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...]
The Fredericks Foundation Business Awards Dinner at Hampton Court
Fredericks Foundation is a charity that provides loans to people who want to set up a new business or maintain or expand an existing business as a route to financial independence. While we are open to anyone who has a viable business proposition but cannot obtain mainstream finance, we focus particularly on the disadvantaged. We provide a range of business support and microloan funding for start-ups and small businesses. In doing so, we enable people who cannot access finance through the usual channels to realise their potential for the benefit of themselves, their families and the Country. We are delighted to announce the Fredericks Business Awards Dinner This is a prestigious event to be held on the evening of Tuesday 6th October. The venue is The Garden Room set in the beautiful Tiltyard Gardens at Hampton Court Palace. The event acknowledges the achievements of the companies that Fredericks Foundation has funded. There will be a drinks reception followed by a superb 3-course … [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...]
Employing family members in the business
Talking to MDs of family businesses, I am struck by how many started off working in the business during school holidays and then fell into the business after school or university and worked their way up to the top job as the company grew and they became the obvious successor to typically – but not exclusively – the founding father. Move on a generation and second generation owners have different and similar challenges. Holiday jobs are still on offer but the next generation, on graduating from university (typically), want to forge their own careers and get trained in their chosen career. Mum and/or Dads business seems less exciting and probably not an immediate career choice as the child wants to spread his/her wings. First of all that’s good news. I would recommend that any children of the owners in a family business go out and experience the world, get trained, learn about a sector or two, and perhaps get a professional qualification be it plumbing or accounting. They will … [Read more...]
A quick guide to Credit Control
'Credit control' is the system used by a business to make certain that it gives credit only to customers who are able to pay, and that customers pay on time. Credit control is part of the Financial Controls that are employed by businesses to ensure that once sales are made they are realised as cash or liquid resources. Crisis Credit control is usually an afterthought when an invoice has gone unpaid or a customer’s account exceeds a set credit limit. Follow your bad debt procedure: Gather your evidence, invoice, proof of delivery, contract terms. Send a Statement to your customer with a letter asking for the money (Letter 1) If you get no response in the time frame set out in the letter, send Letter 2, send by post and email attachment. Call the customer to check they received the letter. If they still do not pay you, then send Letter 3 detailing the Interest and costs they will incur if the debt is not settled. Two days later file the claim on the Government … [Read more...]
Employing ‘partners’ or ‘spouses’ in the family business
Over the Christmas break l was reading an article about how relationships between married couples are likely to survive longer than relationships between partners, particularly when children are involved. If commitment is at the heart of this then l guess that it is the reason many families agonise about whether the partner of the blood line relatives should be able to access the benefits of being part of the family business – whether through employment or dividends as a result of shares held. The arguments for and against are summarised below: Of course it’s a no-brainer that a spouse should be part of the family business Not in a million years, I don’t want to dilute my legacy outside of my family · Strong message that spouse is part of the family · I have built this business for my children; the risks of marital breakdown are too high · Tax efficient way to distribute income · Buying back the shares is potentially difficult with a negative impact on cash … [Read more...]
Financing the Retirement of the MD, or a Major Shareholder in a Family Business
Planning the retirement of the MD or another major shareholder in a family business is often an emotional, complex and time consuming affair. It is normally, but not always in the case of death, a long term project spanning a number of years. The challenges and risks are often more intense in a family business than in a non family one and these have already been discussed in previous blogs in this series. One challenge that has not been discussed is how does the family business plan for this important liquidity event, without seriously damaging the company’s cash flow and profitability? The MD or major shareholder will need to finance his or her retirement and the company needs to carry on trading with the possibility of a major capital withdrawal damaging prospects. The best solution for the business is for the incoming or promoted family member to purchase the shareholding plus potentially a portion of goodwill of the exiting member, with new capital from his/her own outside … [Read more...]
What is involved in succession planning in a family business?
This may sound an obvious question yet my experience of family businesses is that many business leaders don’t know how to get started with succession planning or they view it as a single event rather than an on-going process. There are three main processes involved in succession planning: Identifying and appointing a successor Managing the exit of the current MD Managing change from both the family and business perspective Identifying and appointing a successor This is the first stumbling block and where the family and business systems can collide. In a family business the hope is that a family member will be sufficiently interested and qualified to take over the reins. Depending on the experience and skills the family successor has, there may be the need for coaching, mentoring and accelerated learning to equip the successor to take over the reins. This may take up to two years as responsibilities are handed over in such a way that business continuity is … [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...]
Why family businesses might consider putting governance structures in place
The buzzword of recent years is professionalising the management of family businesses. Not only does this mean appointing talent at the top of the organisation be it management or having a NED to advise and seek counsel from, it also means confronting the way families manage the business. Family businesses represent the merging of two systems – those of the business and the family. The drivers of the two systems are different. Business is about taking risks as opportunities present themselves. Families operate differently – often it is about maintaining harmony and so being risk averse. Problems occur when the two systems collide. This is where governance structures come in – to assist families manage the predictable problems. Some predictable problems l have come across are succession, dealing with conflict between family members, dealing with underperformance by a family member, employing family members (or not) in the business. One aspect of a governance structure is the … [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...]
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...]
5 things to do to ensure successful transition in the family business
In many recent surveys[1] nearly half of family businesses intend to pass on their business to their children, less than 44% have put a formal succession plan in place. In this blog we summarise the 5 things to do- following up in more depth in successive future blogs. Have family governance structures in place Transitioning management and ownership in a family business is a time of great change creating opportunity and uncertainty in equal measure. Governance structures formalise the way businesses are managed and delineate the separation between family and business. Yet family governance is one of the issues many families seem to be reluctant to address because it forces them to confront major changes in the way they manage the business. Consider a family business that has a family council, which is used to meeting twice a year to discuss how the business is doing from a family perspective. At one such meeting the father announces that he wants to retire in 5 years’ … [Read more...]
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