Making Your Business Profits (Boat) Grow (Go) Faster

At this months Entrepreneurs Circle meeting we had an inspirational presentation from Olympic gold medal winner Ben Hunt-Davis. I Know what you’re thinking – who the hell is he? Well I have got to say that was pretty much my reaction, however he comes with good credentials for helping business owners being one of the coxed 8 rowing team that won Gold at the Sydney 2000 Olympics.

Why is that relevant to business ? Well Ben described a typical business scenario of having several years not quite getting to the top of his trade before he started to changed his thinking. For 7 years his team of eight had regularly come seventh in major competitions. Coming seventh is like coming nowhere since only the top six qualify for the finals.

When the team for Sydney 2000 was assembled they did things differently. Every one of their habbits was linked to their driving force “Will this action make the boat go faster”. That included having a beer before training or a race (answer obviously no – so don’t do it). A favourite saying was “Today’s going to be a good day because I’m going to make it a good day”.

The team worked smarter not necessarily harder and in fact reduced the number of training sessions from 21 to 19 per week (ok 19 times a week requires major dedication which 99% of rowers would not match). They operated continuous improvement processes, literally analysing every training session and race to see how they could make improvement. On one occasion they actually had a physical fight in the boat, so plenty of improvement possible after that. Great detail was observed and terminology such is ‘separation of the hands’ defined carefully to make sure there were no misunderstandings, hence best performance was achieved.

All business owners can learn from these philosophies to do things differently, reaxamine the business, continuous improve, and have a single minded determination to achieve your goals. Ben’s mantra and title of his book was “Will It Make The Boat Go Faster” ? What is your equivalent mantra that will drive your business to achieve your Goals.

Should you Model your Business on The Queen ?

Now media coverage of the Queens Diamond Jubilee settles down it is good to reflect on what we can learn from the 60 year reign. The Queen represents a fantastic example of how you should run your business.

Firstly it is very clear that the Queen has a detailed plan that has been prepared months or even years in advance. The logistics involved in organising the 1000 boat Pageant on the Thames required meticulous planning. And the same goes for the faultless presentation of her other many engagements before and after the jubilee celebrations. Every business needs a plan with deadlines, and those deadlines mean you must achieve implementation which is the key to your success.

Clearly the organisation of these events requires the backing of a good team. Being crowned Queen at such a young age must have been a really frightening experience. Certainly I can remember how scary the first year in business was. You have to achieve sales to pay the bills. There is no better incentive than that. Business owners are well advised to make connections with experienced business associates who can help mitigate those initial challenges and indeed allow you to grow in future years.

In the accountancy professional each year we are required to follow programmes of continuing professional development. It is clear that the Queen knows who her customers are. By reading newspapers and relevant documents every day the queen is doing her continuing professional development so she can communicate to her target market in an informed manner. All businesses should do the same.

Fashions have changed dramatically over the last 60 years but The Queen has consistently presented a style and image that is recognised throughout the world. All businesses would benefit from consistently presenting their branding and message to their target market.

The Queen is respected and admired throughout the 54 commonwealth nations she represents, and indeed throughout the world. Her ability to continue to smile and wave at the attendees at the pageant on the River Thames while standing for several hours was amazing. Despite some difficult times over the years she has had the dedication and determination to continue to serve the nation. Any business owner who can emulate these characteristics will surely have a business to be proud of.

Sir Tax Accountants help small business owners minimise their taxes and also review how you grow business profits, in Camberley and surrounding areas.

The Royal Wedding Opportunity

Whether you are a royalist are not I sure you will have an opinion whether the extra bank holiday is a good thing or not.
Small business has been hit hard in the recent years with the statutory minimum for employee holidays increasing from 20 days to 28 days, so a further day is unlikely to be welcome from business owners already under pressure in a slow moving economy.
Businesses that sell products would have been well advised to seize the opportunity and release a royal themed product a few weeks ago. And creative service companies could for example have offered a free glass of champagne this week when clients attend a consultation.
Small business owners should check employee contracts. If the contract says staff are entitled to 28 days holiday there is no obligation to offer staff the extra day holiday. But you should also consider the effect on staff morale if you don’t offer the extra day off. So where is the opportunity for small business owners stuck with this dilemma. All too often staff take business owners for granted. So why not take the opportunity to have a team briefing with staff and explain the affect on the business from the lost time, and that you need a commitment from staff to increase productivity so that the lost time does not damage the viability of the company.
As Camberley accountants we offer clients business advice as well as tax planning. We hope it helps.
Looking forward to the street party on Friday – enjoy the day.

