it lasts and reassuring to know that you still have what it takes. But don't let it trap you....

Monday, 19 November 2018

What's the point in business growth?

We seem to be slightly obsessive about growth in business. 

It's a measure of success. Sales growth, profit growth, share price growth, market share growth. It's all about growth.

Or is it? Well it depends on the business and more specifically the business owners. What is important to them?

Many 'lifestyle' businesses are happy to reach a certain scale and then stop growing when they reach the optimum size to support their lifestyle. They might tweak aspects of the business and replace lost customers but growth in itself is not an objective.

I've always liked the 'buzz' around growth. Many moons ago, in my role as a management accountant for for a large food retailer I was responsible for a while for reporting weekly sales. It was exciting and immediate to analyse and present the sales figures for the previous week. Management were passionate about looking for trends in regions, departments, 'like for like' sales,  new stores etc. It helped that this was a period of high growth and dominance for the company but the culture was very much about having aggressive growth targets and tracking and measuring against these.

Since moving onto my own business I've kept that excitement about growth. I've always set targets and worked hard to achieve these. There's something rewarding and motivating about beating last week's or last month's or last year's results.

It works for me anyway

Leaving the score-keeping aside, there are serious reasons why growth is a good thing.

Some which spring to mind are:

  • It keeps the business fresh and interesting for employees
  • It creates new opportunities for the team and allows them to develop
  • Employee retention is probably better (provided people don't feel overloaded or unsupported)
  • If well managed it can lead to more profits
  • More satisfying and rewarding for the owner. The potential to create a business of scale which may endure after they move on

So growth still motivates me and keeps me excited about being in business. It's not an end in itself but in my view it makes the journey much more interesting and satisfying

A test of whether you have a growth mindset is if you know your sales target for this month and how close you are to achieving it.

Do you?

If you don't know either your target or how close you are to achieving it, I would argue that there is a gap in your reporting systems.

It's a bit like the John Lennon quote, 'If you don't know where you're going, any road will take you there'.

Setting sales and profit targets and tracking against them is not a terribly radical or difficult thing to do.

In my view it is essential however if you are serious about growing your business over the longer term.

Monday, 12 November 2018

How busy is too busy?

We are all busy it seems. 

It's a bit like a badge of honour where we try to outdo each other with how hectic and out of control our lives are. 'It's been mental. I'm so busy. There's work, the kids, the elderly parents, we're having the kitchen done, Christmas is coming etc.' The busier we are, the greater the kudos.

Does it have to be this way? I'm reading, 'Tribe of mentors' by Timothy Ferriss. It's basically a book of life and business tips from a 100 or so successful people - 'Short life advice, from the best in the world', as the strapline goes. One of the contributors, designer Debbie Milan, comes out with a great quote, 'Busy is a decision'. She argues that broadly we do the things we want to do. If being busy is an excuse for not doing something, what we are really saying is it's not important enough.

I struggle a bit with how busy to be in my own small business. My ideal is that I'm the sales, client care and business development guy and everything else gets covered by the team. At times (not often) I have short windows of feeling on top of things and going into the office in the morning without a long to do list. It feels good while it lasts (which is usually not long) but it is always  accompanied by a slight feeling of guilt that I'm not busy enough.

I used to work with a business coach who was obsessive about helping his clients grow their businesses. One of his sayings was, 'Business owners don't realise how hard they need to work to be successful'. He felt it was human nature for an entrepreneur to take their foot off the gas and coast for a while when they reached a milestone and things became a little more comfortable. He believed it was his job to stop that happening and keep the owner's nose to the grindstone.

It's tax season so I'm in a busy phase now until February. No coasting or taking my foot off the pedal. That's fine and I have my browny points in the 'How busy are you?' chat with people I bump into in Sainsbury's.

But getting back to the phrase, 'Busy is a decision', I really need to sort this out. It's up to me what I do and how busy I choose to be. I will be putting my mind to soon as I get the time

Saturday, 27 October 2018

My 'big 3' for business success

What makes an enduring, successful business?

Well lots of things. There is no magic formula. For most small businesses, success and longevity is down to the drive and commitment of the business owner. More often than not, that's a single individual, the founder - or maybe a small group of 2 or 3. If they are lucky, they are supported by a capable and loyal team.

That's fine but what attributes must the owner have to achieve sustained success over several years? I've boiled it down to three, based on working with and observing successful business owners over the years.

The first attribute is focus. The business is the most important thing in their lives. Ok, family first, but its a close second. It's an obsession. They are never 'off'. If it's a choice of missing a nice relaxing weekend away or finding time to prepare that urgent proposal, the proposal wins. There might be tension with loved ones due to the owner's inability to switch off. Their reading list is business books so even when taking time out they are learning. On holiday they observe other businesses, see how they act, what they do, see what can be applied to their own business. They will always put the business first. That's their main focus. It beats everything else.

The next attribute is resilience. Often things don't go right. A key employee leaves, computers break down, a big client moves to a competitor, business partners fall out. The owner needs to fix it and move on. Sure they might get upset. They might rant and rave and moan and gnash their teeth. But eventually they need to take the medicine, face the problem and get on with the next thing. Here's where having a great support network helps. For most people it might be their spouse or it could be a trusted employee or business pal. Someone to listen and give you perspective. It's then up to the owner to just get on with it.

