Its all changed, but good business practice still applies

This is an incredibly difficult time for everyone, both personally and professionally. 

I’ve rewritten this blog once or twice as I don’t want to understate or show any lack of empathy with the difficulties some businesses face at the moment.

For business owners, our woes don’t compare with key workers and those on the front line in the NHS, but there are huge challenges nonetheless.

For some businesses, especially those in retail, hospitality and leisure, turnover has dropped almost instantaneously to zero. For other businesses there has been a sharp decline and the future is uncertain. It’s as if all the day to day challenges we all face as business owners have been crammed into the space of a few weeks and magnified several times over.

It’s tough and we are all trying to navigate our way through.

The Government financial support measures will help many businesses through this period. As business advisors we have spent much of the last few weeks advising our clients on what support measures apply to them and how they can make a claim. For some its a lifeline, for others they have slipped through the net, at least for now and are doing what they can to get by.

Despite all the difficulties I want to argue that the basic rules of doing business should still apply. 

That is, it is incumbent on all of us to negotiate in good faith and only agree to receive products and services we can afford to pay for. If we’ve had a sudden financial shock and meeting agreed payment terms is not possible in the short term, we should speak to our suppliers and try to agree a mutually acceptable way forward.

Something which I believe is not particularly helpful or constructive is saying to suppliers, ‘Things are tough, I’m not going to be able to pay you for a while.’ Another way of putting this is, ‘I’ve prioritised things and paying you is not a priority.’

There have been well-publicised instances of some larger firms doing this and leaving their suppliers high and dry. In my own network I am aware that this has happened a number of times.

In some cases, as well as stopping payment, the customer was still expecting to continue to receive services until their situation improved.

Of course I get it that things are tough. Of course I understand that businesses want to hold onto their cash. Survival is their main objective.

But shifting their problems onto their suppliers isn’t helpful in the longer run. 

A sensible compromise is agreeing a reduction in the ongoing scope of services delivered to what is affordable and perhaps agreeing extended payment terms for old debt.

So everything is different but good business practice still applies.

As the Government has said, this will end at some point and more normal trading conditions will resume. 

Following good business practice during this period will ensure we have a better chance of emerging in good shape and with positive business relationships when the time comes.

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Don’t get carried away with the bells and whistles

It’s easy to be seduced by new technology.

In the accountancy world, ‘Cloud’ is the thing. It’s been around for ages but recently it has come of age. It’s on the telly. It’s advertised as, Beautiful’. Your accounts and tax return are a breeze, completed seemingly in one click.

As enthusiastic adopters of Cloud software we’ve promoted it to our clients and in a relatively short period of time its become our preferred way of working. The benefits are clear to us - more automation, faster and easier processing, better accessibility for our clients.

Every now and then you get a reality check though. 

I met with a client this week and we were discussing her services for the coming year. I threw in, ‘Now we’re using this cloud software you can login any time and anywhere to view your financials’. 

She’s a busy, successful business owner and her response put me in my place, ‘The last thing I need is another login. I want you guys to send me a simple report, when I need it which gives me an overview of my results and actions needed’. 

She went on, ‘This is all about making it easier for you, not me’.

Bam! 

She’s right of course. Certainly about the first part. What is important is how she wants to receive her financial information. A login doesn’t work for her. She wants us to prepare management accounts at the frequency and timing she needs to manage the business, So that’s what we will do. The technology is the enabler, rather than the solution.

On the second point, the technology undoubtedly makes things easier for accountants. It does help us to a better job and do more of what matters - advising on financial performance and being proactive.

As a business owner I’m also a user of the new technology. 

We’ve adopted the cloud for our own accounts and yes, I have my own login. Do I use it regularly? I must confess its more of an occasional thing if I need to check a particular aspect of the accounts. Like my client, I’m a bit ‘old school’. I prefer a monthly discipline of a printed management accounts report which I can review in detail with another team member and take action accordingly.

Each to their own. 

My meeting with my client was a timely reminder and wake up call that new technology is great but in accountancy (and in business) it’s still ‘all about the numbers’.

