In order to manage your business effectively you need to be sure that it has enough cash to keep trading and that it is running profitably. To ensure this happens, I recommend you review your financial status at the start of each and every business week. You will have financial records, probably in one of the most popular accounting software packages such as Sage, QuickBooks or Xero. Either your own staff or your accountants will use these to prepare VAT returns and the other legal requirements such as the annual accounts required by Companies House. These accounting systems can also produce many of the essential figures you need to review on a weekly basis. Additionally, you need to forecast which clients are likely to pay their invoices this week. This is often not the same as those who should pay this week. Accurately forecasting your weekly cashflow is a skill every business needs to master. Not all of the figures in the list below will apply to all businesses. You … [Read more...]
Top Tips for Foreign Nationals Setting Up Business in the UK
In December 2018 Forbes Magazine placed the UK as number 1 in its list of Best Countries for Business. There is no doubt that the UK offers tremendous opportunities for businesses to be set up and to thrive. However the fact that this is so well recognised means that it is also probably the most competitive country on earth for businesses. You need to make sure that all aspects of your UK operation are run to the highest professional standards in order to succeed. The aim of this article is to give you some tips as to how to setup a company in the UK. Visa. If you do not already have the right to live and run a business here you will need a Tier 1 Entrepreneur Visa. For this you will need to invest a minimum of £200,000 in your new business and employ yourself and take on at least two members of staff in the first two years. Business Idea. You need to start with an idea of what product or service you want to sell. The first step is to think who … [Read more...]
Top Tips for Networking at Business Events
Business networking is one of the most effective ways of generating new business, but it can seem daunting for the less extrovert doing it for the first time. However, even the most shrinking violet will gain confidence and effectiveness with practice. There are many different types of networking event and different times of day in which they happen. Most will let you try them out once or twice for a small fee. Once you have attended a few, chose the ones where you are most comfortable and have had the most success. To help you make more of the opportunities present at your next business event, here are my top 10 tips for networking effectively. Draft an 'elevator pitch' - a short (approx. 30 seconds) overview of your business, that you can trot out when asked “what do you do?”. It is best to have a few variations so that you do not say exactly the same thing every time, and so start to sound like a recorded message. Take a plentiful supply of … [Read more...]
Setting up business in the UK for non EU citizens – Essentials Check List
The summer is a time when visitors come from all over the world to watch our famous sports events including Wimbledon, test cricket at The Oval and the UK Grand Prix at Silverstone. To the side of these visits, many are also researching the UK as a destination for their new business. The UK is now one of the easiest countries in the world to do business in but there are a number of essentials you must have in place before you can start trading if you are a non EU citizen. Visa You will need a Tier 1 Entrepreneur Visa, or a Tier 1 Investor Visa. For the Entrepreneur Visa you will need to invest a minimum of £200,000 in your new business and employ yourself and at least two members of staff. For the Entrepreneur Visa you need to be prepared to invest at least £2m in the business. Business Idea You need to start with an idea of what product or service you want to sell. The first step is to think who might buy your product and why. You need a USP (Unique Selling … [Read more...]
Setting up a Company in the UK
This is a brief guide aimed mainly at overseas businesses wishing to set up in the UK. However much of it is also relevant to someone already in the UK who wishes to start a business. Overview The UK is one of the most business friendly countries in the world. A company can be set up quickly and inexpensively, with a minimum of interference from national government bureaucracy. Legitimate businesses will be able to flourish in a country with little corruption, and a legal system that is fair and open. A business in the UK can be set up as a Sole Tradership, an LLP (Limited Liability Partnership) or a Limited Company. In practice almost all overseas businesses setting up here incorporate as a Limited Company. This is the way that enables the overseas management to best control the UK entity. Initial Incorporation You will need to choose a name for your company. Most probably this will be a variation of the existing … [Read more...]
Brexit – What now for SMEs?
