5 tips for growing a digital creative agency

Around 100 attendees packed How-Do’s recent Creative Industries Business Forum held at the stylish The Hive in Manchester.

Liane Grimshaw (former managing partner at Amaze) stole the show for me with a passionate summary of the key learning points that have framed her entrepreneurial journey so far. Here’s my summary from my notes:

1. Know when to say “No” – the more you can narrow your focus, the more you can become an expert and dominate a niche. Once you can dominate a niche and develop your own unique approach, the more price becomes an irrelevance.

2. Practice what you preach – why is it, she questioned, that marketing agencies have some of the worst and most unimaginative websites? Websites and literature that simply lists services…… Agencies frequently use words like “innovation” and “creativity” and then deploy “pedestrian” techniques for marketing their own services and solutions! You need to practice what you preach every day. You can’t have an away-day to create a strategy document and then expect this to magically change the agency culture overnight! The culture comes from the way you and your people act every day.

3. Trust your gut – this applies to selecting your people, strategy and interpreting your results. Probationary periods for recruiting new staff should be observed and people moved on if they do not fit into the company culture – shirking these difficult decisions early on often can develop into much bigger problems further down the line. Your intuition is rarely wrong.

4. Size does matter – there are pros and cons to being a small agency and likewise for larger agencies. Being smaller agency allows for greater agility, speed of decision-making and willingness to take more risks in terms of creative briefs. As agencies grow, the pressure to become more “corporate” in approach can result in employees trusting their own initiative less and starting to “lean on company processes”. Many large agencies could learn a thing or two from smaller agencies e.g. using smaller teams within an organization.

5. If you don’t want to get up in the morning, change it or let go – life’s too short. It may seem like a difficult decision at the time but trusting your gut instinct and making changes or walking away completely to start again may be the best decision for the longer term.

In the discussion groups that followed, these themes kept cropping up repeatedly. These principles can be applied to any business. Home truths – well said. Thanks Liane.

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1 April is no joke for UK companies!

1st April is an important date for UK companies as it signifies the start of a new tax year (yes, the personal tax year is different running to 5 April each year) and there have been some important announcements made in recent Budgets. Here are the headlines:

1. Small companies rate of corporation tax falls from 21% to 20%.

2. Standard rate of corporation tax falls from 28% to 26% (applies broadly to stand alone companies with taxable profits of £1.5m or more).

3. R&D tax credits increased from 75p enhancement for every qualifying £1 spent to £1 enhancement. If you haven’t considered whether R&D tax credits apply to your business it is well worth considering now.

5 tips for securing funding – Bill Morrow: Angels Den

Bill Morrow, founder of the Angel Network, outlines 5 top tips for entrepreneurs seeking funding from VCs:

  1. Make sure you can explain your business quickly and succinctly. If it takes you more than 5 minutes, then you’ve yet to get it nailed. Back to the drawing-board for you!
  2. Outline the pain that your product or service will solve.
  3. Explain how your business will solve this pain.
  4. Enthuse investors with the opportunity for growth and how you will achieve this – how will your business scale to achieve the 5x + return on investment for your investors?
  5. Set out clearly how you will spend the money that you are requesting.

Morrow also explains how it helps for entrepreneurs to “humanise” interactions with potential investors, where possible. If you can build rapport by indulging in a bit of chit-chat about the cricket or football etc then this helps build relationships beyond business.  After all, you may have to work with each other over a number of years, so its important that you can get on outside of business-talk.

Good advice. Listen to this podcast in full over at Smallbiz pod.

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Crowdcube: A useful funding option for UK startups and fast growth companies?

Crowdcube presents an interesting angle on an idea I’ve been pondering for a while:

“How can we open the door for armchair investors to (partially) fill the funding gap suffered by UK startup businesses whilst providing a more interesting and varied investment opportunity compared to say traditional pension or ISA investment offerings?”

