It’s very easy to buy software today – gone are the times when you needed to go out and buy a disk and install something. Now you go online looking for a CRM system and, within minutes, you are using one on a free trial, and it works on your desktop, laptop, tablet, phone – anywhere you need it. This ease of access has a couple of effects: first, it’s easy to sign up for something without fully understanding the functionality on offer and, second, there are a lot of people after your monthly subscription, so there is a variable quality of product on offer. In short, it’s a bit of a minefield. Smaller businesses who are not willing or able to implement a modular enterprise system like SAP, Microsoft Dynamics, or one of the larger Sage products, for example, are potentially left with numerous different solutions. These may cover accounting, CRM, e-commerce, order-processing, inventory management, and other specialised business … [Read more...]
Selling a Business – Avoiding an own goal in due diligence – Part 2
How secure is your intellectual property? In the last blog I dealt with the tricky question of contracts and “change of control clauses”. Another hard lot of questions you will have to answer will be to do with your Intellectual Property. You have searched for all your IP stuff and mostly drawn a blank. The questions you could be asked are for you to provide a list and supporting documentation covering all: “Details of any software, web site or electronic database owned or used by the company indicating in each case whether the software, web site or electronic database is owned by the company or licensed. Supply copies of all licence agreements together with a list of fees payable and Copies of all other agreements relating to the development or operation of software, web sites, databases or hardware for or on behalf of the company. Details of any infringements or alleged infringements of any intellectual property owned … [Read more...]
What is Financial Modelling and how can it help my business? Part 1
What is Financial Modelling? -- Business owners have posed this question to me often. While there can be several complicated definitions, simply put, it is the practice of projecting a business’s operating and financial results. Financial modelling allows you to see into the financial future of your business, to plan, and to understand if sufficient cash is available to meet your future operating needs. Is Financial Modelling relevant to me? Every business, large or small, growing or struggling, needs to create robust business plans backed by sound financial forecasts. Successful businesses usually do this better than the ones that are struggling. Or reversing the argument, businesses that create sound financial forecasts are far more likely to succeed over time than the ones that do not. What kind of questions can financial modelling answer? The short answer is – almost all types. Here are some examples: For start-up businesses How much … [Read more...]
What does Brexit mean for the future of R&D Tax Credits?
The initial shock waves from Britain voting to leave the EU are subsiding, however the longer term impacts are yet to be felt. The big question for those UK companies claiming R&D tax relief and tax credits is - What does Brexit mean for our R&D claims? General opinion is that there will be no immediate impact. Over the longer term there could even be some positive outcomes, as the UK will no longer be bound by EU regulations that put restrictions on how R&D tax relief and tax credits are framed. The UK government, like many other countries around the world, uses tax incentives, such as the tax reductions and cash credits available under the R&D schemes, to make the UK more attractive for companies. They see the R&D tax credit schemes as critical to underpinning UK economic growth and competitiveness by supporting investment in innovation across all industries and sectors. Their belief in the schemes is evidenced by the many recent … [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...]
The Autumn spending review relating to property
Landlords and Second Home Levy New 3% surcharge on stamp duty for buy-to-let properties and second homes from April 2016, raising about £1bn in England and Wales will have to pay a 3% surcharge on each stamp duty band. George Osborne said the new surcharge would raise extra money. This change, would "choke off" investment in rented properties for the small investors and those who are thinking about investing as a pension plan for the future. This is likely to turn many new and existing landlords away from the sector and reduce the number of homes to rent and almost certainly driving up rents for the millions. Higher rents make it even less likely that those on low or modest incomes will ever be able to raise the deposit required to realise their dream of home ownership, despite new Help to Buy ISAs or capital loans for Londoners that were unveiled in the Autumn spending Review– first-time buyers will still need to find around 5% of the total purchase price as their share of the … [Read more...]
Getting maternity leave right with your key employees
Over the last 12 months l have worked with client MDs on 6 cases of maternity leave and on two of these cases, because they have become contentious, I have reflected on the causes of these disputes. Looking at this dispassionately one might say that this reflects a normal distribution – most situations of maternity leave will be managed perfectly well by both employer and employee. However, occasionally, there will be situations where the maternity will cause a rethink in the nature of the employment relationship leading to a dispute. In some cases the maternity accelerates the amicable ending of the employment relationship. I offer these thoughts to better manage the maternity leave process to do the best you can to avoid disputes. As the MD who knows the employee’s situation, you are probably best placed to predict any risks that may emerge. Whether you want to admit to the risks is another matter. If there is any likelihood of a breakdown in the employment relationship, ensure … [Read more...]
Acquiring a Business – Issues to consider – Part 4
Before you make the offer to acquire a business – Consider what happens next Post-Acquisition Strategies Prior to making an offer, the acquirer should consider the purpose of the acquisition and re-visit the reasons for making the acquisition and how well the target fits within those reasons. The steps required are: Confirm the acquisition meets the deal objectives Is the business to be run standalone or integrated? Is the culture very different and will this inhibit the deal success? Does the acquisition meet the objectives set out in the overview? Ensure the commercial due diligence checklist is linked to running the business Understand the competitive landscape the acquisition target operates in. Understand the management intentions and how to use the management team being acquired to best advantage. Plan to take advantage of the “halo” effect Identify the areas where the quickest and most profitable extra profit can be obtained and assign people to exploit it Assess the … [Read more...]