My last attribute for a successful business owner is being 'sales-minded'. You can be the greatest technician in the world - the best widget-maker, best accountant, best carpenter, best project manager, best shopkeeper, but if you can't find customers and sell to them, you don't have a business. So sales and selling needs to be part of your make up. Not everyone who starts a business is a natural salesperson. But I would argue they need to learn fast. They need to put a lot of thought into why their product or service is different and what price they should sell at. And they need to sell.

There is another attribute which didn't quite make my top 3 but is very important. That's watching the money and the numbers and ensuring the business finances are well managed. You would expect an accountant to squeeze that one in wouldn't you?

So that's my top 3 attributes for business success (or 4 if you include financial management). Following these may not guarantee success but will I think be a step in the right direction.

Sunday, 14 October 2018

Tailor made or one size fits all?

I'm thinking about booking a holiday.

We know what we want. A bit of a tour with some sightseeing and then a few days at the end in a nice hotel to relax and unwind. We have spoken to a few travel companies to see what they offer. Some are fairly rigid. ' This is the tour we offer and it can't be changed'. Some are happy to tweak parts of the tour to fit in one or two extras we would like to see. One will make it completely 'tailor-made'. We can have what we want and they will price it up accordingly.

It made me think about my own accountancy practice and how we have evolved into more of a 'tailor-made' approach. That wasn't necessarily my intention when I started out 15 years ago. The aim was to provide accountancy support to small businesses. Naturally, in the early days we tried to fit in with what our customers and prospective customers wanted and the tailor made approach developed from there.

We have different 'products' or bundles of services from a basic, 'essentials' service focussed mainly on compliance to a full 'expert' service which is more akin to having your own outsourced finance department. If our customers want something more bespoke than our standard products we are happy to look at this and see if we can provide a more individual service.

Like in other areas, technology is having a huge impact on the accountancy sector. HMRC's major change programme, 'Making Tax Digital' is encouraging (and will ultimately compel) businesses to maintain their records in a digital format. New scanning software is able to read receipts and categorise expenses without the need for manual input, bank data feeds automatically into accounting software.

These changes have driven some accountancy practices towards a 'one size fits all' strategy. They choose a single software provider, throw all their eggs in that basket and provide their clients with a standardised way of working. It's ruthlessly efficient and in the longer run will drive down their costs.

But is it what their customers want? Sure, many will be happy with the one size fits all package if the price is right. But some won't. They may want to move at their own pace. Hang on to their manual records for a little while longer. Stick with the software they have been using for the last 10 years and fits well with their business.

We intend to  stick with our tailor made approach. That's not to say we will ignore the march of new technology. Far from it. We need to embrace this change and offer it to our customers who are ready to make the leap.

That's a little more complicated to manage as we have multiple accounting systems and multiple processes to work with. Following our customers has served us well so far however so that's what we will continue to do.

Oh, by the way it looks like the 'tailor-made' holiday option is the front-runner -  Viva Mexico!

Monday, 8 October 2018

Let's dance!

When I was coming up to 40 I learned to juggle. 

A set of juggling balls appeared in my Christmas stocking with a little instruction book. So I thought, 'Let's do this'. Following the little book I practised for 5 or ten minutes a day. The first attempts were pretty hopeless but then gradually I started to get the hang of it. Starting with 2 balls, then (with a struggle) moving to 3, then clubs, then rings, then a few tricks. I never mastered 4 balls though and soon stopped practising.

Twenty years on I can still do a basic three ball juggle but that's about it. If I had kept practising, who knows I may have had a second career as a street entertainer in Covent Garden.

So what, you may say. Well, it kind of stuck with me that something that seems impossible can be achieved with practice and consistent effort for just a few minutes a day. Not rocket science I know but it works for me.

So l'm doing the same thing now with dance. Dancing is not my thing. I'm really, really bad at it. Which is very annoying considering I am part of a large family where all my siblings are naturally good dancers. I just missed out on the dancing genes.

A few weeks ago I was asked to join in for a charity dance event. Me and eleven other novices have been paired with 12 people who can dance. We get a month to practice and then we perform at a glitzy event. A bit like a local, low budget Strictly Come Dancing.

I know that I will never be the next Anton du Beke and will probably never reach even Ed Balls standard (No offence Ed - I think you did really well). At my first lesson I quite literally was unable to move my feet. A couple of weeks on and with daily practice, I can see some progress. That's a wonderful feeling. Going from no knowledge and no proficiency to the semblance of a routine in a short space of time.

I'm not sure how the event will go but whatever happens I will have gained on a personal level. I've made a new friend in my long suffering and patient dance partner, I've started to learn a new skill and who knows, at the next family gathering I might be able to give my dancing siblings more of a run for their money.

I think the lesson for me is that it's never too late to learn something new. You may not reach dizzy heights of brilliance but great enjoyment and satisfaction can be gained from achieving your own personal goals

Oh the charity we are dancing for is Pancreatic Cancer Research. If you are able to support this cause with a small donation I would be really grateful

Saturday, 22 September 2018

Breaking up is hard to do

Small business is a bit like a family. 

We probably spend almost as much time with our work colleagues as we do with our real families - often in a crowded office, working (hopefully) towards the same goals, sharing successes and less successful moments and occasionally falling out

So as a business owner when someone decides to leave it can get emotional. Of course it happens. Of course people are entitled to do what is best for them. But that doesn't make it any easier. Someone has worked for you for many years, you have tried to develop and nurture them and they are liked by everyone in the team. You didn't see it coming.