Business angel investor networks are well established, however, these are normally aimed at high net worth individuals (broadly those with income of £100,000+ and/or significant assets) who are willing to write cheques for more sizeable sums than those accepted by crowdcube – in fact crowdcube is willing to accept investment cheques from just £10.

Zopa already provides an innovative peer-to-peer banking exchange for individuals e.g. to pay off credit card debts, buy a new car etc from individual lenders who can lend in small parcels of cash (typically no more than £20 per borrower) to minimise the credit risk. By cutting out the middleman (aka banks), Zopa can pass on cheaper interest rates for borrowers and higher income for lenders – a win-win.

Can Crowdcube pass this on for small business?

The answer right now is I’m not sure. But I’ll be keeping a close eye on it and may well try the service to see how it works.

Here are some initial observations:

  • The site clearly needs more investment opportunities but this should come over time.
  • I like the idea of implementing video presentations etc in the future to give added depth to the pitches (more like the Dragons Den experience).
  • I am unsure about the forthcoming trading exchange for exiting investments as its not really in keeping with the nature of private company investing – its a medium term play at best and short-term thinking is the sort of mentality that’s got us into the recent financial mess. Still, if it gets more individuals interested in supporting small, private companies then this can only be a good thing.
  • I would like to see more on the tax benefits of EIS brought into the investment process – especially given the recent announcement in the Budget 2011 – although the mechanics of applying this in practice could give its own challenges given the low levels of some investments, tracking / admin plus education and support required.

Overall, I think that Crowdcube is a great and welcome addition to the funding network for start ups and fast growth UK companies. I look forward to seeing how this service unfolds over the coming months.

Budget 2011 supports digital, technology and creative businesses (mostly!)

Yesterday’s Budget speech provided largely good news for entrepreneurs in the digital, technology and creative sectors.

George Osborne had promised an “unashamedly” pro-business, pro-growth and pro-aspiration Budget and, although it might be over-flattering to suggest that he achieved this, he certainly made some positive inroads toward addressing some of the roadblocks facing early-stage startups and fast growth companies.

