Non Executive Directors - What you need to know?

As levels of boardroom regulation have increased, more and more businesses are appointing Non Executive Directors (NEDs) to their boards in order to assist the management team with risk management, compliance and governance.

While executive directors help to run a company’s business, NEDs don’t have daily management responsibilities. As a result, they have the time to contribute to the development of the firm’s strategy, monitor the performance of the management team and ensure that appropriate risk management processes are in place.

Whereas executive directors can be too busy with day to day duties, NEDs are there to point out what the management team doesn’t know. They also help to ensure that a small group of individuals can’t dominate the board’s decision-taking.

So where do you find a NED for your board? NEDs tend to be people with extensive managerial experience in areas such as finance, marketing, sales or legal. Many businesses find their NEDs through word of mouth or business contacts. An alternative is to use an executive recruitment agency.

In order to get the most out of having a NED on your board, you should create a clearly defined job description with a strong letter of appointment, setting out exactly what is expected of them.  NEDs should operate at more of a strategic level, challenging executives and providing the board with an independent perspective. It’s not just the business that needs to be careful, as NEDs face considerable personal risks in terms of personal liabilities if a business were to fail. They are as accountable as other directors to the regulators and shareholders of the business.

NEDs are not necessarily as important to the success of a business as a chief executive or management team but they can provide expertise, guidance and perspective which can help to pave the way to success for the firm.

Strategy Vs. Culture!

“Culture eats strategy for breakfast.”

These words, often attributed to Peter Drucker, are frequently quoted by people who see culture at the heart of all great businesses.

Strategy is written down on paper whereas culture determines how things get done. Most people can come up with a strategy, but it’s much harder to build a winning culture. Moreover, a brilliant strategy without a great culture is ‘”all talk and no action”, while a company with a winning culture can succeed even if its strategy is mediocre. It is far easier to change strategy than culture.

Strategy ultimately consists of two aspects; which sectors should you be in and what is the value proposition that you will go to market with in each of those sectors?
A business’s cultural strengths are central to the first aspect of your strategy (sectors). For example, Ryanair has a culture of keeping costs down and offering cheap prices. As such, they would probably not succeed if they entered the premium, private jet sector where wealthy clients expect high-end service and the best of everything.

Maintaining cultural coherence across a company’s divisions should be an essential factor when determining a corporate strategy. No culture, however strong, can overcome poor choices when it comes to corporate strategy. The second aspect of your strategy is the value proposition. Customers consider more than concrete features and benefits when choosing between alternative providers. They also consider “the intangibles.” In fact, these often become the tiebreaker when tangible differences are difficult to discern. For example, Virgin Airlines tries to attract passengers who like its casual, fun and non-establishment attitude in how it operates.

The businesses with the best cultures have instilled norms of behaviour that are essential features of their winning value propositions. For example, in Virgin’s case, offering consistently fun service at a reasonable price. What these companies really demonstrate is how culture is an essential variable - much like your product offering, pricing policy, and distribution channels - that should be considered when choosing strategies for your business. This is especially so when the behaviour of your people, and particularly your frontline staff, can give you an edge with your customers.

Strategy must be rooted in the cultural strengths you have and the cultural needs of your businesses. If culture is hard to change, which it is, then strategy is too. Both take years to build; both take years to change. Don’t let culture eat strategy for breakfast. Have them feed each other.

How to Manage Business Mistakes?

No matter what type of business you run, mistakes will happen. All employees make mistakes. However, the key to resolving the situation when things don’t go to plan is to manage your team and the actions they take, effectively.

When things go wrong, stop and analyse the situation. How big is the mistake? Is it one that should not have been made but can be rectified? Or did it cost your company hundreds of thousands of pounds?

If a team member makes a mistake, hopefully they will own up to it. If not, you may have to raise the issue with them. The key at this point is to communicate clearly and in a professional manner. There is no point getting angry and shouting at people. Instead you should outline your expectations.

Discuss the mistake with your team member and ask them what they think they can do to rectify the situation. Outline that the most important thing right now is to come up with an effective remedy rather than pointing out whose fault it was.

If the mistake is a one-off occurrence, you should outline to your team member that the main thing is to learn from the experience in order to avoid it happening again. If the team member in question has made various mistakes in the past and it is becoming a regular issue, then perhaps it is time to consider getting HR involved. Maybe the individual is making regular mistakes because they aren’t properly qualified for their job or perhaps they just aren’t suited to their current role.