The electorate has decided that the UK should leave the EU. How best can SMEs respond to the coming changes? Whether you are pleased with the outcome or dismayed is irrelevant. The decision has been made. What you need to focus on is how best to manage and grow your business in the short to medium term. Long term planning is more difficult as the Brexit option only leads to many uncertainties. The first thing is - Don't Panic. Nothing is ever as good or as bad as it seems. Every triumph always has at least some form of downside, and every disaster (except perhaps illness and death) is never as black as it first appears. There is almost always some benefit to be found, and things are very rarely as bad as they seem initially. As small business owners we are naturally optimistic people. We would not have started and continued to run our businesses if we were not naturally hopeful. Now is the time to start thinking … [Read more...]
How To Significantly Increase the Sale Value of Your Business
Big public companies trade at a significant premium over small businesses in the same industry because investors perceive big, sophisticated companies as a safer bet than small, owner-dependent companies. So how do you get a public company-style multiple profit value for your business? One approach is to look for a strategic buyer. Unlike a financial buyer that is looking for a relatively safe return on their capital invested (which is the reason investors place a premium on big, stable companies trading on the stock market), a strategic buyer will value your company on how buying you will impact them. Let’s imagine you have a grommet business predictably churning out £320,000 in pre-tax profit. These days, a financial buyer may pay you around 4 or 5 times earnings – in this case, roughly £1.6 million – if you can make the case your profits are likely to continue well into the future. Now let’s imagine that a company that sells a … [Read more...]
One Hidden Thing That Drives Your Company’s Value
You already know that your company’s turnover and profits play a big role in how much your business is worth. Are you also aware of the role cash flow plays in your valuation? Cash vs. Profits Cash flow is different from profits in that it measures the cash coming in and out of your business rather than an accounting interpretation of your profit and loss. For example, if you charge £10,000 upfront for a service that takes you three months to deliver, you recognize £3,333 of turnover per month on your profit and loss statement for each of the three months it takes you to deliver the work. But since you charged upfront, you get all £10,000 of cash on the day your customer decides to buy. This positive cash flow cycle improves your company’s valuation because when it comes time to sell your business, the buyer will have to write two cheques: one to you, the owner, and a second to your company to fund its working capital – the cash your company needs to fund its immediate obligations … [Read more...]
10 Things That Make Your Business More Valuable Than That of Your Industry Peers
The value of your company is partly determined by your industry. For example, cloud-based software companies are generally worth a lot more than printing companies these days. However, when we analyse businesses in the same industry, we still see major variations in valuation. So we dug through the data available to us and we found 10 things that will make your company more valuable than its industry peer group. 1. Recurring Turnover The more turnover you have from automatically recurring contracts or subscriptions, the more valuable your business will be to a buyer. Even if subscriptions are not the norm in your industry, if you can find some form of recurring turnover it will make your company much more valuable than those of your competitors. 2. Something Different Buyers buy what they cannot easily replicate on their own, which means companies with a unique product or service that is difficult for a competitor to copy are more valuable than a company that sells the same commodity … [Read more...]
Eight Questions You’ll Be Asked When Selling Your Business
One of the most intimidating aspects of selling your business can be facing the barrage of questions during the various management presentations you’ll be doing for potential acquirers. Be prepared to be grilled on all facets of your operations. Of course every meeting will be different, but here are some questions you can expect to be asked when you’re in the hot seat: 1. Why do you want to sell your business? It's a slippery question because if your business truly does have a bright future and you want the buyer to believe that's the case, the obvious question is: ‘Why do you want to sell it, and why do you want to sell it now?’ 2. What is your cost per new customer acquired? The potential acquirer wants to find out if you have a predictable, economical and scalable formula for finding new customers. 3. What is your market penetration rate? The acquirer, with an eye to future growth, is trying to understand how big the potential market is for your product or service and what … [Read more...]