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Carry on networking

Browsing LinkedIn this week I came across a post from a marketing expert, specialising in the accountancy sector. 

The thrust of her message was that networking for accountants, particularly start-up accountants was not the best use of their time. There are better ways to spend 3 or 4 hours which would probably deliver more sales leads and be more productive.

I kind of get this. 

As an established accountancy firm owner I’m much more selective these days about the kind of networking I get involved in. More typically its, ‘One to one’ rather than ‘One to many’. A coffee and a chat with an existing contact or maybe someone I’ve not met before where there are opportunities to explore for mutual benefit.

In my start up days I did the rounds - structured networking groups like BNI and other, less formal groups. I put myself out there and got involved.

Looking back, I think it’s been worthwhile.

First it helped me think about my marketing and how I could stand out from other firms. There is nothing like knowing that you are going to have to present to 30 or 40 people to focus your mind and make you think about your message. If you don’t get it quite right, there’s always next week and gradually you refine it to get something a bit more polished and coherent.

It was a great way to learn presentation skills and other skills like...networking. How to talk to people (and listen!) in a crowded room and make a connection.

Then there are the contacts I made. The people I met networking who now look after our IT, our HR, manage our payroll, our marketing. They were contacts first, then people I liked and came to trust and then we worked together. They have developed into great, long term relationships. Being a business owner can be a tough journey and having a number of business pals to share it with is a positive thing.

It was good for awareness and raising mine and the firm’s profile. ‘There was that accountant bloke who I met at that networking group who specialises in that kind of service.’ Word got around.

Of course there were the sales. Particularly from structured networking we gained a good number of new clients, some of whom remain with us to this day.

For me, more structured networking which required a regular commitment, came to a natural end. It reached a point where the time and effort involved didn’t justify the payback. So more informal, targeted networking became more effective.

What would I say to my younger self though if I was starting out again? 

I think I’d say, ‘Carry on networking’. Keep reviewing, keep re-evaluating what works and what doesn’t, but carry on.

The benefits are much more than just achieving the next sale. The learning, personal development and connections you make are just as important and probably more enduring.

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The billable hour is dead!

Or it should, be according to business guru Ron Baker and others. 

But it lives on. Buoyed up by years of habit and entrenched thinking.

Ron is a writer and radio host and one of the founders of Verasage, a US think tank committed to researching and promoting best practice in professional firms. I first came across Ron when I went to my Institute’s conference for accountants working in practice just before starting my own practice 16 years ago. The other speakers at the event were pretty forgettable and Ron stood out as the one with the most radical and authoritative message. His delivery was good too. Confident in his subject and put across with a dry humour, laced with anecdotes. His brilliant book, ‘The Firm of the future’, co-written with Paul Dunn, is 16 years old now but still feels fresh and innovative and full of great ideas.

So in my own accountancy practice I have tried to avoid timesheets from day 1 and reject invoicing customers on an hourly basis. I say ‘tried’ as I haven’t always been imaginative enough to avoid returning to the dreaded billable hour. 

Ron and his acolytes advise pricing based on value. Start with the price and the hours expended and other internal costs really shouldn’t matter to the customer.  Although sometimes it does. Occasionally when I quote a price a customer will want to know how long the project is going to take or afterwards (very rarely) they may ask to see a time log. Maybe for some people their perception of value is still based on how long it took to deliver it? As customers we don’t ask that about cars or the latest iPhone but in some cases we do it seems about professional services.

Value Pricing’ as the term goes is, ‘The highest price a customer is willing to pay for a product or service’. 

Wow! What business wouldn’t want their customers to pay the highest price for their product or service? The important phrase here is ‘willing to pay’. In value pricing both the seller and the customer are happy as they have achieved what is valuable to them.

Lets be clear. This is not about over-charging. In accountancy firms some services like monthly payroll and a basic tax return might be 'commoditised' and the price standardised and set by the marketplace. For more complex advisory work or for a bundle of services where a customer's requirements and perception of value are unique, value pricing can be a win/win for the seller and the buyer.

