12 tips on building a business you can sell

Here are my notes from a very readable book called Built to Sell: Creating a Business That Can Thrive Without You by John Warrillow

  1. Do one thing well
  2. Treat like a product rather than bespoke service – one size fits all
  3. Service based companies are normally over-reliant on their founders – even if you can sell will result in an earn-out over 1-3 years post sale which is beyond your control
  4. Bill up front like a product sale – otherwise sales cycle means adverse cashflow
  5. Systematise the process into easy to follow steps
  6. Document the steps clearly so that anyone can follow
  7. Get rid of staff that are non-core to the one thing
  8. Measure number of leads and conversions to allow for systematic prediction of future revenue
  9. Hire two sales people – always two or more as they will compete
  10. Hire product rather than service sales people – the latter will use consultative selling that will require bespoke services
  11. Sack your other clients
  12. Allow three years

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Must read 2014 business books – before diving into 2015’s top reads!

So we’re already into 2015 and a bunch of new hotly tipped business books are already hitting the shelves. Before diving into these, here’s a summary of some of the stand-out must read 2014 business books:

Inc magazine‘s Top 3 went with:

1. How to Be a Power Connector – Judy Robinett

As somebody who is often overwhelmed by people who want to “connect” with me, Robinett’s system of differentiating between levels of contact was truly a revelation. It’s one of those books I wish I’d been able to read two decades ago.

Sounds impressive – one to add to the list…

2. The Ambitious Woman – Esther Spina

Interestingly, Girlboss was voted No,1 by Goodreads. There appears to be a theme here…

3. Money: Master the Game – Tony Robbins

This features across most of the Top 10 lists for 2014 and its Robbins’ first book in a while on a subject he apparently feels quite passionate about. Although I’ve yet to read it, I’ve heard its quite US-centric but the interview sessions in the back are apparently worth the price of admission in of themselves. It took the No.1 spot in the New York Times best seller list for 2014.

Entrepreneur magazine put The Virgin Way: Everything I Know About Leadership by Richard Branson at the No.1 spot in their list of Amazing Books in 2014. The Innovators: How a Group of Hackers, Geniuses, and Geeks Created the Digital Revolution by Walter Isaacson and How Google Works by Eric Schmidt and Jonathan Rosenberg came in 2nd and 3rd respectively.

Pikkety’s Capital in the 21st Century took first prize in the FT (good to see this available to borrow for free within the Kindle Unlimited library) whilst Creativity Inc seemed to be a repeat star across the majority of top 10 lists.

Forbes magazine looks to Blinklist to help get through as many of their suggested top 10 books in as little time as possible – a kind of Cliff’s Notes for business books. Incidentally they put Ben Horowitz’s The Hard thing about Hard things as the only 2014 book in that list aside from First, Break All The Rules, Marcus Buckingham.

So having run through this whistle-stop tour of the top business books in 2014, I can see my library getting even bigger – perhaps I’ll need to take a leaf out of Zuckerberg’s book (pardon the pun) in reading a new book every other week

Any books from 2014 that you loved that we missed?

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Patent FAQ session with Appleyard Lees, Patent Attorneys

You may be contemplating seeking a patent for your invention but you’re not quite sure where to start?

Here we share a real back-to-basics 101 session on patents with the friendly folk at Appleyard Lees – European Patent & Trademark Attorneys who answer frequently asked questions in relation to patents and patent strategies.

Ean Davies and Simon Bradbury from their Manchester office walk us through:

  • what rights does a UK patent offer?
  • what can typically be patented?
  • when to patent an invention?
  • strategies for patenting an invention
  • common errors in approach to patenting an invention
  • typical costs and approach

Enjoy.

Note that this interview was recorded in early 2014 and has only just been published as there were some ‘technical issues’ with the recording

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VAT MOSS: A new VAT MeSS for ambitious digital, tech & creatives

Unless you’ve been hiding under a rock someplace, you will have heard the screeches of uproar regarding the new VAT rules introduced from 1 January 2015 in relation to the supply of ‘electronic services’.

Coined a #VATMESS on Twitter, this is all part of an exercise to ‘harmonise’ EU VAT rules to prevent unfair competition where some companies may be selling from lower VAT jurisdictions – if only harmonisation could be so simple!

Given that the changes apply to the supply of ‘electronic services’, the key companies and businesses that have been hit by these changes are tech companies. Simon Briton has written a good summary on the impact of the VAT MOSS rules for tech companies.

In summary, the new rules require businesses to determine whether their customers are businesses themselves (B2B) or ‘consumers’ (B2C) – if its the latter, sellers are required to apply VAT at the consumer’s local rate of VAT…. yes, you read that right: businesses that are exporting their electronic services (e.g. software as as service (SaaS), apps, plugins, downloads, ebooks etc) are required to identify the status of each customer and then apply local rate VAT to the sale if it is to a non-business customer (B2C).

Now it would be too much to expect businesses to register for local VAT in each country so the UK – and other EU territories – are offering a Mini One Stop Shop (MOSS for short) whereby you can register with HMRC and file (yet) another VAT return for MOSS on a quarterly basis and HMRC will distribute the cash to the relevant territories.

What about small businesses that are not registered for VAT because they fall under the VAT threshold? There was a minor climb down by the UK Government in allowing such companies to side-step paying VAT on UK sales but this is only a half way house. Don’t forget, it is not just EU companies that are impacted by these new rules – here is the view of a US digital services provider who is having to change his business model following the advent of these new VAT rules.

