Cash rich, but time poor

Are you too busy making money to have the time to enjoy it? I meet a lot of business people in the work I do. Some are really successful. A lot are doing OK, making money but working really long hours and usuallly 6 days a week.

 if you're continually tired it’s difficult to keep your momentum going. You may unknowingly give your customer poor service. And sometimes you might think ‘what's the point!’

Your health may suffer as you don't have the time to look after yourself. Relationships with family and friends may suffer as you are short-tempered and resentful of the demands they make. Your business may suffer as you spend most of your time working ‘in’ the business leaving no time for planning for the future.

Successful business people do at least 5 key things to create a business that delivers them great results. Just think how it would feel having more energy, having the time to exercise and eat healthily, having the time spend with family and friends in a relaxed manner.

So what are the 5 keys?

1.      Get your price right

If you don’t charge enough you will never make enough profit and you wil spend your time just trying to keep up with your work

2.      Delegate or outsource

You can’t do everything so don’t try. Why spend the time learning how to use book-keeping software when you could be marketing or meeting prospects?

3.      Differentiate yourself from your competition

Your customers will only choose you on price if there’s nothing that differentiates you from your competitors. Know what makes you special (in the eyes of your customers, not your mum!)

4.      Know who your customers are

Not everyone is your customer so you need to pick who you want. This will dictate everything you do in your business

5.      Measure what’s important in your buisness

Don’t leave it to chance. Decide what measures are important to your business and look at these regularly (and by that I mean monthly)

If you would like a free copy of my e-book ‘7 Mistakes Small Business Owners Unwittingly Make…. and how to avoid them’ then email gloria@murrayassoc.co.uk

How do you know if you charge enough for what you do?

 Are you cheap? Are you good value? Do you give customers great service? You have to choose which two are important to you as you can’t be all three – it just doesn’t work. Something’s got to give.

Pricing is key to the profits in your business. Over the years I’ve seen so many businesses go out of business because they didn’t charge enough. They ran themselves ragged doing a great job and giving great customer service at really low prices. But in the end it wasn’t enough and they gave up. It was too much like hard work and without the rewards.

So think about what you do. Have you forgotten to charge for something that’s an integral part of your product or service? Is there something that takes longer than you had anticipated when you first set your prices?

Are you being unrealistic about the quality of customer service you can deliver at the price you charge? Please don’t drop the quality of your service, your good customers will happily pay more for this. Do you like crappy service? It costs more but it’s not something you can compromise on.

Do yourself a favour, have a look at what you do and how you charge for it. At the end of the day your customers will choose on price if that’s the only difference between you and your competitors. Give them bloody good service and let them know you care. They will pay more and stay with you longer

How do you feel about change in your business?

It can be hard to change what you’ve become used to. But in reality business is all about change and reinvention. Nothing stays the same, society changes, what’s hot and what’s not changes. We’ve got to keep up with this or our business will shrivel up and die.

Have you ever seen this happen to any business?

I can think of a few examples in the recent past. Woolworths for one, Oddbins being another. There were undoubtedly lots wrong with them. But the 3 that are easy to see are:

•    they didn’t move with the times
•   they did nothing to combat the threats from competitors
•   they didn’t analyse the way their markets were going

So how do you manage this along with everything else you have to do in business? It’s back to the business cliché – spending time working’on’ your business and not ‘in’ it. In practical terms it means taking time out, at least once a month, to examine what’s happening in your business and create time to think up new ideas. You don’t have to do it all yourself, if you have a team they will be happy to help – once they get used to the idea of being asked!

Get a non-exec, a mentor, a coach, a business friend or someone you know and trust. Ask them to come and spend at least an hour and  half with you each month looking at your business.

You can’t see the label when you’re inside the bottle! It’s the same in business – an outsider’s perspective is wonderful. It will hold you accountable for all the things you know you need to do. You will get to see your business through the eyes of a ‘customer’. You’ll have a sounding board for all the ideas you have, the worries you have and maybe the insecurities you have about your business.

Don’t take my word for it, why don’t you try it for 3 months? What harm could there be in that?

Who are your customers?

Do you give much thought to who your customers are? It’s really easy when first starting your business to go after anyone who will give you some money. Then after a while you find that your time is taken up with lots of customers, some profitable and a lot that aren’t. How did that happen?

If you’re in that situation what can you do about it? Take a big breath and get rid of the customers that give you most of the hassle, don’t pay on time, and want lots of discount. It’s the old 80:20 rule, 20% of your customers probably give you 80% of your profit and conversely 20% of your customers probably take up 80% of your time.

By getting rid of them you can offer the customers you do like a much better service and clear the way to attract the customers you do want. You will have more time to go back to your existing customers and tell them about the other products or services you offer and help them spend more money with you.

You can then think about who your ideal customer is and write a description of them. What do they look like, what age are they, do they have kids, how much do they earn? Whatever is relevant to building up your customer profile.

Once you’ve done that design your marketing to attract them. Your customer profile will dictate how and where you market and advertise. By the end of this process you will have a better business and you’ll enjoy serving the fantastic customers you have.