As a manager, you should think about what type of leader you are and what you want to accomplish. Do you want your team members to be scared of you or do you want to encourage them and support their actions? As a manager you can’t be their friend but you can be supportive. A supportive manager will use mistakes as a learning opportunity for the team.

If your firm's current culture for handling mistakes is not one that encourages learning or growth, it might be time to update your strategy. The best modern businesses use mistakes as an opportunity to step back, look at a process and find a better way of doing things. This type of approach helps to identify best practice, minimise the chances of similar mistakes happening again and may even create a better, more efficient way of managing parts of the business.

How to Embrace Innovation for your Business?

It seems there is a new way of doing business being created every week. Disruptive, technology driven, new business models are constantly being developed by the likes of Uber, Skype, Amazon and Air BnB.

Your business might hold an established position in the market today but that doesn’t mean that you and your management team can be complacent.

Disruption and commoditisation have impacted most industries and we are now seeing new players coming into traditional markets and establishing a disruptive model and capturing significant market share. This trend is only going to continue.

So what can you do, as the leader of your business, to minimise the impact of a potential disruptive new player entering your market?

It is difficult to constantly create new products or services. However, perhaps you could consider how best to commoditise some of your firm’s existing product or service offerings in order to increase profit margin and efficiency. This could also help you to improve customer experience – by making your services faster, easier to access and so forth.

When it comes to innovation, you don’t have to constantly re-invent the wheel. While creativity is usually associated with thinking outside the box, the fact is that few ideas are 100 percent original. The most brilliant (and often most profitable) business ideas are usually variations of an already existing theme rather than completely new concepts.

Netflix didn’t create a new industry. They just took the business model that had been so successful for Blockbuster Video and created a new way for customers to rent films - online instead of through a video shop. As Steve Jobs once said, “Creativity is just connecting things.” What sets creative people apart is that “they are able to connect experiences they’ve had and synthesize new things.”

If you want to embrace innovation in your business, you need to develop an environment that encourages creativity. Your staff should be empowered to explore new ways of delivering products or services.

Experimentation should be encouraged and your office should have collaborative workspaces in order to allow people to sit down together, work as a team, solve problems collectively and create new solutions.  In addition to this, your business should celebrate innovation through recognising those team members who find new ways of doing things. Whether that is a bonus for implementing a new innovation or perhaps celebrating the delivery of new innovations with a team night out. The key is to encourage your team to be creative, find new and better ways of doing things and keep innovating.

Developing A Culture Of Accountability

One of the toughest balances to achieve within any business is between building a culture that gives people the autonomy to get on with their job while maintaining an environment of accountability.

There is a fine line between managing and micromanaging  and it tends to be quite subjective. Some team members will welcome day to day management and guidance while others might rather be left alone to get on with their job. As such, it is necessary to create systems and processes which allow the management team to maintain awareness of what is going on across the business without people feeling like someone is constantly checking on them.

Everyone in the firm should have annual goals which align with the overall objectives of the firm and are communicated to everyone across the business at the start of the year. Each individual should then be tasked with agreeing what their personal goals should be with their manager. These should cascade down from the overall objectives of the business. Ideally you should aim to agree between five and eight goals for each team member.

Once everyone’s objectives have been set, you and your management team should set up quarterly meetings with each of your staff to discuss progress towards achieving each objective. You should let your team member lead the meeting, explaining the progress they have made towards each goal and what they intend to do in the next quarter in order to keep moving forward. As a manager you should ask open questions such as “What went well? Which areas could be improved upon?” or “Do you need any additional resources in order to achieve your goals?” This will provide the opportunity to assist the individual towards successfully achieving their goals but in a way that doesn’t feel like they are being micro managed.

Finally, each team in your business should have a weekly meeting with an agenda designed to allow everyone to update what happened last week and what is planned for the next week. This provides an opportunity for managers / team leaders to drive objectives forward. In order to encourage accountability, at each weekly meeting, every team member should be required to give a 3-minute update on where they are against their objectives.

In order to make this approach work, the managers in your firm should be accountable for the objectives and their teams should be responsible for delivering them. In order to communicate progress across the business and increase transparency, each manager should produce a quarterly update, which can be shared across the firm. This could take the form of a simple email to all staff. This type of communication also allows the managers to outline what is coming up in the next quarter and solicit help / resources if required.

Hiring Multilingual Staff

Are businesses that employ multilingual staff getting ahead of their competitors?