Getting back to why I occasionally fail with this and revert to the billable hour. It tends to be on projects which are ‘open-ended’ and you don’t quite know what is going to be involved or how much effort and time will be expended. An example might be a tax enquiry going back several years. Under value pricing you would quote a fixed price to achieve certain results and offer appropriate guarantees. I usually ‘bottle it’ and quote an hourly rate and the prospect is invariably happy. Value pricers would argue that the prospective customer is looking for a solution and certainty and a fixed price would be more attractive than an open-ended bill based on time spent on the project. Next time this comes up I will try to be braver and see how I get on.

The accountancy sector is slowly changing and more firms seem to be moving away from timesheets and billing based on these. There are even software products which help firms set prices based on their own set of rules. I have tried these and I couldn’t get on with them. Although I set the rules, the price the software churned out didn’t necessarily agree with my judgement of the where the value point was for my prospective customer or for me. It felt like I was passing the pricing decision over to a machine.

That’s not for me although I can see the benefits of standardisation and rules for pricing. 

But going back to the definition of value pricing, “The highest price a customer is willing to pay...’. How can software decide that unless it is very clever software indeed? 

Value pricing seems to be an art rather than a science.

A dance between the seller and the prospective customer. For the seller to establish the needs and wants of that prospective customer and then address them with a compelling proposition with service guarantees, a certain outcome and a price which reflects the value delivered.

I will be sticking with my judgement for pricing for the time being but who knows, with the progression of AI maybe the machines will take over before too long.

That really would be the death of a salesman or maybe, more accurately, the death of a value pricer

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Ch-Ch-Ch-Ch-Changes

‘Turn and face the strange’, as Bowie said.

I’ve lived through and played a small bit part in some big change programmes in my former life as a management accountant at a large food retailer.

Big consultancy firms were involved, large PowerPoint presentations, lots of jargon and buzzwords and backing from the Board. Some went better than others. Key aspects were engaging those affected and ultimately the whole business on why the changes were needed and communicating, communicating, communicating.

Some of the changes implemented like effective meetings, project management tools and process improvement became part of the DNA of the company and helped it stay ahead of the competition for a sustained period of time.

What about managing change in a smaller company - say with 10, 20 or 50 employees? Processes and ways of working tend to be more informal and centred around people and their likes and dislikes rather than a company style. Budgets are small and people (including the owner) are normally working at capacity so there is little time to consider and actively engage with change.

But sometimes change needs to happen.

Small businesses evolve and from time to time they reach a plateau. Perhaps they have become too dependant on the owner. Perhaps the owner is nearing retirement age and wants to move away from doing 50/60 hours weeks. Perhaps the business has become a bit stale and is not focussing on their customers.

Making a change can be difficult but it can transform a business if the owner and key employees commit to the change and focus intently on delivering it.

The same principles of communication and engagement are critical as with a larger organisation.

I strongly believe that an external facilitator of some kind is important if not essential. This could be the company’s external accountants or a business consultant of some description. Their key attributes should be that they are experienced in managing change and ideally with specific experience in the areas you are looking to transform.

Another essential component in my view is to have a programme manager or project manager whose responsibility is to oversee and facilitate the change. This would probably involve freeing up one of the team from their day job for a period of time to manage the change programme.

So you have a plan and the objectives you want to achieve. It’s worth bearing in mind Mike Tyson’s quote, ‘Everyone has a plan until they get a smack in the mouth’. You will probably get several smacks in the mouth to veer you off plan and will need to keep the objectives in mind and try to steer back on track.

With luck, effort and resilience the plan can be achieved and the business taken to a much better place.

Good luck if you decide to embark on your own change journey.

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Early Adopters, Laggards and those in between

I used to work with an Early Adopter. 

No, I mean a real Early Adopter. He loved the newest of new technology. Whether it was the latest phone, the latest palm pilot (as it was back then), he was first in. It didn’t matter that it was pricey or still in Beta version with all the glitches. He had to have it. So he did.