  1. The headline grabber was that the UK is set to have one of the lowest company (corporation) tax rates in the G7. To achieve this Osborne accelerated the previously promised rate cut by introducing a 26% standard rate from 1 April 2011. This will be followed by a series of 1% cuts until it reaches 23% by 2014. This is a further 1% cut to what we were expecting.  Good news if you’re a big company but of little consequence if you’re a startup or SME – as the standard rate only applies for single companies with taxable profits over £1.5m. Unfortunately there was no 2% cut for the small companies rate that applies for most startups and SMEs – the rate will be 20% from 1 April 2011 as previously promised. Still, 20% isn’t bad and if you’ve yet to incorporate your business into a company, it may well be worth crunching the number to see if tax savings could be made.
  2. R&D tax credits get a whole lot better – Research and Development Tax Credits are a key tax incentive for many companies in the tech and wider sectors so it was great news to see Dyson’s recommendations followed and in fact improved upon. Most startups and fast growth companies are already entitled to claim a further 75p tax deduction for every £1 they spend on qualifying R&D activities (primarily comprising relevant staff salary costs), however, it was announced that from 1 April 2011 companies can claim an additional £1 tax deduction for every £1 spent (i.e. a 200% tax deduction) and this set to go up to £1.25 for every £1 spent from 1 April 2012! There are also plans to remove the requirement for the company to have generated sufficient PAYE to cover the cash repayment, a requirement that has been a key roadblock for many companies, particularly start-ups, in making repayment claims. How many companies have significant PAYE bills in the early stages? Not many. There are also plans to abolish the de minimis limit of £10,000 qualifying R&D spend before you can make an R&D tax claim. These changes should open the doors to more companies being able to access cash at an earlier stage than was previously possible. All good news and if you haven’t looked at this for your business, please drop me a line.
  3. Entrepreneur’s Relief lifetime allowance doubled from £5m to £10m for sales after 5 April 2011. For all the blood, sweat and tears put into building your business it is encouraging to know that you will be able to shelter £10m of your gain at a tax rate of just 10% – that’s a potential £1.8m tax saving compared to applying the general CGT rate. I would have liked to have seen a relaxation in the qualifying criteria to assist employees with less than 5% shareholdings, but still, in theory, it will be possible to shelter gains of £200m at just 10% if structured correctly. Mouth-watering huh? At the very least, it is important that you ensure that you are maximising this relief by allocating shareholdings at the optimum levels although care must be taken as there are many pitfalls for the unwary – remember, there is potentially £1.8m of tax at stake….(a subject for another post – or drop me a line).
  4. Enterprise Investment Scheme (EIS) is made much more attractive for investors in startups and fast growth companies. Accessing funding for business has been tough of late and we are increasingly seeing the private business angel networks as well as family and friends stepping into the fray to lend financial support where possible. EIS allows investors in qualifying businesses to obtain income tax relief as well as capital gains savings in relation to investments in startups and fast growth companies. The income tax relief will be increased from 20% to 30% from 6 April 2011 and we will see further sweeping changes in 2012 to increase the amount that can be invested and the breadth and scope of the relief.
  5. The ‘Patent Box’ is on its way! As previously announced, the UK will be following other countries in introducing a lower rate of corporation tax (10%) for patent income to encourage investment in new technologies and methodologies. Although likely to be of most interest to life science and pharma companies, it will be worth keeping an eye on this relief as more details emerge in readiness for its introduction from 1 April 2013 to see if it can be applied to tech companies more generally. As currently drafted, the rules will be too restrictive for most tech companies as few derive significant income from patents but I am hopeful that there will be a widening of scope to catch broader intellectual property classes as it undergoes consultation.
  6. 21 Enterprise Zones to be introduced (including in Greater Manchester and Liverpool) and £100m investment in Life Sciences and Technology with £10m to be invested in Daresbury Innovation Park. Creating clusters of innovative businesses builds support networks and knowledge transfer leading to fast growth businesses. A win-win.

These were the headline announcements relevant to digital, technology and creative businesses – we await the draft legislation which may throw up some anomalies or slight tweaks and I’ll keep you all posted.

Please drop me a line via the contact form on the about me page or my email address is in the sidebar – otherwise, please air your views below.

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My single biggest wish for the Budget 2011

Aside from the minute detail behind likely tax changes and incentives that might emerge from today’s Budget announcement, there is one overriding wish that business owners repeat to me again and again and its a wish that I too share:

Stop tinkering and remove red-tape so that UK businesses can plan for the future with a degree of certainty

 I live in hope….

Budget 2011 must support entrepreneurs

With a little less than 30 minutes to go until the Budget speech, I am looking forward to a pro-entrepreneur business set of proposals and actions to support growth for the future.

Looks like the Institute of Directors (IoD) are too with some of their proposals – here’s one in particular that I like:

Introducing an exemption from future capital gains tax for entrepreneurial investments. If a new company starts in business between now and 5 April 2012 then the people who subscribe for shares in it within that period would be exempt from capital gains tax when they sold those shares, whenever they sold them. This would encourage the injection of fresh equity capital into businesses (only shares subscribed for would qualify, not shares bought from existing shareholders).

If we want more private sector jobs then we need more private sector businesses.

How do you encourage entrepreneurs and business owners to take that capital risk? This is one good idea. Let’s hope George has plenty more up his sleeve!

Northern Tech Awards 2011 – Techcelerate – 23 March 2011

It is a busy day tomorrow with the Budget 2011 closely followed in the evening by the inaugural Northern Tech Awards 2011 hosted by Techcelerate.

Last time I checked there were a handful of tickets left. We’ve got a table there and it promises to be a great evening.

Techcelerate is a great initiative for tech and digital companies across the North so it is well worth lending your support if you can. Hope to see you there!

