VAT growing pains for virtual UK business

Interesting comments from Ryan Carson of Carsonified in response to questions regarding hidden challenges lurking in global business via the excellent Duct Tape Marketing. He singled out dealing with VAT as one of the single biggest challenges in growing his UK training business to become a global player commenting:

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The laws surrounding tax here aren’t written for the Internet age and don’t really make any sense. It was tough getting a straight answer from the tax man about who we needed to charge tax to and how much. Nightmare!

So true. Yet there have been further changes to VAT introduced this year to add to the confusion and administration. ‘Place of supply’ rules for VAT and determining which services are standard-rated, zero-rated, exempt etc are all routine causes for concern for UK businesses – such issues cause much head-scratching for many accountants let alone business-owners.

We need to simplify VAT administration for UK businesses especially when much of it comprises unpaid form-filling for the government e.g. EC Sales List, Intrastat etc let alone unpaid tax collection! And don’t get me started on the ‘reverse charge mechanism’!

Ryan Carson wisely sums up his advice for UK businesses looking to expand beyond UK shores by saying:

Call your accountant and check tax laws. It’s tough, but once you figure it out, it’s a huge new opportunity to grow your business. Just do it.

Expanding overseas is a minefield for the unwary with rules and regulations above and beyond VAT to contend with, however, by following Ryan’s advice in the above order a supportive professional accountant should be able to walk you through the process. Better to invest a little upfront and get it right, rather than have to unpick a series of potentially expensive cock-ups further down the line.

P.S. Get ready for the change in standard rate VAT from 17.5% to 20% from 4 January 2011.

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Oil Regeneration: A slick idea!

Whilst the herd frantically invests in oil futures to protect against rising oil prices, it is both refreshing and inspiring to see stories of the few who are prepared to think differently. In this case, to not only regenerate oil so there is some left for future generations, but also to take steps to reduce the amount of plastic waste that needlessly fills our landfill sites the world over.

Your lucky oil strike might be closer than you think…

5 minutes well invested.

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Using free writing to unleash creativity

Idea generation is at the cornerstone of all successful marketing and strategic thinking.

Mark Levy has written a truly brilliant and fresh book on effective idea generation called Accidental Genius: Using Writing to Generate Your Best Ideas, Insight, and Content. In this book, Levy encourages readers, in essence, to write faster than your conscious mind can think – no time to stop and ponder – in order to get all your ideas, thoughts, concerns etc on paper / screen. In doing so you effectively empty your mind. He suggests you aim for 10 or 20 minutes non-stop ‘free writing‘. You should then pause to pick through and organise important stuff, links, ideas and concerns by highlighting or bolding key sentences or thoughts. Once you’ve sorted key points you can then set off on further 10-20 minute bouts of free writing to dig even deeper.

I’ve found free writing exercises to be extremely helpful in unleashing more creative and productive ideas which have turned into really interesting plans and actions. It is so easy to get caught up in endless thought-loops and free writing can help unblock these frustrating dead-ends by getting everything out of your head. Once in full flow I’ve found myself (or subconscious mind) willing and able to dig far deeper and, only by finding channels such as this, can potential new openings and ideas be unlocked.

I recommend you get hold of this book and give it a try – especially if you’re looking for that elusive creative breakthrough or killer idea.

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Business technology solutions: Keep it simple

Few would doubt that technology is set to be a huge enabler for small to medium sized businesses (SMEs) as most have been largely underserved until recent years. We are only now starting to see some more user-friendly enterprise software e.g. for accounting, CRM, communication (internal and external) etc, that help SMEs compete on almost a level playing field with larger enterprises (who have larger budgets).

