10 Tips for Today’s Successful Business

  1. Plan for the next 48 hours (rather than 48 months).
  2. Be clear on your vision. Your reason for being. How your business will add value – then share this with the world.
  3. Opportunities exist in problems. Don’t run away. Seek them out – today there are many BIG (profitable) problems to solve.
  4. Source new ideas from all areas of your business – regardless of hierarchy.
  5. Focus on being GREAT rather than being big.
  6. If you treat your staff like children – they’ll no doubt act like children.
  7. Improvise. Always.
  8. Ideas. Innovate. Ideas. Innovate……
  9. Transparency – be humble when you cock-up (and you will).
  10. Don’t be scared to Try stuff!

Should I set up a Limited company for my new start-up?

Most business start-ups tend to opt for setting themselves up as a limited company from day one – but is this right?

Answer: It depends.

In many cases, a limited company is the right option but it pays to think through all the options as there can be benefits to thinking a little differently.

You basically have 3 main choices in the UK:

  1. Company
  2. Partnership
  3. Sole trader

The main advantage of a limited company is the limited liability status. This means that the company’s liability to a claim made by say an aggrieved supplier is limited to the share capital of the company. So if the company is set up with £1 share capital – that’s the extent of its liability. Hardly worth pursuing so the shareholders can sleep at night.

Limited liability status is not only important to protect the livelihood of the company owners but it is also useful for protecting valuable assets like trademarks, patents, know-how and other intangible assets.

But a company is not the only business vehicle that can attract limited liability status. Partnerships can also now attract limited liability status as an LLP (Limited Liability Partnership).

Why consider setting up an LLP over a company?

The key issue is flexibility. LLPs are more flexible than companies, particularly in relation to tax planning.

Consider the example of Jane & Freddy. J & F are starting a digital advertising agency. Rather than opting for the typical default option of a limited company, they set up an LLP at Companies House. J & F are partners in the LLP rather than shareholders and directors of a company. J & F pay income tax under Self Assessment rather than PAYE. They don’t pay any income tax until 31 January in the year following the coming 5 April tax year end. So they can diligently set aside this tax and keep it stashed in say a high interest cash ISA or bank account until it is due to be paid to HMRC. This compares with paying tax over monthly under PAYE.

But it gets better. There is no Employer’s National Insurance (currently 12.8% – potentially set to increase to 13.8% from 5 April 2011) on partners’ income from the LLP. Plus partners(and sole traders) are subject to Class 2 and 4 National Insurance which is more favourable than company Class 1 National Insurance. If they have taxable benefits such as company cars then there is also more favourable tax treatment in an LLP than in a company.

And yes…. it gets even better. After 2 or 3 years of successful trading, J & F may decide to incorporate their LLP and turn it into a company. (This might particularly be the case if they feel they have reached the stage where they need external investor funding in return for shares in their company.) The digital advertising agency business and its assets (e.g. computers, cash in the bank etc) would be transferred to the newly formed company at market value. This would crystallise a capital gain based on the market value of the business – however, this tax can be deferred.

The market value of the LLP business would be measured not only on the tangible assets transferred but also more interestingly on the intangible elements of the business, particularly goodwill (which may account for most of the value in the business). Goodwill is made up of the value in the brand, the customer base, its future potential etc built up over the past 2 or 3 years of trading – the factors that would influence a willing hypothetical purchaser to pay over and above the value of the visible tangible assets.

Post transfer, J & F Ltd would be the proud owner of the digital agency business and assets. The goodwill element would attract valuable tax relief in the company. Also, in return for the value transferred in, the company would have a debt owed to J & F as LLP vendors and now shareholders. This creates a highly valuable and flexible tax-free balance that can be drawn down as and when needed by J & F. Combined with a carefully managed remuneration extraction strategy from the company, J & F will have added considerable after tax value to their business which they can enjoy now compared to if they had followed the herd and set up as a company from day one – all by thinking a little bit differently.

The purpose of this short article is to emphasis that there are alternatives to setting up a company for a new business venture. It is oversimplified and the key benefits and principles may change (e.g. in light of the imminent emergency budget!) so, as ever, please take professional advice specific to your circumstances.

Serendipity with Malcolm Gladwell in Manchester

Malcolm Gladwell – author famed for The Tipping Point, Blink, The Outliers and more recently What the Dog Saw – visited the Lowry in Manchester last night to give an insightful talk on his latest thinking.

I must confess to being a little nervous about giving my views after he kicked off last night’s talk by reading aloud a stinging blog review regarding his Oxford talk the night before – Gladwell discouraged the packed Manchester auditorium from following suit by joking that “the bar had been set high”! I am pleased to say that I disagree with the Oxford critic and thought that the talk was a masterpiece of story-telling, managing to string together a series of insightful connections and conclusions.