In a big corporate if someone leaves there is no drama. HR step in, plans are made, vacancies are advertised, agencies are notified. The leaver is patted on the back and leaving drinks are planned. The business quickly moves on and the gap is filled.

In a small business one person leaving might be 20% or 10% of the workforce. Replacing that individual is often costly and time consuming. They know your values, ways of working and your customers know and like them. The business owner who may have stepped back a little and is enjoying more free time outside the business may need to roll up their sleeves and get stuck in again. It's not easy

But it can also be an opportunity. A good time to restructure and reenergise the business by bringing on other team members or bringing in new talent.  When I look back at times we have lost 'key' people over the years, after the initial change and disruption, the business has kicked on and ended up in a better place than before. It can be a spur to fix underlying issues which may have been a trigger for this individual deciding to leave.

I guess it's the emotional cycle of change - shock, hurt and disappointment are often the initial feelings. In time (and it may be weeks, months or even years later) there may come a gradual feeling of acceptance that it was all for the best.

Thursday, 13 September 2018

Why I like financial forecasts

Most of accounting is about compliance or looking backwards

Much less is about looking forward. From a business management perspective however, I believe this is where most of the value can be gained.

Now one thing we all know about forecasts is that they are likely to be wrong. As the famous saying goes, 'Forecasting is the art of saying what will happen, and then explaining why it didn't!'

But I think it's worth the effort. I had a good apprenticeship on the benefits of forecasting as a management accountant at Tesco Stores, the U.K. Supermarket chain. I was slow however to implement forecasting in my own accountancy business, focussing more on historical management accounts and targets. It was an external consultant who introduced me to his simple forecasting model and it's something I've used ever since.

Basically its an Excel spreadsheet that I update most days and sometimes several times a day which forecasts sales, cost and profits for the financial year. So if I gain a new client or lose a client (not a regular occurrence) or put a proposal to a new prospect or have an unexpected increase in a major area of cost, these all get fed into the magic spreadsheet and out pops my new profit figure

It's great because it keeps me in control and reduces the risk of  being caught out by any surprises. Once set up it takes hardly any time to maintain and I think it is the best financial management tool I have in the business

Henri Poncaire' was a very clever man who was one of the creators of chaos theory. He said, 'It is far better to foresee even without certainty than not to foresee at all.'

If it's good enough for Henri, it's good enough for me

Saturday, 8 September 2018

Value, like beauty is in the eye of the beholder

It's a truism that the same thing will be worth more to some than to others.

For individuals the value of something will also change depending on their circumstances. A glass of water is worth much more if you are lost in the desert than if you are sitting at home watching tv.

Despite this most products and services we buy are a standard price. There might be regional variations but broadly the price is uniform. That makes sense for 'commodity' products and services where there are multiple units and each one is identical or very similar.

Where products and services are unique there is an opportunity for businesses to be more flexible with their pricing. 'Value pricing' is nothing new and there has been and still is much research and debate on how businesses can do this effectively.

The Wikipedia definition of value pricing is, 'Value-based price is a pricing strategy which sets prices primarily, but not exclusively, according to the perceived or estimated value of a product or service to the customer rather than according to the cost of the product or historical prices'.

I like this definition and the key phrase is pricing based on, 'the perceived the customer'. How many of us do this in business? Surprisingly few I think.

Surprisingly, because the thing about value pricing is that both the seller and the buyer end up happy. The seller because they have maximised their selling price and the buyer because they have purchased something at a fair value to them.

One area where value pricing comes into play and has been exercising me recently is selling a business. Value here can vary tremendously between each prospective buyer. Some may see synergies with their existing business or opportunities for improvement that may not be apparent to other prospective buyers.

So the 'game' for the seller and their representatives here is to find out where the prospective buyer's value threshold is. There is an old saying in business, 'How much money did you leave on the table?'. For many sellers it can be quite a lot.

A seller may be pleasantly surprised at an initial offer and be tempted to accept. In most cases though, this is a time to step back and reflect. Put yourself in the buyer's shoes and think hard about what the real value is to them. This could mean that you leave less money on the table and both you and the seller achieve a good outcome. That is worth some time and mental effort I think.

Saturday, 1 September 2018

And it all started so well...

When broken down to its main processes - operations, marketing and finance,  running a business seems pretty straightforward - right?

Operations is making the product or delivering the service,  marketing is promoting and selling it and finance is sending the bills and collecting the money. No problems so far.

So why does it sometimes go wrong? Well of course it's a journey. At the start the business owner probably needs to wear all the hats and do everything. Many people are content with that and the business stays small.

If the business grows the owner needs to transition from being the 'Technician' to being a manager and then the entrepreneur, developing and growing the business. Michael Gerber describes these 3 roles - Technician, Manager and Entrepreneur in his brilliant book, 'The E Myth Revisited'. The E Myth or 'Entrepreneur Myth' is that business owners are entrepreneurs. In truth, we are mostly technicians building a business around our core skills and experience. Gerber argues that to be really successful and grow, business owners need to move on from being solely a technician and ensure they wear the manager and entrepreneur hats too.

If I reflect on the many businesses I have worked with and am still working with, surprisingly few are what I would call real 'entrepreneurial' businesses. By this I mean the owners are focussed, to the point of obsession, on building something big and valuable and they relentlessly pursue this goal. I have worked with a few - some of whom have had successful exits with a pot of money and some where it all went wrong and the businesses failed.