Sole Trader vs Limited Company – How Should You Structure Your Business?

Are you starting a business ?

That can be quite scary if you have never run a business before.

How do you structure the business ?

The question of whether you set up as a Sole Trader or Limited Company tends to be more involved than you think.

As for all areas of tax planning you should consult your accountants before you take action not afterwards. Sir Tax Acountants Camberley are happy to give advice on the issues listed below.

There are 3 scenarios (not including further options for partnerships):

1       Do you start with the intention of trading as a sole trader until you cease trading or sell the business ?
2      Do you immediately set up as a Limited company ?
3      Do you start as a sole trader with the potential strategy to convert to a Limited Company at a later date when you have proven the growth potential of the business ?

The answers to these questions will inevitably be affected by individual’s circumstances. Key points to note are as follows:

1      Sole Trader

• Operating as a sole trader is the easiest approach from an administration point of view, and gives you flexibility in terms of how capital is introduce and drawn from the business.
• It is easy to start a sole trade business – just make sure you contact HMRC within 3 months of trading to avoid a fine.
• Your legal obligation is to submit a tax return to HMRC by 31st Oct for paper filing or 31st Jan for online filing
• You should adopt the mentality that you are growing your business to sell your business. In some circumstances it is more advantageous from a tax point of view to sell a sole trade business than a Limited company

2       Limited Company

• Operating as a limited company can: offer some tax advantages; limit your personal liability if the company fails; and give you a better level of credibility with your potential customers
• As a director of a Limited Company you have a number of statutory obligations laid out in the companies act 2006. Keeping it simple you have legal obligations to your shareholders, customers, and suppliers, H M Revenue and Customs (HMRC) and Companies House. Eg, you can only draw dividends from the company if there are profits available to do so
• Each year you are required to: submit accounts and a company tax return to HMRC, Accounts and an Annual Return to Companies house; prepare resolutions to declare dividends and other significant company actions; and operate PAYE and submit the associated returns to HMRC
• Due to the extra administrative effort the cost of accounting is significantly higher for Limited Companies than a sole trade business, so you need to have a reasonable level of profit to make the extra cost worthwhile.
• It is difficult to get buyers to agree to buy your shares when you sell a Limited Company. Under these circumstances it is usually less tax efficient to sell a Limited Company when compared to selling a sole trade business

3      SOLE TRADE transferred to LIMITED COMPANY

• Unless you have experience of running a business it is difficult to be sure how successful you will be. Of course you should do market research and assess the risks in your business plan, as covered by my earlier blogs. Unless you are experienced and confident in your ability to grow your business, it is a good idea to start as sole trader and potentially convert to a limited company at a later date
• If you transfer your sole trade business to a Limited Company you are effectively selling your personal business to the Limited Company. In most cases a ‘goodwill’ value will be created.
• You may have to pay capital gains tax on the goodwill value transferred to the Limited Company, be it at a relatively low rate where entrepreneurs relief is available
• The goodwill value that you transferred to the limited company is available in the director’s loan account and can be useful for tax planning purposes.
• For companies incorporated after 31March2002, the goodwill value can be amortised in the accounts to reduce profits. This reduces the amount of corporation tax to be paid, but you should also be aware that this reduces the amount of profits available to be distributed as dividends.

Please make sure you discuss these points in more detail with your accountant

Business Planning – Minimize Financial Risks

In the current economic climate it is more important than ever to take steps to minimize your financial risks in business. A number of key areas to address follows:

• Prepare a business plan detailing: the business case; start up funding needs; and ongoing cash flow requirements. Don’t forget to allow for VAT in the cash flow forecast.

• Make sure you do detailed market research to verify that there is a market for your products / services

• Don’t take on a business partner unless you are sure they add value to the business.

• Operate your business from a home office for as long as practicable. You can meet clients at their premises, at a good hotel, or at an office rented on hourly basis. Technology and outsourcing will allow many operations to function remotely from your office

• If you have to take premises negotiate the shortest lease period or break clauses as possible.

• Wherever possible obtain payment for goods and services up front, or at least a deposit. Do not offer extended credit terms

• Make sure sales invoices are issued immediately on work completion. Lack of cash flow causes many business failures so consistently follow up until payment is received

• Continuously measure staff performance and be prepared the lay them off if they do not achieve the required return on investment. After one year in employment (including the notice period) it is potentially much more difficult to make staff redundant

• Continuously evaluate and improve business processes, with the mindset to add value ready to sell the business.

The above is not an exhaustive list however if implemented will go a long way towards assuring the long term survival of the business.