Gladwell focused on the power and importance of serendipity to the growth of individuals and wider society – history shows how society depends upon those who are brave enough to assume responsibility and uncertainty and search for solutions to unknowns. From explorers to philosphers to scientists to entrepreneurs to teachers the list goes on. I will not give away too much detail on the content of the talk (which primarily revolves around one key moving story) suffice to say that those who commit to stepping into the unknown open up possibilities for great personal growth and success (for themselves and wider society) but also disappointment – often in equal measure.

Aside from the importance of the message that Gladwell was seeking to communicate, I was equally entranced by Gladwell’s presentational delivery style. Here were my take-aways:

  • Open with some humour to break the ice
  • Say what you’re going to say and then remind the audience throughout the talk to keep everyone on track – the old mantra of Tell them about what you’re going to tell them; Tell them and then Tell them what you just told them rang true here.
  • Tell stories. Give examples. Gladwell rarely bleated facts. His stories spoke for themselves.
  • Make connections from the stories – help the audience out.
  • Use hand gestures to emphasise points. Gladwell often touched his forehead when he was making an insight and waved his hands to make specific important points.
  • Use differing voice intonations to add passion, pain and wistful insights to emphasise points and maintain interest. There was rarely a monotone note audible throughout the talk.
  • Be consistent with your image. Sneakers, jeans and jacket with Gladwell’s trade-mark hair style did not disappoint.
  • Surprise the audience by ending unexpectedly…..

Business Playground unleashes business creativity

Dave Stewart (formerly of the Eurythmics) has turned his attention from music creativity to business creativity.

Speaking on BBC2’s The Working Lunch , Dave Stewart outlines how all businesses must become more creative if they are to even survive the next 10 years. No business is safe or immune.

I have just received a copy of Dave Stewart’s latest book Business Playground and will review it shortly.

John Timpson talks Upside Down Management

upside down managementJohn Timpson talked Upside Down Management to kick off Manchester Business School’s (MBS) Vital Topic series this evening.

Having built the Timpson business into a £100m+ turnover and £10m+ annual profit group, John Timpson had plenty of contrarian business ideas to share with the enthralled and packed MBS auditorium.

Built around his Upside Down Management philosophy – that came to him as a lightbulb moment during a failed bid to acquire a competitor – it became “obvious” to Timpson that the key to success was to have:

  1. Happy Customers
  2. Great Jobs

To achieve this the Upside Down organisational chart was born with customers at the top and Mr Timpson himself at the bottom. From now on, the frontline shop employees would run the business by putting a smile on the faces of customers whilst the management team would serve them. To achieve this, Timpson introduced two new rules:

  1. Look the part and put the money in the till
  2. You can do anything else to best serve customers

This relaxation initially fell on deaf ears as the employees didn’t trust this new regime, however, a further rule got the wheels of change moving:

  1. You can spend up to £500 to settle a customer complaint (without management authorisation)
  2. Charge whatever you like – the price list is a guide only

Timpson explained how the key to success of the business is in choosing frontline shop staff who have personality. “You can train for the job but you can’t train for personality”. This is reinforced by an interview assessment form that used by Timpsons which is disinterested in past qualifications and experience and instead focuses on the key personality attributes using a Mr Men style analogy. An approach that has worked wonders for the past 10 years.

John Timpson has a book on his Upside Down Management that you can get from Amazon.

Here are some other fascinating facts from the world of Timpson’s Upside Down Management:

  • Staff are actively encouraged to use their initiative and try new ideas. “If the ideas work, tell me. If they don’t work, just stop.”
  • Employees are encouraged to let management know if they’ve got themselves into some personal financial difficulty. To help them stay happy and focused on their work, Timpson operates a financial assistance package with £350k currently on loan to staff – “we normally get pretty much all of it back”.
  • There are 5 holiday homes available for staff to use for free.
  • Employees are invited to submit their Dreams Come True entry once a year and a lucky few have their dreams fulfilled e.g. family reunions, holidays, concerts etc.
  • Get rid of poor performing staff quickly.
  • Weekly bonus scheme – all staff are eligible for the weekly bonus payment which is based on the store’s sales less the wages paid x 4.5 (“because 4.5 works”). 15% of this profit is shared between store employees each week.
  • The proportional share of the 15% weekly bonus is increased for the more highly skilled employees based on (internal) courses attended and completed – “so we have staff pleading to attend Health & Safety courses!”
  • All internal manuals contain illustrations rather than words. Staff take the manuals home to absorb – would they do this with folders full of words….?
  • A key internal training course is (as you might expect) Customer Care. Participants are asked to nip out to buy bits for the course not knowing that the bulk of the course is spent discussing their experience of shopping for the requested items.
  • Most customers are a miserable bunch. Don’t just encourage staff to smile, it is their role to put a smile on the face of their customers.
  • No advertising – “our customers do that for us”
  • Delegate authority but NOT responsibility. “This is what most external people misunderstand.”
  • How to be a great boss = Listen + praise (praise 10 x more than you criticise). Email has placed a premium on the hand written thank you letter (ideally with a hand written envelope and a stamp sent to their home address perhaps with a hand written bonus cheque).
  • Avoid meetings. A waste of time.
  • Avoid excessive time spent budgeting. Get out on the road to visit your shops and customers to get real-time information.
  • Watch cash. Daily.
  • Avoid formal salary structures. Review each employee’s remuneration on the anniversary of their joining – this avoids gangs of staff receiving wage appraisals at the same time (and comparing notes).
  • No appraisals. Stopped this 25 years ago and best thing ever. Danger with appraisals is that the best staff are encouraged to look at their weaknesses whilst positives are looked for in the weaker staff!
  • No head office staff allowed to issue orders. This is upside down management, remember?
  • No management head office structure.
  • Capital expenditure is the only decision requiring head office input.
  • No marketing. No PR.
  • A final salary pension scheme that is open to new entrants (!). This rewards loyal employees and is worth the added cost.
  • Birthdays – a day off on your birthday.

If you like this, I recommend you listen to this recorded interview in which John Timpson shares more of these ideas. Or you could purchase his book Upside Down Management: A Common Sense Guide to Better Business.

A refreshing talk from an older established business that has a forward thinking approach to doing business – and is doing very nicely out of it too.

Championing Honest Business

Matt Langford (MattFlies.com) and Chris Pearson (Personified.com) recently exchanged views on whether businesses could be driven by values other than profit?

Their skepticism appears to be swayed by the values of BIG business which can become skewed toward profit as the company grows – even if it didn’t start out that way.

The challenge is for businesses to embrace a mixture of values: people, planet, profit – the triple bottom line.

This is easier when businesses stay small. But why do we assume that the natural passage for all successful businesses is to grow into monstrous globalised entities? Hasn’t the past few years demonstrated that faceless, global businesses lack the trust of the public?

Your thoughts on the way forward?

19 Thoughts on Effective Strategy

  1. Be crystal clear on your Vision. Your Mission. Your reason for Being.
  2. Solve a problem. Ideally a BIG problem.
  3. Be prepared to say ‘No’ or pass up on opportunities that don’t match your strategy (you WILL be tested).
  4. Never put price at the centre of your strategic advantage. When you are solving BIG problems in NEW ways, price becomes (almost) irrelevant.
  5. Don’t think you can do it on your own. You can’t.
  6. Remind yourself on a daily basis of your strategy. Have it emblazoned on your wall and etched on your mind.
  7. Share your vision with your team and others – regularly.
  8. Be acutely aware of where you are and where you’re starting from – don’t deceive yourself (or others).
  9. Be prepared to lose people along the way – you can’t be all things to all people.
  10. Make tiny goals and have lots of mini celebrations. These build into GIANT leaps.
  11. Have a ‘not- to-do’ list.
  12. Be honest and open. Treat others how you wish to be treated. We’re all adults.
  13. Be stubborn…..
  14. ….but be prepared to adapt your strategy if you are not getting the results you need.
  15. Be ever mindful about what you are thinking about – is it moving you forward?
  16. Don’t be afraid to walk away from the crowd – in fact, actively seek new and unexplored areas.
  17. Keep it simple.
  18. Seek feedback from your customers (regularly) – and act on it!
  19. BE PASSIONATE – its infectious!

Earning a Buck in the Digital Age – Delivering Professional Services to Digital & Creative Businesses

Pro.Manchester‘s Creative session on Earning a Buck in the Digital Age proved to be a compelling discussion on how professional service firms can work more effectively with the North West’s flourishing digital and creative businesses.

Held at Halliwells in Manchester, the panel consisted of Simon Wharton, Nick Rhind, Shaun Fensom, Coral Grainger, Philip Hemsted and Steve Kuncewicz (hosted by Nick Jaspen ).

The session focused primarily on the interaction between law firms and digital businesses, however, the discussion was equally applicable to ALL professional advisers (PSFs).