So to go back to the original point. If business is simple - operations, marketing and finance, why did these smart and driven people end up failing?  In almost every instance I can think of, failure came down to a lack of balance. One or more of these key processes was not done well enough. I've seen brilliant marketeers and sales people who sell stuff but don't deliver it, businesses that expand without having finance in place, people who make great stuff but can't sell it and so on.

Those that don't give sufficient attention to any one of operations, finance or marketing are unlikely to stay the course.

Tuesday, 28 August 2018

Sharing out the business cake

Never, ever, under any circumstances give away any shares in your own business. Period.

I'm paraphrasing Felix Denis, the late publishing billionaire here. He believes that business owners and entrepreneurs should hold onto their share capital as their greatest opportunity to retain wealth and as a fair reward for their enterprise and risk.

That's not to say he didn't believe in rewarding his employees. He argued that rather than through shares, this should be done by giving them a fair 'slice of the annual pie' of profits.

As a general rule I agree with Felix. Including employees and others as shareholders adds complexity and creates tensions. It also takes some incentive away from the entrepreneur to drive the business forward.

Are there exceptions to Felix's golden rule though?

I think there can be in cases of succession or exit or in exchange for providing finance and specialist knowledge, skills or contacts (Dragon style) but the entrepreneur should tread carefully and consider the pros and cons before taking this step. Once ownership is diluted things will never quite feel the same again for the founder so my default view is, 'Don't do it' unless there are compelling reasons.

As Felix says, 'Getting rich all comes down to ownership. Every single percentage point counts'.

Of course there is more to creating and running a business than getting rich but his point is well made. As the owner you are the one who has made sacrifices, had sleepless nights, strained your personal relationships, worried about paying the mortgage. If you give away the fruit of your endeavour lightly you may have a long time to regret your decision.


Tuesday, 21 August 2018

Grinding it out

Ray Kroc, the founder of the McDonalds empire has always been one of my business heroes.

I didn't know much about him until recently, apart from the fact that he started McDonalds at the ripe old age of 52. As a late starter to business myself, that was enough for me, along with the ingenuity of the McDonalds concept - simple, effective processes, brilliantly executed can make for a great business.

So I was delighted to stumble upon Ray's autobiography, 'Grinding it out' in a second hand bookshop a couple of weeks ago. It's an honest, fast paced read about his rise to fame and riches. As the title suggests it wasn't an easy ride and success didn't fall in his lap. He earned it.

His work ethic was incredible. Ray was first and foremost a salesman. But he had other attributes as well. Not least he was an accomplished pianist.

In his early years he sold paper cups. Rising at 6am to pound his beat looking for new orders. He finished around 6pm and dashed off to his evening job - playing piano on a radio show. After the 6 to 8 shift he nipped home for a couple of hours to have tea and spend some time with his wife. Then back to the studio for the 10pm to 2am shift!

I've had periods of working fairly hard every now and then but Ray was at another level.

Of course his obsession with business left casualties. He was married three times and had some big business dust ups too. Business came first, rising to the top of his industry selling paper cups and mixers and then building McDonalds.

So why isn't McDonalds called Krocs? Well the McDonald brothers had already opened a successful burger restaurant with the signature attributes of simple processes, well executed and quick and friendly service. They were happy with their one successful store and had no desire to expand. Ray saw the opportunity, did a licencing deal with them and the rest is history. It was a fraught and strained relationship but the McDonalds brothers became rich beyond their wildest dreams when Ray finally bought them out many years later.

Like many super successful entrepreneurs he was multi-faceted. He was tough and driven but also had strong values of honesty and trust and had a knack for creating a strong, loyal team. He was also good at giving his team independence and freedom to make their own mistakes.

So this book in putting some flesh on the bones of Ray's life didn't disappoint. By today's standards he wasn't politically correct but it was a different era and I'll cut him some slack for that. He has left a thriving and enduring legacy and he remains for me a brilliant and innovative entrepreneur. He is an inspiration for me and other over 50s that it's not too late to do something great. Maybe not something as ambitious as a global food empire but something nonetheless.

Monday, 6 August 2018

How to finish big

I've just finished reading 'Finish Big' by Bo Burlingham. 

If you've read Bo's other best seller, 'Small Giants' you'll know that he's a journalist who's passionate about small business and entrepreneurs and loves digging into what makes them both tick.

Bo argues that 'Finishing big' or exiting well from a business is one of the biggest decisions that entrepreneurs make, having profound and far reaching implications on the rest of their lives, but many give little thought to it.

The book is full of absorbing case studies of people who have exited well and those who haven't. The emphasis is on the 'Medium' within the  Small and Medium Enterprise' cohort. So for most business owners these will be quite large enterprises with tens or hundreds of employees and multi million dollar turnovers. For British readers there are some americanisms like ESOPs (Employee share schemes) and venture capital played a bigger part in some exits than it does over the pond.

Although the businesses may differ the issues for the exiting entrepreneurs are very similar wherever they are based and Bo tries to distil the common themes which make for a good exit.

Four stood out for me:

1. Start early

Entrepreneurs need time to plan for their exit and to shape the business in a way which achieves the best outcome. Some of the time is needed to allow for making mistakes - finding the right successor was problematic for example in several of the case studies

2. Think about the exit you want

It's not just about the money. What do you wants to happen to your employees? Are you worried if the culture and values in your business change after exit? What kind of legacy do you want to leave? It's important to think about these things before exit.