Thanks to technology and globalisation in business, the world has become a much smaller place. Access to international markets is now easier than ever, thanks to ecommerce, the internet, etc.

Big multinational businesses recognise the importance of language skills. McKinsey counts more than 130 languages spoken across its staff, and offers a bursary scheme to those who wish to learn another language before joining the firm. Another example is Unilever, which estimates that up to 80 of their 100 most senior leaders speak at least two languages.

The obvious benefit of hiring multilingual staff is better communication with clients and contacts across the world. Although English has become the international business language, having employees who speak other languages can only be beneficial to an international business. Most people prefer speaking in their native language. If you are contacting other companies to work with, or customers in other jurisdictions, multilingual staff will be able to communicate in their native language, which makes the process easier and makes your firm come across as more professional and gives the impression that you are more of a “global business”.

A report from the European Commission a few years ago stated that “a significant amount of business” was sacrificed because of poor language skills across Europe. The report identified that as much as 11 per cent of small and medium-sized businesses had lost a contract as a result of their poor language skills.

So, if your firm is targeting international business, you should try to recruit employees who are multilingual. They will be able to help your firm to understand how complicated communication between two cultures can be, including knowing which areas require sensitivity and which areas call for being more direct. They will also be able to help your firm to adapt its business development efforts, website, marketing materials, etc. to the target market. These team members can also assist the firm as multilingual proof readers, in order to ensure quality and consistency of external communications in your target markets.

Should Your Business Build A Mobile App

The biggest and best businesses all seem to offer a mobile app of some sort. Whether booking a taxi, checking into a flight or checking your bank balance, it seems that the smartphone is now the “Swiss army knife” that everyone uses to do pretty much everything. So does this mean that you need to build an app for your business?

The first thing you need to think about before committing to building an app is what your needs are. Do you need an app to help you with marketing, sales or customer services? How would an app add value for your customers and streamline processes for your business? You don’t need to be a programmer to create an app as there are plenty of agencies and online DIY tools that you can use to create one. Here are a few things to think about before you decide whether or not to develop an app for your business:

Marketing

Your app reflects your firm’s brand, and that icon on a mobile device that is frequently looked at will help to build recognition of your brand. You can also use an app as a marketing tool to create “push notices” that deliver information about your business and its products or services to customers. For example, you could use an app to push special offers, updates, or announcements to your customers.

Accessibility

Do you want to create an app simply to make your business accessible to your customers 24/7? Apps make it easy to engage with your business because customers don’t have to switch devices. When your business crosses their mind, they simply tap the app on their smartphone.

Sales 

Could your business use an app to sell more products or services to your customers? Again, this depends on the type of business that you operate. For example, if you run a coffee shop, perhaps you could replace loyalty cards with an app. Alternatively you could allow your regular customers to place orders for future products or services directly from an app. This would speed up the sales process for your customers and also help to generate loyalty from customers who may keep coming back to buy more because it is so easy to do so using an app.

Customer service

Do you want to put your products or services at your customer’s fingertips? You could create an app that allows your customers to engage with you and your business in a matter of seconds. You could offer product support, help desk services, market updates or even a booking service, depending on the type of business that you operate.

Millennials vs Generation Z: What Businesses Need to Know!

Generation Z (Gen Z) is a demographic group born after 1995. The oldest members of Gen Z are turning 21 this year, which means that some have already graduated from University. Gen Z is a much smaller demographic cohort than Gen Y (also known as millennials).

It would be easy to assume that Gen Z are just an exaggerated version of the generation that came before them, spending even more of their lives on social media, doing even more of their shopping online, and demonstrating an ever-greater collaborative nature. But Gen Z grew up in a starkly different historical context than millennials, which has given them a distinct outlook on the world.

Millennials invented Facebook, shopped from their smartphones, and moved from satellite TV to Netflix. Gen Z, meanwhile, doesn't remember life without these basics of 21st century life. Millennials came of age during a time of economic expansion and were shocked to find a diminished, difficult job market after university; whereas Gen Z sees a tough job market as the norm. They are a generation that has been shaped by the recession and are prepared to fight hard to create a stable future for themselves.

Market research has shown that compared to any generation before them, Gen Z is less trusting of brands. They have grown up in an era where information is always available via the internet, social media, etc. They can research products and brands and see other users' reviews of them online.
Gen Z are financially cautious.

They grew up hearing horror stories about how many millennials ended up living at home after university, sitting on a mountain of debt, so they tend to save more and spend less than millennials. In a recent study, 89% said they remain optimistic about their futures, which is higher than any other generation on record.