Acquiring a Business – Issues to consider – Part 2
WHAT SPECIFIC ATTRIBUTES MAKE AN ACQUISITION AN ATTRACTIVE STRATEGY? Acquirers are interested in growing their own businesses and an acquisition is one of the options available to them, and usually provides a faster track to growth than organic growth. In addition, they can be interested in other benefits, for example: geographic expansion customer base customer spread, i.e. for a retail business a large number of customers, for a manufacturer a number of blue-chip customers, such that there is no undue reliance on a small number of customers contract durations repeat business patterns skill-sets technology Intellectual Property Rights depth and quality of management uniqueness and competitiveness of products and services scalability of products and/or services market position and brand systems and processes, particularly relating to winning new business distribution quality of service the “halo” effect, the extra revenues and profits that can be gained from e.g. … [Read more...]
Acquiring a Business – Issues to consider – Part 1
WHAT IS THE MAIN STRATEGIC REASONING FOR ACQUIRERS OF A BUSINESS? Acquirers do not buy the past performance of business. They buy the future performance of the business, but use the past performance as a guide (along with other things) to establish the likelihood of the future profits. Acquirers can have diverse motivations: ego or status a carefully thought out strategy opportunistic reasons, e.g. see a competitor of failing business up for sale and think a good deal may be had by acquiring it a Seller (or the Seller’s Advisor) has managed to paint a vision for the Acquirer of what the end result will look like of the two businesses once they have been merged. The case will appear convincing, such that the Acquirer will believe that, by acquiring, he or she will be able to generate a value significantly greater and faster than the alternative of continuing organic growth. Whatever the starting point, once an Acquirer is “in play” and considering an acquisition, then it is the … [Read more...]
Small Business, Enterprise and Employment Act 2015 (SBEE Act)
New legislation will require company owners to provide additional information to Companies House. The Small Business, Enterprise and Employment Act 2015 introduces the Register of Beneficial Owners, which requires companies to submit details of all individuals who have at least 25% control. The register comes into effect on the 1 April 2016. As with the Annual Return, there will be a yearly requirement to update the document; however, changes should be updated when they arise. The legislation requires submission of details of owners with 25% control, but the process for determining control is complex. It addresses direct and indirect control, as well as dilution of control, which is particularly relevant if the UK Company is part of a global group. The public register will contain the following details: Name, country, nationality and date of birth Service address, residential address Date the individual became required to register Nature of his/her control and … [Read more...]
Dealing with an under-performing family member
This is one of those predictable problems which takes on additional angst because it involves a family member. As a predictable problem, its’ resolution can be proceduralised by specifically mentioning this situation in a family constitution so that there are no surprises if and when a situation like this occurs. But first things first. Why do people underperform? There are 4 reasons, 3 of which are the responsibility of family business management. The person cannot meet expectations The person does not know what is expected of them The person does not know that they are not meeting expectations The person will not meet expectations The first 3 reasons are management issues. Identifying the reason is the start point for the discussion. Are expectations too high? Are expectations too vague? Is the person’s role clear? Are the objectives set SMART? Are there regular reviews of the person’s performance? Is training or coaching provided to help the person … [Read more...]
Personal Guarantee Insurance
Are you or your clients worried about the Personal Guarantees that you have given? Then think about PG Insurance. Personal Guarantees are the bane of most business owners’ lives and something that they continually ‘moan’ about. Invariably any form of borrowing above say £5-10,000 from a bank or other financial entity will require further security in the form of a personal guarantee from the business owners and directors. This is on top of any security that they may also take over the assets of your company. As has been seen over the recent past, it doesn’t take a lot for an excellent business to be hit by unforeseen factors that may result in adverse trading and the lender may demand repayment of its money. You may well be faced with a call on the guarantee that you have given. At that point your personal assets are at risk. Personal Guarantee Insurance is there to meet that claim up to the amount for which you are insured. Personal Guarantee Insurance … [Read more...]
What do the new accounting standards mean for you?
In the next year your accountant will start talking to you about the changes in accounting standards in FRS 102. This new standard is about moving the UK Accounting standards closer to the International Accounting Standards. The main difference will be an increase in costs and these will come in two parts. In the year that you convert to the new standards there will be extra costs because your previous year’s accounts will have to be converted to the new standards. There will then be higher costs because there are extra reporting requirements. Here are some of the new requirements: There will be new accruals for items such as Holiday pay. You will have to declare any foreign currency transactions you have set up but not actioned. You will need to make declarations about Fixed Assets, Intangible Assets such as intellectual property and Goodwill. What can you do to minimise these costs. Be prepared. Find out from your accountant which of these changes affect you … [Read more...]