3. The best advisors have been through it

This was an interesting one. Many advisors have facilitated multiple sales and the more they do, the better they get. The very best advisors though have sold their own business or ideally several businesses. They have the unique advantage of seeing things from the seller's perspective and Bo rates this very highly.

4. What will you do after?

Somewhat surprisingly, this was one of the biggest issues for the exiting entrepreneurs. Those who thought about it in advance and had something to do after exit, tended to finish big and well. Those that didn't ended up a bit lost, without purpose, full of regrets and unhappy, often for many years.

So I'd recommend 'Finish Big' to all business owners. If it gets you thinking about your exit now rather than when it's too late to finish big, it's a few quid very well spent.

Wednesday, 1 August 2018

A perfect pipeline

I'm not a marketeer but like all business owners who want to grow their business, I do marketing.

The nirvana we search for is a perfect pipeline. A method or methods of marketing which delivers a steady stream of leads, where we know the cost per lead and we know the liklihood of converting each lead or enquiry into a new customer.

If the cost for each converted lead is justified based on the price of your product or service then, Bingo! That's it! Growth plan sorted.

But its not normally that straightforward.

What I've found over the years is that something works for a while - a networking group, google adwords, telesales, a referral scheme...and then it stops. Sometimes this is an abrupt or sudden change. Your brilliant telesales person moves on, Google changes their algorithm, more competition - something happens to make your trusty lead generation star less effective.

Of course when this happens we try and change things. Find out why it has stopped working so well and try and fix the problem. But often tinkering doesn't work. The moment has passed.

So it's back to the drawing board again

I'm in that happy phase now where I've stumbled upon a lead generation method which has exceeded my expectations and is delivering impressive stats

So I'll be enjoying this while I can. I fully expect that just around the corner there will be a glitch. We will tinker and tweak but it may not be the same again

And then the search starts again for the next big thing...

Saturday, 28 July 2018

Filling the void

Most entrepreneurs don't like uncertainty. Like nature they try to fill the void and create certainty. Something they can act on and get done.

Deciding and doing something may not always be the best thing though. From time to time when a problem or opportunity arises the best thing may be to do nothing or wait and mull it over.

I'm not very good at that. Sometimes my mulling can go into overdrive and I have numerous options floating around and keeping me awake at night. First one idea comes to the top as a clear front runner and I've decided to act on it very soon. Then I'm not so sure. Idea number two fights back and is maybe not so bad after all.

This is where I look for help. Cue calm, sensible 'sounding board' type person. This could be a trusted business pal (I have several), a work collegue or more often than not, my long suffering spouse. They patiently listen to the different options and pros and cons and help me make my mind up which way to go. I end up happy and decisive. They are slightly frazzled and worn out having had to listen to my musings.

Then the mulling continues. What if Plan A is not so good after all? There was that zany option which we ruled out but maybe, just maybe that could work?

Back to trusted business pal, work colleague or spouse. 'You know that thing we were talking about the other day?' 'Yeah, the one where you decided to....'

And then you go through all the options again but explain why zany plan E has come to the top of the list.

This is where timing is critical.

If you have timed it right your sounding board will listen attentively as you go through everything again. Get this wrong and your spouse may chew your head off and trusted business pal or work colleague may rush for the broom cupboard if they think you are heading their way for another chat.

Problems, problems...

Friday, 20 July 2018

Tax, lies and stereotypes

Let's start with the stereotypes. Accountants are steady, boring and cautious. Phillip Hammond rather than Bojo. Well, some are but many aren't.

I've been told many times that I'm not a 'typical' accountant because I'm approachable and easy to talk to. I'll take that as a complement but I can do dull, boring and cautious if I need to.

I had an accountant pal who was (and probably still is) charismatic, energetic and persuasive. He is also a risk taker and his cv is a roller coaster of exceptional highs and near catastrophic lows.

He also has a tendency to be 'economical with the actualite'' to use Alan Clarke's phrase. I found this out to my cost which is why he is now an ex pal. I think this expression is particularly apt. Often it's what's not said rather than what's said by an untruthful person that is most deceptive and damaging. 'Risks? You never asked about the risks'

My ex buddy's gambling tendencies mean that he is willing to push the boundaries with tax planning. This, along with his charm and persuasive skills can be attractive to a hard-pressed business owner. Saving a load of tax - what's not to like?

Well, each to their own but when it comes to choosing an accountant I think risk taking, charisma and persuasiveness are overrated. There lies the probability of early and easy wins, followed by inevitable losses and possibly worse.

As an entrepreneur and business owner I am happy to take calculated risks. I don't want my accountant to be a risk taker too so I'll settle for steadiness and caution every time

Saturday, 14 July 2018

Give your business a boost with your own advisory board

It can be lonely being a business owner.

Most of us need an outlet, a sounding board to share the highs and lows with, ask for advice and to provide support. It could be a spouse, a trusted member of the team, an old business pal, a paid advisor - I've offloaded to all of these over the years and continue to do so.

But what if you could have your own informal board of fellow business owners? A group of people who understand the issues and challenges you face, who want you to succeed and are there to help you. Wouldn't that be great?

Well it is. I can say that with confidence because I've had my own informal board for the last few years. We meet every couple of months or so and take it in turn to be the host - providing a meeting space and copious amounts of coffee and biscuits.

We met this week and we were reflecting on the amount of change we have seen in the few years we have been getting together. We have all seen significant change, both in our personal lives and in our businesses. Nothing stands still.