Growth vs. Value: not all turnover is created equally
When you look ahead to next year, will your growth come from selling more to your existing customers or finding new customers for your existing products and services? The answer may have a profound impact on the value of your business. Take a look at the research coming from a recent analysis of owners who completed their Sellability Score questionnaire. We looked at 5,364 businesses and found that the average company that had received an overture from an acquirer was offered 3.5 times their pre-tax profit. When we isolated just the businesses that had a historical growth rate of 20 per cent or greater, the multiple offered improved to 4.3 times pre-tax profit, or about 20 per cent more than their slower growth counterparts. However, the real bump in multiple came when we isolated just those companies that claim to have a unique product or service for which they have a virtual monopoly. The niche companies enjoyed average offers of 5.4 times pre-tax profit, or roughly 50 per cent … [Read more...]
Six ways to profit from your holiday this summer
Summer is nearly here, and although it may seem strange, now may be the perfect time to increase the value of your company. The most valuable businesses are the ones that can survive without their owner. A buyer will pay a premium for a company that runs on autopilot, and levy a steep discount for a business that is dependent on its owner. This summer, consider taking an extended break from your business to see how things will run when you’re not in the building. It’s likely that some things will go wrong, but use those errors as the raw material for making your business operate more independently of you – and therefore making it more valuable. Here is a six-step plan for profiting from your vacation time this summer: Step 1: Schedule your vacation plus one day Whatever day you plan to start working again after your holiday, tell your staff you’ll be back one day later. That way, you’ll have a full day of uninterrupted time to dedicate to understanding what went wrong in your … [Read more...]
Do you have a £500 million business hiding inside your company?
Asking customers to pay to join a special group of your best patrons can increase your turnover; encourage customers to buy new products and services from you, and provide a healthy boost to your cash flow. Just ask Jeff Bezos, the founder of Amazon.com and the chief architect behind Amazon Prime. In exchange for £49 a year, Amazon Prime customers get: FREE One-Day Delivery with no minimum order size on millions of items. Upgrades to Express Delivery (before 1pm) for just £4.49 per item and Evening Delivery to all eligible addresses for just £7.48 per item. Over 350,000 popular Kindle Books to borrow for free, with no due dates. According to TIME Magazine, more than 10 million people have signed up for Amazon Prime programs worldwide. If you do the maths, that makes Prime a five hundred million pound business for Amazon. And like most programs, members pay upfront, giving Amazon a big injection of positive cash flow. But what is even more interesting is what being a … [Read more...]
Building a Business for Sale
To grow a valuable business – one you can sell – you need to set up your company so that it is no longer reliant on you. This can be easier said than done, especially when, like a PR consultant or plumber, what you are selling is your expertise. To scale up a knowledge-based business, you first have to figure out how to impart your knowledge to your employees, so that they can deliver the goods. However it can be difficult to condense years of school and on-the-job learning into a few weeks of employee training. The more specialised your knowledge, the harder it is to hand over work to juniors. The key to scaling up a service business can often be found by offering the service that prevents customers from having to call you in the first place. You have to shift from selling the cure to selling the prevention. Fixing what is broken is typically a hard task to teach; however, preventing things from breaking in the first place can be a far easier task to train others to do. For … [Read more...]
Is Now the Time To Sell Your Business?
Have you been thinking about selling your business but just can’t decide if now is the best time? Do you find yourself repeatedly analysing the economic situation and wishing you had a crystal ball? There are positive signs and there are negative signs…. If you’re still up in the air and can’t quite decide whether or not to hit the eject button, here are six reasons you might want to consider getting out now. 1. You’re less interested in fighting the good fight A lot of business owners took the Global Financial Crisis in the teeth. If you’ve got your business stabilised and the prospect of possibly having to fight through another recession leaves you panic-stricken, it could be time for you to get out. 2. The worst is behind you Let’s say you were mentally ready to consider selling a few years ago, and then 2008 hit and 2009 was bad, and in 2010 and 2011 you made cuts and adjustments, and now you’re seeing some profit and revenue growth. With your numbers going in the right … [Read more...]