Alternative funding for SMEs keeps on growing
As peer-to-peer lending, invoice trading and crowdfunding shift into the mainstream, the alternative finance market is set to double in size next year, with the sector set to reach a value of £4.4 billion The report from charity Nesta and the University of Cambridge said alternative finance to businesses and consumers was set to hit £1.74 billion in 2014, before jumping to £4.4 billion in 2015. The market was only around £666 million last year. A raft of finance providers have sprung up in the wake of the financial crisis when banks cut back on lending to SMEs, forcing them to look for alternative sources of finance. The co-author of the Nesta report, Liam Collins said: “These findings shed light on a growing movement that is revolutionising banking, investing and giving by using technology to simplify the links between those who want to invest money and those who need it. With bank lending to SMEs down again this quarter, it’s no wonder that alternative finance is fast … [Read more...]
Equity Crowdfunding Around the World goes from Strength to Strength
An Organisation called The Crowdfunding Centre takes data from 120,000 crowdfunds across the World The US leads the way in the number of crowdfunds, However, earlier this month, London originated 248 crowdfunds. The city in second place was Los Angeles with 158. London has a 33% success rate compared to 30% across the rest of the UK and around 25% globally. It leads the way in big growth industries like gaming and films, which has fuelled a lot of growth in the US, is increasingly finding a home in the UK. Evidence is also growing of the positive lasting effects of a crowdfunding round. These figures are from a recent report by Crowdfund Capital Partners: - Reward crowdfunders reported an average sales revenue rise of 25% - Equity crowdfunders reported an average sales revenue rise of 350% - An average of 2-3 new employees are taken on after crowdfunding - Just over half of firms that contributed to the report said crowdfunding was their first choice method for raising … [Read more...]
Funding Growth
Now that the economy is firmly on the mend, management teams have a new challenge to think about and that is how do they obtain the funding that they need for the growth that they are now experiencing. It is vital to remember that more companies go to the wall in a recovery than fail in a recession. Over trading is a very real danger. The best place always to go for funding is your own bank. You have a history with them and they should understand your business better than any other funder. Unfortunately over the last 6 months bank lending to businesses has fallen by a staggering £4 Billion. So if your business is growing and your bank is not lending, then who do you turn to? There are many independent sources of finance for growing companies. The independents are much more flexible in their terms and their attitudes and being smaller you are much more important to them. Invoice Discounting and Factoring is one of the easiest to obtain and most flexible ways of raising finance … [Read more...]
Latest SME Monitor from Aldermore
In the latest SME Monitor produced by Cebr for Aldermore Bank many positive indicators show that the economy is on the mend. Here are just a few of the indicators that the report highlights: • The UK economy expanded by 0.7% quarter on Quarter in Q4 2013. • Recovery is expected to gain further momentum over 2014 as a whole, as GDP is projected to rise by 3.3% year on year • Growth is coming from all three major industrial sectors, production, manufacturing, and services. • Annual cost inflation for small and medium-sized manufacturers fell back in Q4 2013 to 0.2% down from 0.7% in the previous two quarters • Borrowing costs continue to fall back for UK SMEs, with the median interest rate offered to medium-sized enterprises falling to 3.2% in November 2013. Rates have not been lower than this since June 2009. • The same goes for small enterprises where the median rate offered was 4.4% down from 4.8% • The confidence level for SMEs climbed to +39.7 this quarter, its highest … [Read more...]
RandD Tax Credits – Massive Boost for SMEs in UK Budget 2014
I was delighted to hear that the government has increased the rate of the Research and Development (R&D) Tax Credit for small and medium enterprises (SMEs) from 11% up to 14.5% for R&D costs incurred from next week (1st April 2014). The increase was announced in the UK Budget Statement 2014. This represents a very big increase, and means that up to 32.6% of what you spent on R&D can be claimed as a Tax Credit, which is a cash payment paid out in loss making situations. It now compares very favourably with the current 26% benefit (for spend after 1st April 2015) available when offsetting R&D enhancements against a profit. (The higher percentages are the result of applying an R&D enhancement value to the amount spent before calculating the rate of the tax relief or credit). It underlines the Government’s commitment to supporting businesses to invest in research and development and will help to ensure the UK is at the forefront of … [Read more...]
Can a recovery in the economy be dangerous for SMEs?
The answer is yes. Naturally we all welcome the emerging recovery we are experiencing in the UK but SMEs should look very carefully at their finances as they need to be very aware that the pattern established following previous recessions is that more businesses go bust as the economy recovers not less. Typically businesses slowly wind down during a recession until they eventually run out of cash. Economic growth is often the last straw for them. They need to fill new orders and recruit more staff to meet demand but just cannot get any more credit and administration beckons. They may also have been slow in paying VAT and PAYE and built up large arrears which now must be paid as during a recovery the tax man becomes more aggressive. Pegasus Funding Resources, a LGBA member company, can help SMEs that find themselves in this situation and in need of growth funds to take advantage of the recovery. Types of funding that are available in this situation include: • Trade Finance to … [Read more...]