So what should you be aware of when you are thinking about hiring Gen Z employees? Gen Z wants to do work that makes a difference and has a positive impact on the world. But they’re also more concerned about job security than the generation just before them.

They were at a very impressionable age during the financial crisis. This implies Gen Z would rather develop a career in one place than hop from employer to employer.

4 Advantages of Being a Sustainable Business!

The “green agenda” has moved to the forefront of the modern business world. Society is experiencing an increasing shift in focus to sustainable business and environmental responsibility.

For businesses, embracing sustainability includes encouraging active preservation of the environment and communities, while also promising attractive cost savings. Many firms have made considerable savings through implementing sustainability programs across their value chains.

1. Reducing Operational Costs

Low-cost initiatives can have a profound impact on reducing energy consumption. Legislation in the form of tax incentives is also encouraging businesses to implement sustainable practices. This includes property tax exemptions, income tax credits or easier access to financing and government grants. To qualify for these programmes, businesses must either install certain equipment, implement pollution control mechanisms or utilise environmentally friendly materials, recycled components etc.

2. Strengthening Brands

With the increasing global concern about the environment, businesses can now leverage their sustainability and related achievements, investments, and skills, to strengthen their value and reputation. Conversely, those businesses that fail to resonate with what consumers and stakeholders deem to be important could see a detrimental impact on their brands.

3. Improving Employee Recruitment and Retention

The next generation of professionals (millennials) are more environmentally aware and focused on sustainability. They are attracted to businesses that are socially responsible, and want to work for companies with a positive impact on the world around them. Therefore, building your firm's brand around sustainability will help you to attract the best new generation recruits.

4. Enhancing Innovation

Building a more sustainable business encourages your people to become more innovative. This focus on innovation encourages the development of new products or services and new ways of doing business.  Nike, who used plastic bottles from landfills in Japan to manufacture soccer jerseys, being a great example.

-PJ 
☎ 020 89310165 | ☏ 07900537459 | ✉ info@apjaccountancy.com

Reporting To HMRC Every Quarter To Go Ahead In 2018!

The Government and HMRC remain committed to the "Making Tax Digital" project with more information being sent online to HM Revenue and Customs (HMRC) by employers, pension funds, banks and other institutions.

The next big step will be the introduction of quarterly reporting of income and expenditure by businesses and landlords from 2018. HMRC are currently consulting on a number of proposals to make radical changes to facilitate the introduction of the new regime. We accountants have serious concerns about the timescale; HMRC say “you will not need an accountant to fill out the information on the new system.” They are expecting businesses to use new Apps on their Smart phones and Tablets to transmit their data to HMRC.

OVERVIEW OF MAIN PROPOSALS

Small businesses and landlords will be encouraged to prepare their accounts on a cash basis with the threshold for using the basis significantly increased.

The current basis period rules for unincorporated businesses to be reformed.

A new voluntary Pay As You Go (PAYG) system to be introduced to help businesses budget for their tax payments.

EXTENDING THE CASH BASIS

About 1 million small businesses currently prepare their accounts on a cash basis. The present threshold for using the cash basis is the VAT registration limit £83,000 and HMRC are consulting on the limit being significantly increased, possibly double the VAT threshold of £166,000, the current limit for leaving the scheme.

WHAT IS THE CASH BASIS?

The current cash basis for preparing accounts was introduced as a simplification measure from 6 April 2013. Using the cash basis means that businesses merely need to calculate their profits based on receipts and payments.
There are no adjustments at the end of each period for accrued expenses and amounts prepaid, and no adjustment for stock or bad debts at the end of the period.
Another simplification is that the cost of equipment bought for the business, except for motor cars, can be deducted directly in arriving at the profit without the need for a capital allowances claim. One disadvantage of the current cash basis rules is that interest on money borrowed to finance the business is limited to £500 a year and a similar restriction is likely to be incorporated into the new rules.

PROPOSALS TO SIMPLIFY BASIS PERIODS

The current basis period rules are complex, and many unincorporated business owners find them difficult to comprehend.  Where the business makes up accounts to a date other than 5 April the accounts and profits have to be made to “fit” into the tax year. There are particular problems at the commencement of trading as some of the initial profits are taxed twice and the “overlap” profits are then deducted on cessation.

One proposal is for businesses to prepare accounts for a period that aligns with the tax year (6 April - 5 April) or even prepare accounts for shorter periods such as each quarter to align with their VAT quarters and submissions to HMRC.