Aaron Levie of Box.net makes some interesting points about the opportunities for enterprise software providers and business users. He stresses the importance of enterprise software developers removing the shroud of tech jargon and complexity around enterprise software and instead focusing on providing functional yet simple core products capable of being modified to specific business needs. Levie states:

There will always be a few really complex problems that require complex solutions. But for the vast majority (read: 95%) of use cases, simplicity will suffice. Where complexity is necessary – whether it’s to build a specific workflow, integration, or solution for a particular vertical – solve it through customization. Abstract the core areas of your product from the parts that can be modified by a developer or customer, making sure the core and default use is still simple. The best products in the world can do as much or as little as customers want without you having to think twice. The economic upside of this is obvious, of course, as you’ll now have a rich ecosystem of integrators, value-added resellers, and professional service firms that can participate in your success.

Did he say 95%….?!

We have already seen how superb consumer software such as Apple‘s iPhone or Google’s Android platform can be transformed by third party modifications and developments. What if we could apply the same principles to SME business software?

What business enterprise solutions are catching your attention?

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Tinkering with tax simplification

Over 1,000 tax incentives have been identified and collated as part of the first stage of the Office of Tax Simplification work – tax advisers across the UK nod wearily! The next step is to review which tax incentives can be eliminated to ‘simplify’ UK tax. Target date for the first review is the next Budget scheduled for 23 March 2011.

I’m in two minds about this – on the one hand, there is little doubt that UK tax legislation has got way out of hand in terms of complexity (for many accountants lets alone business owners!). On the other, there are many targeted tax incentives which appear to have worked well to promote future growth areas e.g. R&D tax credits and the forthcoming ‘patent box’ (promising lower rates of tax) encourage innovation and enhanced capital allowances encourage investment in greener plant and machinery. There are plenty of other targeted tax incentives aimed at putting our economy on a firmer footing for the longer term future. Look at the Dyson Report on Making Britain a Hi-Tech Exporter and the recent Blueprint for Technology report for further support for targeted tax incentives.

Taxation can be effectively used as a carrot to incentivise investment (both cash and more importantly entrepreneurial zeal) in key growth areas, such as intellectual property-rich digital, tech and creative industries; those businesses and sectors that should provide longer term prospects for a healthy UK and global export economy. So why tinker?

Having said that, the relatively recent announcement to provide new start-ups with a holiday from National Insurance Contributions sounds well placed and simple enough – until you look at the detail (and this is just a summary of the detail!).

Overall, I am concerned that putting an axe to scores of these targeted tax incentives in the name of ‘simplification’ could have far-reaching and painful longer term repercussions for the UK economy. Yet we do need to plot a way through the streams of red-tape and bureacracy facing businesses so things must change.

Welcome your views.

Automate your tax alerts

This is a basic yet nifty little tool for creating a calendar of your key tax deadlines for the forthcoming 12 months.  Okay so your accountant should – and probably is – letting you know in good time about up and coming tax deadlines but this is a useful addition. You can opt for email alerts too which is good. 

Now, take this a step further – what if this could be built into an iPhone or android app? Is there already something similar out there? A first step in a series of helpful tax alerts that could be piped to business users….  

Become a Nose Collector

I like the idea of turning our natural inhibitions about selling products or services on its head – so rather than tentatively seeking a ‘Yes’ from prospective clients or customers, instead how about focusing on becoming a collector of ‘No’s’ (or should that be ‘nose’ :))?

Approaching new business generation from this perspective suddenly becomes a whole lot more fun. Your aim now is to meet as many people as possible to talk about their problems and issues and to see if you can interest them in saying ‘No’ to your offer of assistance. You become more natural and less pressurised in your approach and more focused on understanding the needs and interests of the people whom you meet. A win-win.

So how many ‘No’s’ can you collect this week?

IPOs for technology companies – Key learning points

Yet another insightful Techcelerate event this evening in Manchester chewed over whether ‘initial public offerings’ (IPOs) or ‘stock market listings’ are the right capital raising vehicle for growing technology businesses and the process required should they choose to go down this route.

Marcus Stuttard (AIM CEO) delivered a concise analysis of the advantages of listing on the markets including scenarios where this might not be so appropriate and then Anish Kapoor (Telecity LSE listing) and Simon Elms (Warthog AIM listing) delivered warts and all accounts of the IPO process as entrepreneurs who had been through it and managed to live to tell the tale.