Why are YOU in business?

Did you ever feel there was a ‘why’ missing from your business? I don’t mean the money or the freedom but maybe something a bit bigger! How can you design a business that not only gives you what you want, what your customers want but that can give back too?

The future

I’ve seen the future of business and it’s really awesome. In fact WOW!! Have you heard of B1G1?  I hadn’t until I went to an accountant’s conference recently. I know what you’re thinking, nothing inspirational happens in the accountancy world – but you’d be wrong.

Paul Dunn, an internationally famous inspirational speaker told us how this came about and I struggled to keep the tears from my eyes. I came away more fired up than an accountant ever should be and now I know I can play a small part in changing things for the better.

How?

B1G1 stands for Buy 1 Give 1 and it’s a way that business owners can involve their clients and employees in specific charitable projects. So for instance if you are a café every time someone buys a coffee they could give clean water to 1 person for the day in Malawi or Ethiopia. Did you think you could make a difference like that by buying something?

100% of the money goes to the project, it’s not swallowed up by admin fees. As a business if you want to join you pay a fee and that goes towards the admin. I’ve signed up on behalf of Murray Associates and in the past month we've sent 45 kids in Nepal to school for a month.

I am so excited I can hardly contain myself. I’ve found my ‘why’ and I’ve been waking up everyday thinking about who else I can tell about this. So now I’m telling you. Check out www.b1g1.com and see what you could do to make a difference.

Turnover or Profit, which would you choose?

Turnover is vanity profit is sanity! You’ll always hear me saying this.Why? Because it’s easy to have £1m turnover and not much profit. You can be a busy fool, so the profit is of major importance.

Being an accountant I’m always around business people and I love to hear about their business. But as soon as I hear someone bragging about their turnover I get alarm bells ringing in my ears.

Don’t just set goals for your sales make sure you have a profit target as well.  It’s really easy to make unprofitable sales – it’s called giving it away! What’s the easiest way to make a loss? Don’t charge enough for what your doing. So make sure you’ve got a really good handle on how long things take to produce or service. Look at your whole process and what’s involved.

It can be too easy to think about your profit in terms of an hourly rate and compare that to a salary. Remember if there’s only you in the business then you can’t spend 35-40 hours a week producing or serving your customers. You’ve got admin, you’ve got quotes, you’ve got meetings!

In general, one third of your time will be spent generating the money and two thirds doing everything else. Doesn’t look quite as generous now, does it? Set your profit targets and then work out how you can get there. And if you’ve got incredibly tight gross profit margins I would look at what you’re doing and ask if it’s worth all the hard work.

Are you giving money away?

Do you discount? Do you cave in as soon as someone asks for a discount? Or do you play the game of negotiating? And if so, how pokerfaced are you? Let me take you through an example of discounting that caused problems for its owner directors.

Once upon a time there was a business with a turnover of £2m and profit of £50k. The three directors were not happy as they worked long hours and didn’t get much money for all the work they did. They had done everything they could to cut their expenses but they still couldn’t make a decent living. Once they started digging deeper into what was happening they discovered that their sales team were giving discounts of over £1m. Too strong to say they felt gutted? All the sacrifices the directors had made to sustain the business without having any rewards for themselves suddenly hit home.

However they knew the rules of leadership – the buck stops with them. They didn’t sack the sales team or rant and rave. After all they weren’t measuring anything! It became really important to measure those discounts, show the team the parameters they could work to and ensure a monitoring system was put in place. Not only that they gave their team extra sales training and specifically a workshop on negotiation skills.

Equally important they also put any discounts negotiated on their sales invoices. The reason was twofold, it made it easy for their management accounts to see how they were doing but also reminded their customers about the discount. Upshot was it ensured future sales negotiations with the same customers did not start at the discounted price but at the list price.

Don’t think your team know everything, whatever part they play in your business you must make training a part of what you do and guess what, that costs money – see my future blog on getting the price right.

So don't throw money away. Ensure you have thought about your discount policy and measure it.

We're producing a booklet 13 Mistakes that Small Business Owners Unwittingly Make which includes tips about pricing and it will be out on 30th June 2011.

However if you are interested in getting the booklet email Carolann@murrayassoc.co.uk and if you register your interest by 31^st May you can get it for Free (Normal price £5.95 incl. postage & packaging).

We are also hosting our regular Aberdeen Business Growth Club in Lloyds TSB Boardroom at 33 Queens Road Aberdeen on Thursday 19th May from 9 - 11:30am. The presentation is on Knowing Your Numbers - the fastest and easiest way to understand the numbers in your business. 

If interested in this event please book asap as places are limited by emailing Carolann@murrayassoc.co.uk or book online at http://www.murrayassociates.co.uk/events.htm

Will you be fined £3k by the tax man?

I haven't seen an enquiry at my practice for at least 2 years but that's all about to change. HMRC are targeting 50,000 small businesses each year and they are planning to check your record keeping for accuracy! You must keep till rolls, sales and purchase invoices, paying in slips, cheque stubs and bank statements for 6 years.