PAY AS YOU GO

Another complication of the current self-assessment regime is that where tax has not been collected under PAYE or at source, primarily on self-employed profits and rental income, the taxpayer is required to make payments on account.

These payments on account are due on 31 January and 31 July based on 50% of the outstanding liability for the previous tax year with a balancing payment the following 31 January.

This can make budgeting cash flow for the self-employed and landlords difficult for some to manage.
The government is proposing to introduce a new voluntary Pay as You Go (PAYG) system for the self-employed and landlords to make payments towards their income tax, national insurance and VAT liabilities monthly with a reconciliation at the end of the year.

Many of these proposals may have significant implications for your business. We will update you on further details once we see the outcome of the various consultations. We can then discuss how we can assist you with your quarterly obligations.

Contact us for more:
PJ | ☎ 020 89310165 | ☏ 07900537459 | ✉ info@apjaccountancy.com

Importance of Gaining a Competitive Edge!

Competition is a fact of life. The best businesses set the pace and aren't afraid to go their own way. How do you and your firm respond to competition? Are you leaders, differentiators or do you follow the pack?

If you want to move ahead of your competitors, you need to change how your business positions itself within its sector of the market. After all, doing the same thing over and over again and expecting a different result is a definition of madness.

Being in business is about running your own race and doing it your way. Have a plan and execute it the way you want and at the pace you want to. Running after the competition is no good if they are running in the wrong direction.

Many businesses struggle to identify their competitive advantage and even those that do manage to define it, tend to be ineffective at communicating that advantage. Consider what it is that makes your business unique. What is it that sets your business apart from the competition?

Identify, clarify, and communicate to your prospects and customers why they should buy from you instead of from someone else. Some firms will focus on being the highest quality provider, others will choose to offer the better service or the lowest price.

If you don’t focus on your competitive advantage and communicate that to your clients and targets, you could lose customers. If you don’t try to differentiate your firm, they could mistake your competitors as being the same as you.

Tell your clients why you are different and what that difference means to them. Create a marketing message which explains the benefit that using your firm provides. It is important to “sell the benefit” of the service rather than to sell the service based on its features.

Liquidating A Company - Is It A Capital Gain?

One of the anti-avoidance measures being introduced by the latest Finance Bill potentially changes the way that certain payments to shareholders will be taxed. This may result in payments following some company liquidations being taxed as dividends instead of capital gains.

The Government is concerned that the new  higher rates of income tax that have applied to dividends since 6 April 2016 may tempt some shareholder / directors to extract value built up within their companies in a capital form, rather than paying out the retained profits as dividends. This is because capital gains are generally taxed at a lower rate than income, possibly as low as 10% where entrepreneurs relief is available.

For example, a higher rate taxpaying shareholder receiving £100,000 on the liquidation of his company would pay £32,500 (32.5%) if the anti-avoidance applies, whereas CGT would be just £10,000 (10%) if entrepreneurs relief is available.  Consequently, new stricter rules are being introduced to apply to transactions on or after 6 April 2016.

When is a liquidation taxed as income?

For the new anti-avoidance rules to apply, the company being wound up must firstly be a close company and the individual must have held at least a 5% interest in the company (ordinary share capital and voting rights).

A further condition is that the individual (or connected person) continues to carry on the same or a similar trade or activity to that carried on by the wound-up company within the two years following the distribution.

It must also be reasonable to assume, having regard to all of the circumstances that the arrangements appear to have a tax advantage as one of the main purposes.

Can we obtain clearance prior to the liquidation?

Accountants and tax advisors requested that the new anti-avoidance rules should provide a formal clearance procedure prior to the transaction, thus providing certainty as to whether or not the payment would be taxed as income or capital.  Unfortunately, there is no formal clearance procedure. HMRC have however received a number of clearance requests from taxpayers and have confirmed that it is not their general practice to offer clearances on recently introduced legislation with a purpose test.

HMRC have therefore drafted a standard reply that sets out a small number of examples and they are working on more detailed guidance, which should be published before the end of this year.

This is a very complex area and we suggest that you contact us before you consider liquidating your company.

Contact us if you need business help:
PJ | ☎ 020 89310165 | ☏ 07900537459 | ✉ info@apjaccountancy.com

4 simple & easy tips for Change Management!

In light of the recent Brexit decision, one thing is inevitable in business in the coming months and years and that is change.