Budget 2011: How to inform (and engage?) businesses

Hmmh, so its this time each year (more than once per year in recent years) that accountants / tax advisers, like myself, scratch our heads and wonder how best we can inform our clients on issues relevant to them that emerge from the Budget speech.

This approach is constantly evolving – my plan for tomorrow’s Budget speech is to:

  1. Tweet points of interest as they emerge during George Osborne’s Budget Speech on Twitter. I’ve used CoveritLive! in the past but fail to see exactly what this adds over and above using Twitter directly. Tweeting comments as the speech unfolds in realtime also allows me to take notes ready for blog posts to be drafted post speech.
  2. Set up the hashtag #budget11 on Twitter to check for interesting conversations (and of course to keep an eye on the competition :)) Also set up RSS feeds for “Budget 2011” on Google for emerging news and commentary.
  3. Download the Treasury Budget Notes from the HM Treasury website as soon as George sits down – the devil’s always in the detail! Usually, lots to digest.
  4. Extract the key points relevant to my clients and targets and draft short commentaries as blog posts and separate client briefings. Post links to blog posts on Twitter and keep an eye out for feedback, comments, questions etc.

Then of course cascade and discuss points of interest directly with our clients – normally via a meeting or call.

This approach is a lot different to the approach in the past in which it was largely a ‘fact race’ to be 1st to clients and targets with a summary of the key points. The internet has blown this approach out of the water for all but the biggest and bravest. This, in my view, is no bad thing as the prize is now more about contextualising the issues relevant to clients and in looking at new ways of sharing this information with clients and prospects in ways that not only informs but also engages (both them and us).

Any thoughts, comments or observations on how we can better engage with businesses on issues emerging from the Budget speeches would be gratefully received…

Budget 2011 wishes for fast growth digital and tech companies

With George Osborne promising an “unashamedly pro-growth, pro-enterprise and pro-aspiration” Budget tomorrow at 12.30pm, I am looking forward to hearing these words turn into solid, workable solutions for UK entrepreneurs.

Giving Budget predictions is almost as much fun as delving into the actual Budget announcements afterward so please allow me to indulge myself for just two minutes!

Here are the tax changes I would like to hear announced tomorrow:

  1. An increase in the enhanced R&D tax credit deduction from 175% to 200%. I’ve seen so much benefit brought to hi-tech companies from the UK R&D tax incentives but I still see a ‘brain-drain’ in talented technical or scientific entrepreneurs and workers leaving the UK to build businesses where more attractive tax breaks are on offer. Dyson has called for similar changes and we should act now to encourage and retain these export-rich companies.
  2. Introduction of specific tax reliefs for video-game companies. TIGA has been calling for such changes for a while and despite squeaks of support from the previous Chancellor, these plans got shelved by the Coalition government. Canada, South Korea and France are busy supporting their games developer industry so we should likewise support our £1bn UK videogames industry.
  3. A reduction in the 5% shareholding requirement in order for entrepreneur’s relief to be available. Company employees are rarely offered the opportunity to acquire shareholdings of 5%+ let alone have the financial capacity to fund share acquisitions of this quantum so it seems harsh for them to be taxed at a likely 28% tax rate whilst those with a small percentage more could get down to a tax rate of just 10%.
  4. A change in the EMI rules to allow for the 12 month shareholding clock to start ticking from the date of grant of the option – in the same way as the old taper relief rules allowed for the clock to start ticking from the date of grant – for the purposes of entrepreneur’s relief.
  5. Relaxation of the Enterprise Investment Scheme (EIS) rules to allow income tax relief for loans to smaller companies given that accessing lending from banks continues to be difficult – especially for early stage start up companies.
  6. Introduction of the ‘patent box’ for intellectual property income – other EU countries already offer this tax incentive. We need it sooner rather than later.
  7. Enterprise zones to encourage clusters of hi-tech businesses. Mini-Silicon-Valleys with tax breaks for qualifying companies operating within the EZs.

So these are my starter for 7. What have I missed? What measures, incentives or changes would benefit your business?

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