For me, the main purpose of groups like this is to support and challenge. Our group is particularly good at the 'support' bit. I think we are all naturally helpful people so we look for the positive and try to encourage and motivate each other. 

For me that has been brilliant. I have floated a number of what I thought were crazy ideas with the group. They have built on these and offered encouragement and I have gone on to launch them successfully. A couple of examples which spring to mind are starting our own networking group, 'Growth Club' and developing and launching our own printed newsletter, 'Beans Talk'. 

I don't know if my colleagues would agree with me but something we are perhaps not so good at is challenging each other. We do it but our challenges can be subtle and nuanced. I'm sure that some groups are more direct and as a consequence their meetings may be more uncomfortable. It comes down to what works for a particular group. Having a disruptor or two amongst you may add some value but it may mean that a group is short-lived.

So if you get the opportunity to form your own group I would recommend it. A good place to start is to chat with some business colleagues you already know and trust and see how they feel about making a commitment to meet regularly. It could just be one of the best business decisions you make.

Friday, 6 July 2018

It ain't over 'til it's over

Turning 60 this week was something of a milestone. 

I had a nice relaxing day off work and England rounded things off by beating Colombia on penalties. Not that I could watch the finale, I had to walk around the block and learn the result when I got back. A good ending.

It does make you focus on your mortality. I'm set to draw two occupational pensions this year. So if I had stayed employed that would be it. I could hang up my boots (metaphorically speaking) and like Marlon Brando in the Godfather tend my vegetables and play with my grandchildren. Marlon did become a nicer version of himself in his old age (It's not hard to improve on murder and corruption) but he came to a sticky end in his pepper patch. Although I love my grandchildren, that's not overly appealing.

One of the plusses about running your own business is that you have choices.You can sell up and retire. You can carry on with 50 or 60 hour weeks and hope you keep your health and energy levels. Or you can keep going but change how you work and what you do. Maybe do less of everything but more of the things that you like and are good at. This last option appeals to me most.

My favourite quote about retirement comes from an unlikely source. Ex US President, Richard Nixon may not be everyone's idea of a role model. Sure, he had his faults but a strong work ethic and sense of duty (occasionally flawed) were part of his make up. His view on retirement was, 'To me, the unhappiest people in the world are those in the watering places, the international watering places like..uhhh..the south coast of France and Newport and Palm Springs and Palm Beach; going to parties every night, playing golf every afternoon, then bridge. Drinking too much, talking too much, thinking too little. Retired. No purpose.' The Palm Springs set may disagree. Pottering about in the sun sounds fun but I think the novelty would soon wear thin. So I'm with Richard on this

Then there is Stephen Hawking who says, 'Work gives you meaning and purpose and life is empty without it'. People find meaning and purpose in different things. To Stephen it was understanding the universe. Most of us have more modest ambitions. For me, being 60 changes very little. I still find purpose, great enjoyment and satisfaction in running a business. If that changes I may try something else but for now its business, more or less, as usual...

Saturday, 2 June 2018

5 reasons why you should find out more about selling your business (even if you have no plans to sell)

Many business owners don't give much thought to selling their business until something happens which brings it into play - illness, family crisis, divorce, economic downturn, increased competition etc. 

The problem is it's then often too late to get the best price for the business. At worst it become a fire sale with years of commitment and hard work sold for a pittance

It doesn't have to be like this. I think every business owner should have a strategy or strategies (there may be a number of options) for exiting from their business in a planned way.

Here are 5 reasons why you should put some serious thought and research into selling your business, before you are ready to sell

1. Avoid a fire sale

I know, I'm repeating myself. But you get the point. If you wait until you need to sell, it is probably too late to get a good price

2. Your exit plan will determine how you shape your business

When you have done your research and thought about a possible method and timing of sale this is likely to influence how you develop your business in the following years. For example you might need to systemise or simplify your business to make it more attractive to a buyer or make it less dependent on you as a the business owner.

3. It leads you to the next stage in your life

For many, selling the business will be the step before retirement. For others, it may be the opportunity to start a new venture in a completely different field. Knowing what you may get from your exit and the timing can help you plan ahead

4. It's a big motivator

If you know what your exit looks like, that brings some clarity to what you need to do to get there. Having that goal of a big pot of gold and freedom 5 or 10 years in the future can be a huge motivator and drive you on in your business.

5. Team development

Your exit plan may highlight that you need to develop key members of your team or recruit key personnel to make your business more saleable

So thinking about your exit in advance is important and worth investing some time in. The payback in terms of the knowledge and benefits gained should be very significant indeed

We are very lucky and honoured to have business sales specialist and author Gary Morley presenting at Knowledge Bites for Base52 on Thursday 21 June. It costs a fiver  and includes a buffet lunch. As a business owner it could just be the best value couple of hours you are likely to find anywhere

Sunday, 27 May 2018

Are you super successful, getting by or struggling?

Business guru and entrepreneur Nigel Botterill often quotes statistics that only 5% of businesses are 'super successful' or doing very well, 15% are doing ok and a massive 80% are just 'getting by' or struggling.

Not a great advert for the joys of running your own business. I have no hard evidence for the validity of the statistics but leaving aside 'one person' service businesses (which tend to do well), the figures kind of ring true.

So what sets the top 5% apart? Why are they able to thrive in challenging times whilst the majority are not doing so well?