Whichever way you decided to vote, the result of the referendum means that you and your business must be prepared to change and adapt to a new business environment.

Here are a few change management tips for your business:

Create a plan and set realistic goals

People tend to resist change so create a plan that outlines each step of the change process, the key stakeholders, the timeline and the deliverables. Ask different staff members from across the business to feed into this plan. Someone might have a great idea to contribute to the plan – sometimes all you need to do is ask.

Communicate

Communicate your vision clearly to your team. Identify what it is that you are trying to achieve through the change process. What is in it for your team? The best managers can explain this in a way that inspires the team to get involved and move forward with the plan.

Maintaining momentum

Your employees may agree with your vision initially, but they're likely to become frustrated or disillusioned along the way, especially if they don't see immediate progress. Find ways to keep the conversation going through short town hall meetings, staff surveys and casual conversation. Ask the team for their honest feedback regularly and be willing to listen. Be honest about what you don't know, and commit to updating employees when those details are finalised.

Get the team on board

Getting the senior management team on board is relatively easy. They should be able to see “what’s in it for them.” However to succeed in managing change in your business you need to get your middle management and your junior staff members on board too. Ask representatives from different groups across your business to get involved, share their views and take ownership of different aspects of the change process.

How to Reduce Business Costs to Increase Profits?

Competition in business is more intense than ever before, with tough economic conditions in most sectors and rival firms battling harder than ever for market share. There are new threats from online providers, new business models and global competitors. As a result, increasing profit levels is quite a challenge. If you can’t increase your sales volumes, consider how to reduce costs in order to increase profits.

Build a culture of cost saving

Everyone can and should take some level of responsibility for the costs related to their work. One way is to involve more people in the budgeting process. All employees could be partially accountable for the costs that affect them.

Negotiate with your suppliers

Renegotiating contracts with suppliers may bring surprising results. Every service provider will be keen to retain your business. As such, they may be open to renegotiating contracts. If you are in a position to negotiate a volume discount in return for another 6 to 12 months of loyalty, you may be able to benefit from some substantial savings.

Decrease waste

Depending on your business, this could be wasted materials, time, effort, money or team members. Everyone in your business should learn to identify and take steps to reduce or eliminate waste. Decrease waste further by “going green” to reduce utility bills by becoming more energy efficient.

Decrease stock levels

Stock is a dead cost and soaks up cash. Decreasing stock levels may require the streamlining of some of your business systems but it may produce some significant cost savings. If you carry excess stock / inventory you should be able to free up some cash flow in the business by reducing stock levels.

Overtime

Overtime is expensive, but a little preplanning of your work schedules will go a long way to helping reduce overtime costs. If you have more demand than you can handle, it might be cheaper to outsource some of the extra capacity.

Reduce debtor’s days

Cash flow tied up on the debtor’s ledger is effectively costing the business money. Reducing the average time it takes to collect outstanding debts from say, 60 to 30 days, can increase cash flow, reducing the need for expensive overdrafts and bank credit.

Check whether you are making these financial and marketing mistakes that costs you hundreds, or EVEN thousands of Pounds. Click to Download the book below!

Contact us if you need help to increase your business profits:

PJ | ☎ 020 89310165 | ☏ 07900537459 | ✉ info@apjaccountancy.com

4 tips to help Strategic Thinking for your business!

The business environment has been quite volatile since the financial crash of 2008. Strategic thinking is an area of focus for senior managers to navigate a way forward for their businesses, despite the challenges they face in the current market.

The benefit of strategic thinking is clear – competitive advantage. For most business managers, the first reaction is to deal with what’s directly in front of us (in our inbox). Maybe this is because it always seems more urgent and tangible. Unfortunately, while you concentrate on overcoming obstacles, you could miss opportunities, not to mention missing the signs that indicate the direction you are going is taking you off track.

Here are a few tips to help you to think more strategically about your business.

1. Ask questions

Ask questions that encourage new ways of thinking. One of the first questions to ask is “Why are we a good business?”  For the best answer, ask your customers. Find out why they use your products or services.  If you disappeared tomorrow, what would they miss the most about what you do for them? Another good question to ask could be, “How do I get my competitor’s customers to buy from me instead of them?” These questions will help you to think more strategically about the direction your business should take in the next few years.

2. Think critically

A critical thinker will question everything.  This means getting comfortable with challenging beliefs and approaches, even your own. Many business people will often respond to questions with answers like “we always do it this way”. You should ask, “Is there a better way to do it?” Following conventional wisdom is often considered to be a safe bet. However questioning convention is what creates new, disruptive business models such as Uber and Spotify. If you always take the safe option, your business could lose its competitive advantage.