Before we get mired in the admin burden of VAT MOSS, we need to know whether or not our customers are in fact businesses? Identification and evidence of their VAT registration number (or local equivalent) is the primary determinant (to give seller’s ‘certainty’) although the rules afford some flexibility – at the seller’s risk – if the customer can prove in other ways that they are a business. There are penalties that can be levied by the local countries and can be applied over a 10 year period….

Even if you establish that they are consumers (B2C), the fun doesn’t stop there as you need to know which country’s local VAT rate to apply – what if the customer is using a mobile device when they purchase whilst on their travels…?

Some think that we are making too much fuss over the #VATMESS and think that more could be made of the carve-out for ‘human intervention’ but this surely loses scalability and requires potentially uncommercial changes in business practices which cannot be a good thing.

There are some emerging technologies to help companies address these changes, however, many companies will have to view this as part of a wider process to ensure they are correctly identifying existing as well as new customers.

Are you still with me….? If so, well done.

If you wish to dive deeper, these resources should help:

Rachel Andrew provides an excellent summary of the horrible implications

Excellent Github summary of new VAT rules (with links to further info) started by Rachel Andrew

Enterprise Nation have championed small businesses on this issue – here is a webinar recording

EU guidance – pour yourself a large, strong coffee

HMRC interpretation

Useful HMRC flowchart

For specific VAT MOSS queries contact HMRC on their dedicated 2015 EU VAT email: vat2015.contact@hmrc.gsi.gov.uk

I don’t think we’ve heard the end of this and I expect further refinements and (hopefully) relaxations as the UK Government realises the negative impact on enterprise and export by UK smaller companies – the exact things they want to encourage…

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Get a great new car like a Tesla Model S and save tax too!

I have been salivating over the new Tesla Model S that has recently been introduced in the UK. It carries a fairly hefty price tag but given its space-age interior, high performance and ‘cheap as chips’ running costs (its 100% electric) its hard to ignore.

The good news for company owners is that there are some nice tax incentives that can sweeten a deal in getting your mits on one of these cars.

Ordinarily it rarely stacks up from a financial perspective to acquire a car through the company as the driver gets stung for high benefit in kind income tax charges and the company gets sloooooow tax relief in the company. 9 times out of 10 it makes more sense to acquire the company personally and take advantage of the Approved Mileage rates to claw back some of the running costs on business mileage. But there are a handful of exceptions – and this is one of them.

The Government wants to encourage people to invest in low Co2 emission and electric cars so they offer tax incentives. A Tesla Model S ticks all the boxes (for now…)

  1. As it is electric, you can get a 100% write-off against taxable profits in the company. This is huge. A £70k P85 Tesla Model S bought through the company (either outright or via HP) would save corporation tax of c£14k!
  2. There is 0% benefit in kind charge – watch out, this is scheduled to run out on 5 April 2015
  3. No road tax
  4. No London Congestion Charge

There have been tax incentives like this around for a while for low emission cars but, to be frank, these cars have been fairly uninspiring.

The Tesla Model S is a bit of a game-changer in this respect and hopefully opens the doors for more innovative performance cars that both help the environment whilst being functional and fun too (oh and tax friendly!).

Your Virtual Accountant

Today was like many others, but perhaps a world away from just a decade ago for an accountant and client working together.

We wrestled through bank reconciliations, talked through accountancy adjustments, mulled over cost-drivers and shared insights around areas for growth.

We were face to face and looked at the same screen with the same figures. Perhaps nothing particularly strange so far.

Yet we were 100s of miles apart.

We worked together all day. Like we were in the same office (but we were far from it). This was made possible by Google Hangouts, online banking and cloud accounting software (Quickbooks today).

Don’t be restricted by geographical boundaries when seeking financial and tax advice for you and your business. Get the best accountant and tax advisor you can – no matter where they might be….

 

Raising SEIS / EIS funding for a software company? Watch out!

969088410_0597019e20_mImagine you are setting up a software development company. Perhaps you plan on generating revenues using a Software as a Service (‘SaaS’) business model: charging users a licence fee to access the service via the cloud.

You need funding and are considering the benefits of Seed Enterprise Investment Scheme (SEIS) or Enterprise Investment Scheme (EIS) to help attract funding for your tech startup. It is always good practice to seek advance approval from HM Revenue & Customs that your company is a qualifying company for the purposes of raising money under either or both of these UK Government tax incentives.

One of the key points to consider as part of this advance planning process is whether your company will be carrying out a qualifying trade for the purposes of these tax reliefs? This is not always so obvious – software companies being a case in point.

Note that the trade of ‘receiving licence or royalty fee’ income is of itself an excluded activity i.e. does not qualify, under either scheme. However, there is an exemption from this restriction where the company creates the whole, or greater part, of the underlying intellectual property that goes on to generate the licence or royalty income. Cue – breathe a huge sigh of relief!

Matters are not so straightforward, however, in situations where intellectual property is acquired from another company and that transferor company has already monetised the IP and received licence fee income in relation to it. At what stage will you have created the whole (doubtful) or greater part of the underlying IP and so qualify for SEIS / EIS?

* I should clarify that the above considerations are not exclusive to software companies – it is simply the most common scenario that I have encountered in practice.