How to make your company irresistible to potential buyers
One of the biggest factors in determining the value of your company is the extent to which an acquirer can see where sales will come from in the future. If you’re in a business that starts from scratch each month, the value of your company will be lower than if you can demonstrate the source or sources of future revenue. A recurring revenue stream acts like a powerful pair of binoculars enabling you and your potential acquirer to see months or years into the future. Creating an steady income stream is the best way to increase the desirability and value of your company. The more certain your future revenue is, the higher the value the market will place on your business. Here is the hierarchy of recurring revenue presented from least to most valuable in the eyes of an acquirer: No. 6: Consumables (e.g. shampoo, toothpaste) These are disposable items that customers purchase regularly, but they have no particular motivation to repurchase from one seller or to be brand loyal. No. 5: … [Read more...]
How to thrive as a middleman – become an Expert
Being a middleman (or woman) has become risky business. When was the last time you used a travel agent? Agencies have largely become irrelevant given the rise of online travel booking companies. How about a record/CD store? iTunes and online music subscription services have removed the middleman from between you and your music. Think back to the last time you rented a film – did you get in your car to visit the local Blockbuster? Travel agents, record/CD stores and film rental businesses have all fallen victim to the curse of the middleman. When all you do is move other people’s product, the only value you have is your location. But in a world where content can be streamed and containers can be shipped overnight, being the local person is becoming irrelevant. Even if you have a protected geographic territory, near perfect pricing information available to your customers through the Internet will eventually grind down your margins. Dragging down your value Not only do … [Read more...]
Beware of the Mile Wide Trap
If your turnover has stalled after a period of rapid growth, you may have fallen into the Mile Wide Trap. Consider the case of Kim (not her real name) who runs a public relations firm. Kim studied marketing at school and went on to work for a big advertising agency where she spent ten years learning a variety of marketing disciplines, from public relations to advertising to direct marketing and social media. Then Kim decided to leave her job to start a public relations firm. Given her depth of experience and connections, she quickly landed tractor giant John Deere as a client, and was asked to handle their regional dealer events. She hired some helpers and her start-up agency quickly began to grow. Kim did a great job with the dealer events, so John Deere asked her to handle their annual sales conference. Again she delivered with style and creativity. Impressed by Kim’s innovative approach to the event, John Deere asked her to handle some of the creative for their next advertising … [Read more...]
Improve your Business – Take a Break
A recent survey found companies that can perform well without their owner for a period of three months are more successful and easier to sell than more owner-dependent businesses. Their owners also have a better quality of life. There is no better justification for taking a blissful, uninterrupted holiday than to see how your company performs in your absence. The better your company runs on autopilot, the more valuable it will be when you are ready to sell. To gauge your company’s ability to handle your absence, start by taking a break. Leave your computer at home and switch off your mobile. Upon your return, you’ll probably discover that your employees were resourceful, and found answers to a lot of the questions they would have asked you if you had been just along the corridor. That’s a good thing, and a sign you should start planning an even longer holiday. You will also probably come back to an inbox full of issues that need your personal attention. Instead of busily … [Read more...]
Some Considerations on Exit Planning
Every business owner should bear in mind that at some stage he or she will have to cease involvement with their business. Possible reasons for this are varied. Some are forced upon the business owner, others are the result of a decision to leave. Reasons include: A wish to start or join another business A feeling that you are no longer the best person to manage the business A loss of enthusiasm for the business A wish to retire Ill health Death Insolvency In all cases (even insolvency) it is in the interest of the owner and the owner's family to optimise the outcome. In practical terms in most cases that means to get as much money as possible for the business. Every business owner should from time to time give some consideration to what might happen if they decided or were obliged to exit for whatever reason. In the case of a planned exit they should also remember that they should ideally start active work on the exit three years ahead of its hoped for … [Read more...]