3. Industry context

When thinking about your business it’s important to understand what strategy means in the context of your industry sector. In the accounting sector for example, it is important to understand contextual issues such as economics, key competitors, legal frameworks, technology and so on. Before developing the strategy for your own business, it’s important to understand what strategies work for your competitors and why. This can help you to create a very different, and hopefully more effective, strategy.

4. Create thinking space

Set aside time alone for strategic thinking/planning at least monthly, if not weekly. Use this time to reflect, research, consider ideas and dream. The focus should not be to “do” things. Getting outside or into a new physical space can make this time more effective. Try to get away from your desk and switch off your smartphone so that you can avoid distractions and think properly.

What to learn from your Business Mistakes?

Some of the world’s most successful business people have one thing in common, they celebrate failure and learn from it. James Dyson famously said, "Enjoy failure and learn from it. You can never learn from success." James Dyson is no stranger to the power of prototypes and learning from mistakes. He made more than 5,100 prototypes of the Dyson Vacuum Cleaner before getting it right.

Albert Einstein said, “A person who never made a mistake never tried anything new”. Wherever we look in the world of business, the most successful and innovative leaders have been the ones who weren’t afraid to fail and if they did, they learned from it.

In most businesses, even if management encourages experimentation, budgeting and risk management processes tend to promote predictability and efficiency. This leads people to do everything possible to avoid mistakes. Attitude to failure differs considerably from one country to the next.

The best and hardest work is often done in a spirit of adventure and challenge. Mistakes are an inevitable consequence of doing something new. As such, there is a tremendous source of value in determining if your people have the right attitude to failure. Here are a few ways to learn from mistakes in your business. 

Study unsuccessful projects

Document the lessons learned about clients, market trends, your firm, your processes, your team and yourself. This is likely to be a painful exercise until it becomes fully embedded in the culture of your business.

Make an impact

The management team should gather frequently to discuss their own failures, and then share the lessons learned with everyone in the wider firm. This builds trust and goodwill, and encourages future experiments across the business. Parameters should be set and communicated across the team - it is not okay to be reckless, but trying something new should be encouraged.

Identify trends

Conduct a firm-wide review to identify patterns. If failure rates are too high, you may need to tighten up systems and controls across the business. However, if they are too low, consider encouraging your people to be more willing to experiment.

3 Effective Tips for Successful Cross-Selling!

Customer retention and cross-selling is important in any industry, yet it's frequently overlooked. Here are a few tips to help you to cross-sell more products and services to your existing customers.

The cross-sell

Amazon.com attributes up to 35% of its revenue to cross-selling. When purchasing you will see both the “frequently bought together” and “customers who bought this item also bought” sections, promoting related products. The key is to illustrate the value to the client of purchasing a complimentary product or service. For example, an accountant may wish to communicate to clients that in addition to audit and tax services, their clients can also benefit from payroll or business advisory services. There is a “value add” in that the client is buying all of these services from one accounting firm.

Data driven campaigns

The firms that are most successful at cross-selling unite insights driven by data with focused marketing campaigns. There is a fine line between timely offers and annoying spam, and understanding buyer timing is critical. Your marketing content strategy is key to cross selling to existing customers, but you also need to understand how you will measure success. Use a CRM system to record customer data including which clients bought what service. Use this database to identify clients who have not yet been cross sold to and create a campaign which focuses on creating a value proposition in the mind of those clients. Ensure your sales or business development people engage with the target clients at the appropriate time.

Listen to your customers

You can’t sell additional products or services to your customers if you don’t understand what they actually want or need. If for example, you are selling business services, ask your customer about their business plan. Where are they going in the next 3 to 5 years and how do they hope to get there? Consider some of the challenges that they will face and identify where your services will be able to make their life better in some way.

Listen and respond to each client and every interaction. This two-way conversation should extend to your own internal teams, as you ask questions and measure outcomes to continuously improve the customer experience.

Self-Employed or Starting a Micro Business?

Did you know that almost one in seven people in the UK are self-employed?

You might also classify self-employment as “freelance work”. UK research suggests that 30% of those who work in the media call themselves “freelance”.

Research by Skills Development Scotland noted that the creative sector is dominated by sole traders, micro and small businesses. Approximately 13,500 businesses employ 0 to 49 employees and accounted for nearly 98% of the total number of businesses in 2014. This is an increase of 35% in the number of small and micro businesses since 2009.