I've had a good think about the successful businesses I've worked with over the last 15 years and these are some of the attributes they show:

1. Review and adapting to change

The best businesses are continuously reviewing their effectiveness and adapting to changing circumstances. They hate complacency and being comfortable and are always striving to get better

2. Focus

They have a core offering which is the essence of their business. Most of the business resources are deployed into making this core offering as attractive as possible. They might diversify but not at the expense of the core business.

3. Business owner freedom

The business owner is released from some of the 'day to day' grind and is able to focus on customer care and team and business development

4. Processes and roles

The business has clear processes and routines for sales and marketing, production and finance and job roles are also clear. Basic stuff gets done well, over and over again.

5. Pricing

Getting this right is key. Price too low and your business will never make money. There will be a constant battle to cover overheads and manage cashflow. An uncomfortable place to be. Price too high and the business will stagnate. Hit the sweet spot where your pricing matches the value the customer receives and gives you a respectable profit and you are on a good path.

That's probably it in a nutshell.

Having a great product or service helps as does finding an attractive market niche. Even in a more competitive space, if you follow the above steps you are more likely to end up in the top 20% and move closer to super success

Friday, 27 April 2018

5 tips for small businesses to survive and thrive in tough economic times

The UK has just announced that growth in the first quarter fell to only 0.1%. Construction and retail sectors were hit particularly hard with the bad weather having a significant impact. 

Consumer confidence remains low with high inflation and slow wage growth being contributing factors

So how do small businesses cope in these challenging times? How can they keep stable and even grow when the overall economy is underperforming?

Here are 5 tips for staying on course:

1. Pay attention to the financials

This is a time to put additional care into financial management. Ensure that you have a regular routine for record keeping and reviewing business profits. Use forecasting to look ahead and ensure that your finances are stable for three, six and twelve months into the future.

2. Stick to the knitting

This is not the time for being distracted by exciting and speculative new ventures unless you have significant reserves or adequate financing in place. Focussing on the fundamentals of your core business - looking after customers, ensuring operations are efficient and effective and that current trading is profitable will pay off in the long run

3. Keep creditors informed

If cashflow is tight it is important to keep creditors informed and work with them rather than lying low and hoping things improve. If your suppliers know that you have a plan and are intending to settle with them when you can, they are more likely to stay supportive than if you keep them in the dark or break promises

4. Talk to your bank

If your business is going through a difficult period, talking to your bank at an early stage is a good idea. It is possible that a refinancing package or extended overdraft taken at the right time could make the difference between fire fighting and a more managed recovery

5. Don't stop marketing

When finances are tight the temptation is to cut back on all discretionary spending, including marketing. That could be a mistake because when the upturn happens you will not be in the best place to take advantage. It is a good idea to review your marketing however and concentrate on the activities which are delivering tangible results.

There are no guarantees for survival and growth for any business. In tough times, doing the basics well and following these tips should help.

If we can help at Base52, please get in touch

Saturday, 14 April 2018

Don't get mad - do something positive

I've recently finished reading 'How to be human'. It's written by the very clever people at New Scientist magazine and is full of facts about how our bodies and minds work and what makes us special.

As a life-long runner I was delighted to learn that we were 'born to run'. It seems that humans are built for long distance running. We have apparently evolved this way to help us hunt and 'run down' prey to exhaustion and also forage over a wide area.

I learnt there is no such thing as a 'sugar rush' and the secret to long life is a combination of exercise, diet, managing stress and good genes. We can do something about the first 3 things but not the last unfortunately.

I also learnt a bit about emotions. I hadn't realised that there are 6 basic emotions - happiness, sadness, fear, anger, surprise and disgust. There are also secondary emotions like curiosity and confusion. A fascinating fact is that all these emotions illicit different facial responses which studies suggest are innate rather than being learned. So when we are curious our heads tilt to one side and the muscles in our forehead and around our eyes contract. Useful information for poker players but they probably know this already.

So what about using emotions as a force for good and for pursuing our goals?  On the face of it anger is a destructive emotion but there is evidence that it can also be beneficial and energising. To be a catalyst for positive change, anger needs to be channelled in the right way.

There is a very famous saying from Aristotle about anger, 'Anybody can become angry - that is easy, but to be angry with the right person and to the right degree and at the right time and for the right purpose, and in the right way - that is not within everybody's power and is not easy'

Saturday, 24 March 2018

GDPR and all that...

These things keep coming along.

It starts with maybe a newspaper article, then a post on Linkedin or Facebook, then more posts and articles. Pretty soon there seems to be a whole industry built around the latest ‘thing’. Recent ‘things’ have been PPI claims, bitcoins, blockchain, crypto currencies and pensions auto enrolment.

The new kid on the block is GDPR. Can we ignore it and hope it just goes away? Well for a while perhaps we can. But the new General Data Protection Regulation (GDPR) comes into effect on 25 May 2018. For all businesses who hold data relating to customers, employees and other contacts there are new rules coming into force and a penalty regime for non compliance. So the time for putting this in the ‘too difficult’ box has passed. Businesses need to act fast to assess what the new rules mean for their business and how they can ensure they are compliant.

The Information Commissioner’s Office (ICO) is responsible for overseeing compliance with the new regulations in the UK. They have published a guide and other reference material which is a useful starting point.

We have also prepared our own summary here GDPR - what is it all about?

If you are still struggling we are running a training event in Hitchin on 18 April which will help you evaluate what you need to do to ensure your business complies with GDPR.

This link provides further details and booking instructions GDPR event Hitchin

Saturday, 17 March 2018

On counting things...

