Learning from the Babylonians

If someone asks me to recommend a book on personal finance I choose George S. Clason’s, ‘Richest man in Babylon.’ 

I’ve given copies to my kids (I’m not sure if they ever got round to reading it) and to several other friends and acquaintances over the years.

Clason was born in 1874 and started writing this book as a series of pamphlets in the 1920s. The pamphlets were circulated by banks and insurance companies and became very popular. Eventually they were compiled into the famous book.

The book is a series of stories which purport to draw on the wisdom of the Babylonians, some 6,000 years ago. They built a prosperous and successful city and dynasty that survived for centuries, founded on principles of trade and sound financial management.

The principles are timeless and if followed, with application and some luck, over a period of time should make anyone wealthier.

Here is a brief summary of the 7 rules for acquiring and retaining wealth as described in the book:

1. Start thy purse to fattening.

Simply put, save 10% of what you earn. Easy if you have a decent income, less so if you don’t. Very true, but Clason argues that whatever your income, regular saving is key. 

2. Control thy expenditures

Self explanatory this one - having a budget and sticking to it. Save the 10% and make sure you spend no more than the remaining 90% each month

3. Make thy gold multiply

As the 10% builds up into a reasonably-sized pot you need to make this work for you and generate an income. In today’s world Clason would say speak to an Independent Financial Advisor or propose investing wisely based on knowledge of likely risks and returns. He guards against. 'Get rich quick' schemes.

4. Guard thy treasures from loss

Clason’s view was that you should ‘protect your principal, ie if investing £1,000 make sure this is protected and is your minimum return. So under this rule the stock market or property investment would be ruled out. I suspect he might modify this rule in today’s world but the principle of being cautious about losses still holds true.

5. Make of thy dwelling a profitable investment

Again, self-explanatory but easier said than done for youngsters in the current housing market. House price inflation has outstripped wage growth for many years making it harder to get a foot on the housing ladder. My personal view is that it is still worth making the stretch to buy if at all possible. Government-backed incentive schemes can help and once on the ladder things should improve over time if household wages continue to grow.

6. Insure a future income

In other words, make sure you have some income for when you no longer work. For many of us this is an employment pension, supplemented by State pension. For the self-employed pensions often get neglected, especially in the start up years. Thinking ahead and providing for this well in advance is sound financial planning

7. Increase thy ability to earn

Learn a new skill, get a new qualification, keep learning. We know that pays off and increases earning potential in the longer run

That’s essentially it. The stories bring the rules to life and keep them in the memory.

By a mixture of luck, a fortunate upbringing and some mistakes made along the way I’ve kind of fallen into doing these things consistently over a period of time.

They’ve worked for me and I think can work for others too

Babylon may be no more but the Babylonians certainly knew a thing or two about the acquisition and retention of wealth.

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Getting paid

Most of us are in business because we are doing something we love or are good at.

We didn’t go into business because we are good at negotiating a price for our product or service and then collecting payment when the work is done.

Without sorting out that part of business however, we could end up being busy but poor.

So how do you reduce the risks of not getting paid?

Here are a few steps which could apply to most businesses:

1. Agree a price in advance for your product or service.
2. Agree payment terms and ideally have a formal written agreement which outlines the work you will do, when it is finished and when and how you will be paid.
3. For new customers or start up business ask for some or all of your payment in advance.
4. When the work is done send your invoice in a timely manner.
5. Follow up if the customer doesn’t adhere to the payment terms.
6. Use the small claims court if the customer persistently avoids paying or breaks promises to pay by a specific date.

These steps won’t guarantee you will be paid every time but they will reduce your risk.

Another good tool in your ‘getting paid’ box is , ‘change orders’ or variations to your contract. These are important when you start off doing the work you were asked to do and the customer keeps asking for something else.

Referring them politely back to the scope of work in your agreement is a first step. If they want the new work doing and it is material, this is where your change order comes in to agree new terms for the additional work.

Someone once said that stripped down to the basic processes, business is simple - ‘make, sell, bill, collect’.

The last one can be tricky to manage but if you want to stay in business you need to do it well.

If you are a one person business you will need to do the collecting yourself. For established or growing businesses, having robust processes and resources in place to manage this key activity is essential.

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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 that...as soon as I get the time

www.base52.co.uk

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!

www.base52.co.uk

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.

www.base52.co.uk

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...

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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

www.base52.co.uk

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.

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