Here are my notes:

  1. Choose the right broker or nominated advisor (NOMAD). They hold the key to your long term success in the market.
  2. Your management team will also be key to the success or otherwise of the IPO and beyond. Start making connections with potential non-exec directors etc who can help (sooner rather than later) with strategy and helping build your team in areas like finance and perhaps getting the wheels in motion to appoint a highly regarded chairman.
  3. Have your business model nailed down before you start the IPO process. Markets don’t like unexpected strategic changes.
  4. Be prepared for a long and arduous due diligence process in the run up to listing as lawyers and accountants crawl over your results and forecasts. Your business will be in better shape afterwards!
  5. Costs of listing are significant – both in professional fees and management time. You then have the ongoing regulatory and reporting requirements to comply with. Think through why you are seeking a listing as there could be better alternatives if you are seeking a one-off injection of cash.
  6. The flip-side of point 5 is that once you have been admitted to the markets, raising future cash is easier than seeking private / VC funding.
  7. Institutional investors like to see a track record of management having successful executed IPOs and exits. They are prepared to invest in the management team – even for pre-revenue businesses.
  8. Listings in the US are even trickier than the UK – tighter regulations etc. Proceed with caution.
  9. VCs are increasingly looking to AIM markets to invest capital. Espec VCTs. Another advantage for listing.
  10. Think about the impact on your staff and how the fluctuation of the share price might unnecessarily unsettle them. On the flip side, think of the opportunities to incentivise them with a ready market for the shares.
  11. An IPO can be great for your PR in your sector – speaking of which, consider getting a decent PR agent as part of the IPO process.
  12. For AIM you’re probably looking at a minimum capital investment of £2m+ with the majority currently in the £30m-ish bracket.
  13. As a founder, think about when you can get your cash out post IPO – you will probably find you are severely restricted in cashing out shares due to potential negative sentiment and insider info plus lock-ins. Work this out upfront.
  14. Don’t try to time the markets. You need to take the best deal you can get when presented if you are to continue to build your business and stay one step ahead of the competition.

Any further comments to add?

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Techcelerate event: Tech IPOs 8 November, Manchester

We’ll be hosting the next Techcelerate event aimed at supporting North West technology companies tomorrow evening in Manchester.

It promises to be a great evening including talks by:

  • Marcus Stuttard, CEO, London Stock Exchange – Alternative Investment Market (AIM)
  • Anish Kapoor – ex CFO Telecity and CEO Yuuguu.com
  • John McGuire, CEO, FreshT
  • Simon Elms – Warthog and Image Metrics

Get your tickets here – be quick as we’re almost full.

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How to tap into your business MOJO

Lunch at Mojos in Rhosneigr, Anglesey is always a treat.

I think all businesses could learn something from from this superb little cafe.

Mojos captures the following key principles of all successful businesses:

1. Focus on your strengths
Mojos serves crepes. Sweet ones and savory ones but not a whole lot else besides. So they are good at making super tasty crepes. In fact, you’d be hard pushed to find better crepes this side of France. The evening menu has a choice of two main courses – a beef or a sea bass dish. That’s it. But they are equally excellent. Keep it simple.

2. Have a story
Alex, who co-owns Mojos, is a former kite-surfing champion. When he’s not teaching kite surfing or scuba diving to catch fresh bass for that evening’s dinner guests, he helps serve whilst his partner prepares the delicious food in the centre of the cafe. Not your average eating establishment set up.

3. Be unique
This is no copy-cat, run of the mill mundane high street cafe. The food is simple yet special and to top it all the cafe is named after Mojo, the cafe dog. Cartoons of Mojo adorn the menus and he occasionally graces the cafe, when he’s not wandering around on Rhosneigr beach – normally waiting for Alex to come back into shore from a stint out kite surfing!

Follow these simple principles and you too should be able to tap into your business MOJO.

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