Here were my key take-aways:

  • How do you square £100-£200 hourly rates of PSFs with small digital agencies which have a handful of employees and a limited budget? This crucial question framed most of the debate and was never fully resolved. What did become evident is a clear communication gap in perceived and actual value that professionals can bring to fledgling and more established SME businesses. Nick Rhind conceded that he had learnt a lesson by settling for free business advice either online or from friends in the early days until his business needed bailing out by professionals a couple of years later. An “expensive mistake” given that it is usually more expensive to fire-fight problems after the event than to stop cock-ups happening in the first place. I see this time and time again when I pick up new clients and just wish I had been involved from an earlier stage. There is so much we can do.
  • Speed of delivery of professional services. Digital businesses operate in a fast moving world driven by technological advances – can traditional PSFs keep up with the pace and demand? Coral Grainger raised the point that many business owners’ experience in working with lawyers for the first time may have been in buying a house – the typical drawn-out conveyancing timetable doesn’t bode well for digital businesses who will expect responses quickly – in hours not weeks!
  • Transparency of billing was quite rightly viewed as key. Businesses want to know how much they will be billed upfront rather than working on a time spent billing basis. I am pleased to say that from comments made from the floor, it appeared that most professionals in the room operate on a fixed fee basis agreed in advance. At my firm, we offer a heavily discounted tax and accountancy package for fledgling digital businesses for this reason. However, the fact that this point was raised shows that we are not communicating our working practises clearly enough and the old image of the ‘ticking clock’ still lingers….
  • Introducing open-source methodology to professional services. Digital and technology companies are increasingly breaking larger projects down into smaller manageable tasks that can either be crowd-sourced or taken on by specialist teams. This has proved hugely effective. Can this be applied to professional services whereby template documentation or boiler-plate information can be offered online for free and amended by businesses for their own use (with advice sought where necessary)? There are already examples in the legal market where such practises are emerging – there is still a long way to go.
  • Professionals need to better engage with social media to build relationships online – professionals have long been good at networking at events, however, they increasingly need to bring social media into the networking mix “or die”. Judging by the limp show of hands from the floor when asked who is active in social media online, us professionals have much to learn and do!
  • Risk averse mentality. Most professional are risk averse – “this is how you surely want us” was a comment made from the floor – so how can professionals make better use of social media as a tool to interact whilst avoiding potentially costly errors or law-suits from instantaneous or “off the cuff” remarks online? I believe the key is in the “social” of social media – we don’t have to constantly spout out technical advice and, quite frankly if we did, we would be preaching to a v limited (and bored) bunch of followers!
  • PSFs / businesses should bring SEO analytics into the boardroom – Simon Wharton is bang on with this. Marketing data has never been so readily available and website and online marketing provides the tools to achieve this. This could be a session topic in its own right.

Overall, this discussion opened the floodgates to a huge raft of issues that, when fully explored, should allow us professional advisers who wish to engage to increase collaborative opportunities that we are clearly sadly missing at the moment.

A great start folks, where next?

Zappos points to Future Business Model

You will see from the above video that Zappos is no ordinary company.

Zappos launched in 1999 and today has annual sales in excess of $1billion.

Zappos sells footwear and clothing online. Sounds fairly ordinary however, the key to Zappos’ success is its unwavering focus on building a unique community culture amongst its staff and customers by aiming to build WOW! into every interaction.

This culture is evident from its (refreshingly different) values:

Deliver WOW Through Service

Embrace and Drive Change

Create Fun and A Little Weirdness

Be Adventurous, Creative, and Open-Minded

Pursue Growth and Learning

Build Open and Honest Relationships With Communication

Build a Positive Team and Family Spirit

Do More With Less

Be Passionate and Determined

Be Humble

Yet the Zappos culture is disruptive in other ways too including the fact that:

  • employees are encouraged to open Twitter accounts – so for any customer complaint posted to Twitter, expect to see an employee run to the rescue within minutes (that’s if a raving customer fan doesn’t get there first!)
  • all new employees are put through an intensive training induction course then offered $2,000 to quit! Not only does this weed out those in it solely for the money (merely a job!) but it also helps maintain morale for the existing team who are reassured that only the committed join the community.
  • Zappos is active in all social media channels and listens to customer comments as well as gripes. An online suggestion to stock sunglasses was listened to and acted upon. Sunglasses sales rocketed and Zappos is now one of the largest online suppliers.
  • It offers a 365 day returns policy. Likely to be abused, most would think – however, those that do return items turn out to be Zappos’s most profitable customers overall.

The list of counter-intuitive policies and business practices (compared to conventional business wisdom) goes on and on….. yet the success of the business is undeniable (Amazon acquired the company for c$1 billion).

The really interesting point is where Zappos could go from here. It has built a reputation for reliability, trust, innovation, relentless customer focus, community, inventiveness, transparency, passion and fun. At a time when traditional BIG business has suffered a fall from grace, there is an open goal waiting for disruptive businesses like Zappos. Zappos is, in effect, a service company (that currently happens to sell footwear) and could go on to sell anything as its mad raving fans would flock to support it.

How many UK companies match Zappos’ approach to business?