Hidden Taxes

Hidden taxes don't you just love them
We've got a staff of about 50 people, most of whom work really hard and diligently. Every now and then something crops up which questions our beliefs on why we do this business thing at all.
The government, in following its austerity plans lemming like over the cliff edge, has stated again and again that the SME companies form the backbone of the economy oh yeah!
Finding out that the their main worry net their only worry is having enough cash to hand out to their supporters has meant that sneaky little taxes have been slipping under the radar. This weeks was finding out that its employers not the Government that funds Statutory Sick Pay. For my employees it comes out of my pocket. So not only do I have to find them work but also have to fund their sick time when both us and them have been paying ever increasing National Insurance payments just to keep our leaders pensions topped up.
It's time Georgie boy was called to account. His astounding under performance is no longer just a joke for the Eton set. Lets all be in on the laugh and dump him. K

Keep warm by being active how to prune effectively.

Take a look out of the window.
Stark isn’t it; nothing growing, everything hunkering down and waiting for a downturn in temperature. You have two options to wrap up warm and sit by the fire or get active, get the blood running and keep really warm. I know which option I prefer so let’s get busy on the business for the coming spring – if the Arabs can have one so can we... it's just a turning point when things can only get better.
Pruning is a great way to ensure healthy growth.(Heads of Government may disagree)
It's always tough to decide which branches to trim right back to the earth to ensure their success in the next season. But in business we need to be just as tough there are clients who suck the very life out of you and your business – we all know who they are and have put up with them.
Some behave like spoilt children, demanding and complaining and even tantrums and blaming others. Unfortunately, they are using up resources that could be better used elsewhere.
This is known as "Lost Opportunity Costs" and raises the question every time we engage with these people “whatever else am I missing out on while I am being sucked dry by these clients” if the answer is “loads” then you know what to do if the answer is more worryingly “I don’t know” then you need some help identifying opportunities. I am not saying the pruning process is because they are bad people or run bad businesses it's just that it is a toxic relationship and to ensure that you both survive it is time to cut free.

If we keep in mind that we need to culture unfair advantage in everything we do then a great clearout will ensure that you maintain your unfair advantage by only keeping those who have good balanced relationships with your company.

Pruning Season

It's the season where, as all good gardeners know, you need to get rid of the dead wood so that next years growth will be better and stronger.
In business it's no different:
Take a good look at your client base and ask yourself which 20% are using up 80% of your resources and delivering so little to your bottom line?
Don't get me wrong, this has nothing to do with whether or not they are really nice people or they add to you turnover figures - its just that they are abusing the relationship and that is not very healthy.
You need to take this time to either get them back on track or dump them over the side.
If you need to know how this can be done wait until the next installment...

Where do we want to be?

We have all heard the basic stuff about planning there are so many from quotes from Alice in Wonderland meeting the Chesire Cat through to the quippy "you don't plan to fail you fail to plan" the problem with them all is that they are all correct!
So let's start with the end.
You have, with a bit of luck, 10 - 20 years of self-employment and you have decide, not right now but eventually, if you want a larger company with employees or a smaller one that outsourced every non core element. It's quite important to know where your risk profile sits and by this I mean at what point do you seriously lose sleep and eventually your sanity? To work this out we need to have dream not a fixed in one point dream but a flexible creative point which allows you to feel what success can be.

Year 5 business be damned

Okay you have promises from contacts orders are being processed and you will have the money by the end of the week phew but until then how will you live a quick glance into the wallet and we are into breaking the rules we have maxed out the overdraft which is guaranteed by the family home and now the drastic plastic is flexed. Spending only until the end of the month then it will be paid back. Then watching the local news you see the directors of your new client being escorted by the local constabulary into the back of a Black Maria they have been arrested for fraud!!
So sitting there with your head in your hands crying out that "Its just not fair" and do you know what? It isn't!
Where does this leave you now?

This is Just a story but it explains why most small businesses fail in year five; the money has run out, the family has run out, and the orders haven't come in. So what can you do to stop this happening to you?

80% Towards Insolvency

Year Four, don't let the family find out!
This year it’s the kid’s college fund that takes a battering and low and behold they don't really need a substandard degree. They can always do better if they take an apprenticeship or they could take out a Student Loan and eventually pay it off just before you retire if you can afford it. This is a delicate time if the partner finds out it could be curtains for your ambitions so best just keep at it and ignore the lack of business as it is starting to come in dribs and drabs but not enough to feed a hungry caterpillar. Kid’s money's all gone so we're focused onto Year 5

Year Three of the "planned" collapse...

We will be getting a bit of work in now; but for the old wage earner it seems that running a business and paying professionals to get going leaves you with less than the minimum wage. Which if you think about it, is only legal if you own and run a business.
You look back at your acquaintances who think you are having the time of your life playing golf or playing with the kids whenever you want - a real life of ease. In reality you sweat yourself awake for long periods in the cold grey night worrying if you should tell your partner that we are moving to a much much smaller place. However; on the good side those big orders promised are just around the corner, the redundancy money is a small stain left in the bank account, but then you could borrow from the savings and holiday fund as long as you put it back when that big order comes in. Who is lying to who here?
But like all things when it comes down to it that big order coming good was more hope than judgment and it you've just heard that it went elsewhere to someone who has a minimum of three years accounts; which you so obviously don't.
One small mercy is that you have not earned enough to pay any tax and the accountant informs you that you should be able to carry over this years loses to next year when you will make a profit. Anyway you loaned the company your money and now you are the largest creditor so if it goes down it now takes you with it...

Taking in the air

Year 2 Survive the first year.
Survival seems likely, as the usual stage in that first year is that you survive on your redundancy payout and live a frugal life but, you have not established yourself yet, people still don't who you are and will be missing out on business that would have been yours in normal circumstances. These are not normal circumstances. Regardless of the fact that 51% of the business registered in companies house (and these are only the limited liability ones) are SME's and the 90% of those have a turnover less than £50K per year; starting your own business is NOT a normal thing to do in the UK, most individuals work for someone else and that matters. Now we will probably reach the end of the year and have to do a set of accounts which will mark a steady downhill slide into the Tax and red tape abyss which constrains and bleeds most small businesses to death.

The first step towards the edge...

An explanation in general terms as to what Unfair Advantage is and what it is not why it is not Strategic Advantage or Critical Advantage or in fact Competitive Advantage why it is more powerful than all of these and why is costs so much less and makes so much more

Introduction

Most business fail in the first five years so let’s take a look at the way this might happen before we look at ways to stop it