If HMRC assess your records as inadequate they can fine you £3k. They will probably start an investigation into your previous years’ tax returns as well. After all you've just given them a good excuse to doubt the accuracy of your records.

Over the years we have seen several investigations, all on small businesses. In one case this resulted in the client owing HMRC £10k. I didn't handle this investigation for this particular client as he had other insurance. However after reviewing the case myself I think I would have got a better result.

These investigations can drag on for years and can result in hefty fees for the work your accountant does for you, even if no tax is due. Another client had 3 investigations over 3 years. However none of these resulted in extra tax due but they still had to pay our fees to argue and negotiate with HMRC on their behalf.



The vast majority of successful businesses keep in close touch with the numbers in their business and revisit them regularly. This means that they not only remain compliant but are able to act on things very quickly to keep their business in good health.

However, you don't have to do it all yourself, ask your accountant or get a good book-keeper. Just make sure you can access your information quickly and easily or have regular meetings with your accountant to look through your management accounts and discuss how the business is doing. There are other things you could measure that will tell you how your business is doing and how it will do in the future. I'll talk about that in my next blog.

So please make sure you’re keeping accurate records. I'm so committed to helping you keep on track that I want to offer you a free health check on your record keeping - normal cost £185 + VAT. Want to find out more? Ask carolann@murrayassoc.co.uk or give her a call on 0141 889 4247 or 01224 432184.

I'm running my regular Business Growth Clubs specifically on Knowing Your Numbers in Glasgow on 21st April and then in Aberdeen on 19^th May and I'd love to see you at one of the events. 

The first one is free. To book a place email carolann@murrayassoc.co.uk or via our website http://www.murrayassociates.co.uk/events.htm

Can you save some tax?

January is a great month for planning. Hopefully you came back from holiday suitably refreshed and with grand ideas on what you want to achieve in 2011. In the last blog we looked at setting personal and business goals. This time I want to talk about tax planning.

No matter how big or small your business it’s a great idea to have a look at this well before the end of the tax year on 5 April 2011 and at your accounting year end, if they're not the same. The very nature of tax means it is almost impossible to rearrange your tax affairs retrospectively.

So what can you do instead? Start planning now! If you’re a client we’ll be sending you out a Tax questionnaire so we can have a look at your options for you.

Generally there is something that can be done for a lot of sole traders, partnerships or directors to save them some tax. Sometimes it’s just looking at the timing of things you were planning on doing anyway to ensure you get the relief as quickly as possible eg a new van or bit of equipment, employee bonus etc.

It’s also possible to do some of this tax planning in conjunction with other things like tax credits. To give a simple example -  if you are a sole trader and normally you have a profit of £30k. You need a new van costing £10k and because of the Annual Investment Allowance the £10k would drop your taxable profit to £20k. You may then find that you’re eligible for tax credits due to your drop in normal income. You would also save on tax. The van could be paid for by loan and you would still get all the tax advantages upfront.

Here are a few more ideas:

1. If you are considering significant capital or revenue expenditure during April 2011 or later in 2011 you may want to see if you can bring the payments forward and claim tax relief in the accounts to March 2011. This may involve you funding the payments earlier but you may possibly benefit from reduced tax bills a year earlier.

2. Following on from point 1, there are still generous capital allowances for purchases of equipment that qualify for the Annual Investment Allowance. The annual limit is set at £100,000 until April 2012 when it will be reduced to just £25,000.

3. If you are carrying stock on your balance sheet at cost and it is now worth less than cost, you should revalue, reducing the stock to its current realisable value. This will reduce your trading profit in the current year or increase your losses; it will also reduce your tax bill or increase any loss relief carry backs.

4. If you are considering the sale of a business or business property that will create a chargeable gain for capital gains tax purposes, you might be advised to delay contracts until after the 5 April 2011. For individuals, any tax payable on gains made on or after the 6 April 2011 will not be due for payment until 31 January 2013. Tax payable on gains on or before 5 April 2011 will be due for payment a year earlier, 31 January 2012. At present CGT rates are still 18% or 28%. Also if your gain qualifies for Entrepreneurs' Relief your CGT liability will be reduced to 10% of gains - up to a lifetime maximum of £5m chargeable gains (for disposals after 23 June 2010). Of course it is always possible that capital gains tax rates will be increased in the 2011 Budget.

5. Consider your pension options. Could you make additional contributions before the 6 April 2011 to reduce your higher rate tax this year? But beware of the anti-forestalling provisions if your income is more than £130,000.

These examples are only given as guidelines and shouldn't be taken as advice. I have no way of knowing individual circumstances.

There are several other ways of planning for individuals and directors too. However tax is very complicated and there is a lot to take into consideration when doing any planning. In fact if you are not a tax expert it’s often a case of  ‘its not what you know you don’t know, but rather what you don’t know you don’t know’

If you’re not a client and you would like me to carry out a review for you then please email me at gloria@murrayassoc.co.uk and I’ll send you out a Taxability questionnaire. We normally charge £350 + VAT for this but I will waive this fee for the first 10 completed questionnaires I get back. Get planning and save yourself some tax!