Accountants like to count stuff and I'm no exception. Sales, costs, profits, tax, debtors, bank balances etc have all been thoroughly counted over the last few years. I've been very good at counting things that accountants like to count but not so good at counting other things that can be equally useful to keep an eye on.

A little while ago I read a book called 'Better' by Atul Gawande. An interesting read about improving standards in the medical profession. Here's my summary of Better

The author closes by giving some tips on some things to do to get better in your own area of work. One of his tips was 'count things'. He didn't say what you should count. He just said, have a go. Pick a few things you think it might be useful to count and start doing it.

So I did. As well as my usual accountancy things I started counting how many tax returns we filed in a month, how many VAT returns, how many payslips we processed, how many meetings with new prospects we had, how many clients we signed up, how many clients we lost (not many thankfully) and so on.

Well I admit I'm a numbers nerd but I have found this very enlightening. Instead of relying on my gut feel for operational and marketing measures I now have some hard facts. Over time we have built up a trend and year on year comparisons. So I can see growth and areas that need some attention.

I think counting these non financial things has helped me to manage the business more effectively. If you are already doing this, that's great. If not, I can recommend it. Pick a few things to start counting now and see how it goes. Let me know if it works for you - I would be interested in your feedback

Saturday, 3 March 2018

8 things to do before the end of the tax year

It may not feel like it with the UK in the grip of snow and ice but we have already had the first day of Spring and the end of the tax year will soon be upon us. 

A little time spent planning in these last few weeks before the end of the tax year could provide useful savings. The tax year end for individuals is 5 April 2018.  Many self employed people also have their accounting year end as 5 April or 31 March to coincide with the tax year. For private limited companies, 31 March is also a common date for the year end. 

Here are some ideas: 

1) Buy business assets and bring forward business expenditure before the year end 

If you are thinking of investing in business assets - new plant & machinery, vehicles, office furniture, computer equipment it is sensible to make your purchase before the end of current financial year, rather than the start of the next one. 

Timing your investment could mean that you can claim your capital allowances sooner, saving on cashflow. Similarly if you are intending to carry out some repairs or maintenance work, doing this before the year end will reduce your next tax bill. 

2) Manage your income

If you are in the fortunate position of being able to manage your income, plan now to optimise your income for tax purposes. For example, as a company director and shareholder, you may be able to reduce salary or dividends to keep your income below the key tax thresholds of £45,000, £100,000 or £150,000. An income level of £50,000 where child benefit is withdrawn from the highest earner in a household is another key threshold to monitor. 

The £100,000 threshold is particularly unattractive from a tax perspective as the personal allowance is gradually withdrawn at a rate of £1 for every £2 of income. This gives an effective rate of tax at a very painful 60% at income levels between £100,000 and £123,000. So best avoided if you don't need the income and can defer this to another year. 

3) Consider the effect of the dividend Tax 

A dividend tax was introduced from 6th April 2016. This affects people who receive a significant amount of dividend income each year – mainly business owners with their own limited companies. 

There is a £5,000 dividend allowance for 2017/18 where dividends are free of tax. The dividend allowance is reduced to only £2,000 per annum from 2018/19 onwards. It makes sense to use this allowance if you have scope to pay a dividend. Above this level new rates of dividend tax apply for varying levels of income. 

The dividend tax has a significant impact on business owners who may be used to drawing a relatively high proportion of their income as dividends. If possible the higher and additional dividend rates of 32.5% and 38.1% respectively are best avoided by capping gross income at the basic rate threshold of £45,000 if this is feasible. Gifting shares to a spouse so that they can utilise the dividend allowance may be appropriate in some cases. 

4) Contribute to a pension 

Pension contributions before the year end are a tax efficient way of saving for the future and reducing your tax bill. This tax savings are particularly attractive for higher and additional rate taxpayers. Advice should be sought from a suitably qualified Independent Financial Advisor to ensure that your particular circumstances are considered. 

5) Use gift aid for donations 

Using gift aid for charitable donations has the effect of raising the basic rate tax band and saving 20% tax for higher rate tax payers. So for every 80 pence you donate, your chosen charity receives £1.00. 

6) Use your tax free savings allowance 

If you are lucky enough to have surplus cash, make sure that you use your annual ISA allowance. Within an ISA, all income and gains are tax free. You can save up to £20,000 for 2017/18. You can choose how you split this between stocks & shares and cash ISAs. There are also new ISAs such as the Lifetime ISA and ͚Help to Buy͛ ISA which are aimed at first time home buyers and offer additional incentives. 

7) Use your annual capital gains exemption 

If you have personal assets (shares, property etc) and are intending to sell them soon,  consider the capital gains tax implications in advance. You may be able to time the sales of shares for example to spread over 2 or more tax years and utilise your £11,300 annual exemption for 2017/18 effectively. 

For married couples and civil partners consideration should be given to each spouse/civil partner using their allowance. 

8) Set money aside for your tax bill 

If you take some of the steps above you should be able to reduce your 2018 tax bill. It is unfortunate that however much we plan, many of us will still be faced with a tax bill for 2017/18, payable in the following January. Setting aside a percentage of your income to cover your tax bill and placing it in a deposit account is a sensible measure and will help avoid any last minute panics trying to find the funds. 

Another tip is to get your tax return completed as soon after the end of the tax year as possible. This gives you an early warning of any additional tax due so that you have sufficient time before the payment deadline in January. 

If you would like Base52’s advice and assistance with any aspect of your tax planning, please contact us.