It must be nearly 20 years ago now since we were working together and he was taking notes using a writing gadget on a rudimentary tablet. They are now mainstream with Smart Pencils and other tools and Apps but he was well ahead of the curve.

My tech-loving work colleague has gone on to be a senior director in the world of marketing and social media. Being at the ‘bleeding edge’ has done him no harm at all.

I’m not like that. I’m always interested, but whether its work or play, I usually wait for something to be tried and tested before I dive in and have a go.

There is a ‘Technology Adoption Life Cycle’ which describes the different categories of behaviour types. These range from Innovator and Early Adopter through to the Late Majority and Laggards. Laggards only come along screaming and kicking after the new technology becomes mainstream. Typically they will still be watching Betamax videos and playing their vinyl records. On the latter, the cycle came around again and they could argue they were the innovators. But that is the exception.

Usually the Innovators and Early Adopters win in the market place. They take the pain and make the mistakes but keep learning and stay ahead of the pack. So when the Early Majority join in they are already on to the next thing. 

Being slightly late isn’t always a bad thing. Being too late is disastrous. 

So in the business world, when the Early Majority ‘wake up and smell the coffee’, if they act quickly and decisively and embrace the new technology or process which is disrupting their market, they can still exploit the new opportunity at the expense of the Late Majority and the Laggards. 

Technology is disrupting the accountancy sector in a big way at the moment. Cloud software has been around for a long time but is really now coming into its own. Why would you use a clunky desk-top package when you can have a cloud package where you can view your accounts from any device, at any time and it is always up to date? Scanning software too is taking the drudgery out of bookkeeping by removing the need to key in receipts. 

I have to admit that we have not been first out of the blocks with this. We have had our cautious accountant’s hat on and observed closely how things have developed. HMRC’s “Making Tax Digital’ initiative has also changed the landscape by making the adoption of accounting software a necessity for small businesses.

Our instinct has been to go with our clients on this and move at a pace they feel comfortable with. We will continue to do this but I think they expect us to lead and guide them, which is what we intend to do. 

On a personal level I have my new tablet now with the whizzy drawing pencil for my notes. I’m 20 years behind my old work colleague but I’m embracing it enthusiastically. 

Who knows, I might just try out one of those new-fangled Smart Watch things very soon.

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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...

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A lesson in value

It sounds rather grand but for the last few years I have hired someone to help with the gardening. It's never been my favourite thing, more a chore than a hobby, so getting some help to do the pruning and heavy lifting seems to make good sense.

The chap I have been working with is his own man and he works around his own schedule. I've tried to book him for specific times in advance but he prefers to keep it more flexible. So it turns out that when I need him he's not always available and when I don't need him (in the depths of winter) I get a text asking if we have any work.

That said, he knows his plants and generally his work is tidy and he's reasonably efficient. His hourly rate is quite high but all in all, he is reasonable value for money.

I was walking to town the other day and saw a young chap with a hedge trimmer attacking my neighbour's privet. I stopped for a chat and found out he charged half the hourly rate of my man. This seemed too good to miss so as the garden needed a tidy up I arranged for the young man to come along and have a look. We had a chat about what needed doing and arranged a time.

Big mistake! Turns out this chap is basically a 'man with a lopper' who appears to know nothing about plants. He has butchered the Rosemary at the side of our steps so it has gone from being a luxuriant shrub to a misshapen bunch of leafless twigs. He carved all the flowering heads off the Buddleia to leave a sorry looking clump of withered leaves and he left when the bin was full of debris so one half of the garden was untouched and half was left scarred by his indiscriminate attack.

As the saying goes, 'You get what you pay for'. My new guy was cheap, but an unmitigated disaster. He sent me a text asking if I would like him to come round and finish the other half. I have gently said that I have this covered

So I am back with my somewhat inflexible but knowledgeable and expensive original gardener. I rather sheepishly told him about my trial with the other chap and he took a little too much pleasure in letting me know what a mess he had made. I think I heard him whistling and chortling while he went about his work.

So a few lessons learned there but the main one being that 'cheap' isn't necessarily good value. I will take a little more care next time I think something is too good to miss.

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