So why start a micro business or become self-employed?

The Royal Society for the Encouragement of Arts, Manufactures and Commerce (RSA) conducted a survey in which 27% of people who moved into self-employment within the last 5 years said they did so to escape unemployment.

The Government 2015 Workplace Employment Relations Study reported that micro-businesses accounted for 33% of private sector employment and 19% of total output. Although micro-business employees tend to earn less, receive less training, and have fewer benefits, it found that these employees were also the most satisfied group of workers in the labour market. Factors like job control influence in decision-making, business loyalty and even satisfaction with pay.

The benefits of a micro business or becoming self-employed include:

• Flexible working hours
• Ability to choose your work
• Developing a relationship with customers who you want to work with
• Ability to respond quickly to opportunities
• Making a greater impact

However there are drawbacks which include:

• No sick pay, holiday pay or redundancy pay
• Little or no support, training, no back up if you can’t work
• Not a 9 to 5 job - it’s 24 hours a day
• No company contribution to a pension
• What if I can’t get paid on time?

Micro-businesses and self-employed people need assistance and if you are starting up or feeling the pressure get in touch with us as we will be able to support you.

Incorporating Your Business? 2016 Updates!

Where a sole trader, partnership or LLP has established a significant value for the goodwill of their business, it was possible, up until 3 December 2014, to transfer that goodwill to a limited company and pay just 10% capital gains tax by claiming entrepreneurs’ relief.

The former owner(s) could then draw down on the loan account created with the transferee company over time as future cash was generated by the business. This tax planning strategy became less attractive when entrepreneurs relief was denied where the transferor and transferee were related parties, although the latest Finance Act has relaxed this rule where the former owner receives less than 5% of the acquiring company’s shares.

Now that the top rate of CGT has been reduced to 20% from 6 April 2016 for such transfers, rather than 28%, it may be worth reconsidering this strategy.

For example where an individual’s share of goodwill is worth £500,000 the CGT due would be £100,000 leaving £400,000 net of tax.

Note that for a transfer in June 2016 the CGT would not be due until 31January 2018.

Consider charging interest to the company on the loan account balance as that is now more tax efficient than dividends for higher rate taxpayers.

Note that although the goodwill would generally need to be written off against the company’s profits, there is no longer a tax deduction for the amortisation resulting in higher taxable profits.

Know more about Capital Gains Tax: changes to rules

Contact us if you need help while incorporating your business:

PJ | ☎ 020 89310165 | ☏ 07900537459 | ✉ info@apjaccountancy.com

Business Strategy: How High Should You Aim & How To Accomplish Objectives?

Every business owner or manager knows that in order to succeed and grow the business, some big thinking is often required. But how high should you aim?

The process of setting strategic business objectives is harder than it looks. It takes a lot more than setting stretched goals to actually see any real achievement, and there are often hidden challenges, particularly when it comes down to the execution.

Aiming high helps

If you aim high in business, even if you don't quite make it, you will inevitably end up doing much better than you would have otherwise done. When setting your strategic objectives, thinking differently about goal setting can be a real game changer.

For example, setting a goal to double the size of the business versus one to increase in size by 10%, will push your business much harder. The 10% goal drives thinking about how to stretch the current business, using the existing tools and assumptions. It is merely building on an existing solution that many people have already spent a lot of time thinking about. In contrast, doubling the size of the firm requires a different mindset; one that moves away from the tendency to think in an incremental and linear manner. This opens up new possibilities that would never have been considered otherwise as the business must focus on creativity and innovation - the kind that, literally and metaphorically, can push the business to the next level.

Making strategic goals manageable

Stretched goals or targets are by definition very big. They are risky and can take several years to achieve. The details of how to accomplish these objectives will not be known when they are set.

Odds of success can be improved with a disciplined strategy execution, and a 'small wins' framework can often help. The objective is to break a larger goal down into smaller, manageable but interlinked parts. For each sub-goal, the team must define the various streams of work required, explicit outcomes, key deliverables, due dates, and a single owner for each component. As such, it will allow for visible and measured progress towards the completion of the larger goal while generating consistent action. Regular updates and team meetings will encourage people to be accountable for their part of the project. This will help drive consistent execution of tasks.

What separates great businesses from those that are merely good are not just the stretched target and strategic goals they set themselves to achieve but also the way they think differently about setting those objectives, and the discipline with which they implement them.