Business News | UK Business Advisors

How to pick the best candidate for your Technology business C-Suite

June 30, 2019 By Mike Pill

With the current skills shortage in the technology sector and ever-increasing demand it is simply not enough to broadcast a role when you are recruiting for your leadership team. Placing an advertisement or hoping a quality candidate will alight upon your website will rarely succeed. You deserve and require the very best of candidates. Invariably, finding great people requires a more proactive approach.

The best candidates are not looking for your role

The best of candidates, or targets, are probably fully committed to working for a competitor, supplier, customer or possibly currently working overseas and not actively looking for another role. Alternatively, they may be restricted via a compromise agreement, garden leave or clause in their current contract – all of which can be the subject of further negotiation and equitable determination.

A discreet approach

A thorough, comprehensive, discreet and confidential first approach to the targets is required for a number of reasons.

You may not wish to disclose your plans to competitors, customers, suppliers or other key employees in the first instance only to suffer rejection.

Without disclosing your identity and plans, the target is open to considering an alternative offer and challenge. An opportunity can be taken to discuss what they are looking for. The target can assess the outline description of your opportunity and challenge. They can consider its appeal and see if it builds on relevant past achievements.

The missing link – Executive Search

In order to achieve this, the assistance of an Executive Search consultant (AKA head-hunter) is recommended. In the UK we have probably the best professional football league in the world which has been enabled to a large extent by professional search consultants. The profession has also assisted many of the most successful large companies and is available to the SME market. The cost is not prohibitive and can be negotiated to an acceptable level. It is worth developing relationships with these individuals so that they can become more familiar with your business and be available to contribute when required. The dividend from this investment can be considerable.

For a confidential chat on finding a new member for your C-Suite IT team contact our recruitment specialist advisor Mike Pill by email at mike.pill@hcbusinessadvisors.co.uk or call him on 01276 684007

Beyond technology – what other sectors are benefiting from R&D tax relief or credit?

May 5, 2019 By Linda Eziquiel

Your annual accounts are ready to be prepared but could you find ways to reduce your tax bill or get a cash payment to support your new product development?

Well it might be that you can if you are undertaking development activities that qualify as Research and Development (R&D). It’s not just for rocket scientists or research laboratories. In fact far from it, all sorts of development activities qualify – a few are described below and we’ve also added a more comprehensive list at the end.

The great thing about UK R&D tax incentives is that they apply to any UK registered limited company in any sector – The Dyson Report on Innovation 2010 made this point saying:

“Of the various tax instruments available to government, R&D Tax Credits have the advantage that they seek to help companies that are themselves prepared to invest in R&D.

Government does not need to choose sectors or companies, with the result that R&D can be encouraged in the widest possible range of sectors, taking advantage of businesses’ own insights into likely breakthroughs”

While it’s sometimes easier to spot R&D being done by pioneering technology companies, there are many other areas where companies are able to benefit and the pay-outs can be significant.

A mini revolution in the food industry

There’s a mini revolution going on in the food industry with new producers coming into the marketplace supplying for example frozen vegan ready meals, vegan ‘cheese’, and a whole array of vegetable, nut and seed based products. Plus established producers are updating their recipes to reduce salt, sugar and additives to meet changing consumer demands. Similar things are happening in the drinks industry. They will all be undertaking qualifying R&D to develop their new or improve recipes and in some cases their manufacturing processes as well.

While my focus here is not technology it’s worth mentioning that food and drinks businesses are also increasingly being driven to embrace technology, to automate manufacturing and production methods and there will be significant qualifying R&D being undertaken as part of that.

Materials and packaging for a better environment

There’s also a lot of qualifying R&D being undertaken to develop new more environmentally friendly packaging materials, to replace or reduce our reliance on plastic and polystyrene.

I buy all-natural cosmetic products made with organic ingredients. I was intrigued to see that my last order was packed using biodegradable, extruded nodules made of a starch product. There was a note on the top saying the packaging is water soluble and wouldn’t harm you if you ate it, so it can be disposed of as food waste. It looked so like the polystyrene or plastic packing nodules we are used to seeing in mail orders items, that I hardly believed their claims. So I put a piece in water and sure enough it dissolved. Development of this starch based packing product would certainly have qualified as R&D for a tax credit cash payment or tax relief.

It’s not only the creation of new materials that qualifies as R&D. Things like the design of packaging and how it is assembled can also be qualifying R&D. For example the development of a new packaging system to improve shelf life for a food product, or to hold a product securely to prevent damage during transportation, would be qualifying R&D so long as the development was not a routine or obvious solution i.e. there was some experimentation involved to work out if it was feasible or how to achieve the desired outcome in practice.

Construction and engineering challenges

There is a significant level of R&D in the construction and engineering industries, much of which is still not recognised as R&D by those undertaking it. For example a company may be seeking to build something in a novel way or in a difficult physical environment – such as a waterlogged area or on an unstable foundation, so they develop a novel solution that was not obvious and therefore would be considered R&D for tax relief. Another example is the engineering of elements of a building to enable a modular construction method, such as metal fabricated stairways or balconies. In this case there could be R&D in arriving at a design that meets the architects brief while also complying with regulatory requirements and being easy to fit.

I’ve just touched on a few areas, below is a longer list. For companies with under 500 employees the benefits are generous paying out between 19% and 33% of relevant expenditure, on things such as staff salaries or sub-contractors costs, materials and energy consumed.

Please feel free to email us to check if you qualify. Or speak to our specialist R&D Tax Credits advisor Linda Eziquiel on 0771 9439 229.

Essential steps when acquiring a new business 3

May 5, 2019 By Peter Kroeger

Part 3 – What do you need to watch out for?

Back in March I looked at your strategic reasons for buying a business and in April I gave pointers on searching for a new business to acquire. This month, in the final part of our series, I will highlight some key areas that you need to consider before you make your final purchase. Follow these recommendations and you could avoid a variety of unnecessary pitfalls.

The main areas to consider are:

proper strategic thinking for an acquisition – be clear about your ‘why’, ‘what’, ‘who’, ‘where’ and ‘when’ and the distinctive benefits you hope to establish from an acquisition
preparation – sufficient and well thought-through preparation by the management team making the acquisition
finances – acquirer must be properly prepared financially
negotiating price – never pay too much, plan your negotiation strategy in advance
support – use experienced and practical professional advisors
resources – ensure that you have adequate resources allied to the acquisition process

Acquiring a business is firstly strategic, followed in short order by “people”, after which it is both a financial and a legal matter. Successful acquisitions always have all four of these pillars soundly in place.

What LGBA/HCBA Acquisition Planning advisors can do to assist your business. Real life experience, strategic advice and tactical support.

Assistance with what follows next – a Business Support Programme to help you implement and deliver the plans
Fund raising and acquisitions assistance
Developing the integration plan which is a pre-requisite to making the acquisition a success
And of course we can negotiate on your behalf and project manage the accountants, lawyers, tax experts and due diligence all the way through to completion

Please feel free to get in touch with me at peter.kroeger@lgba.co.uk or on 07904 766230.

Essential steps when acquiring a new business 2

March 31, 2019 By Peter Kroeger

Part 2 – Where do you start your search?

Last month I started by considering the strategic reasoning you need when buying a new business. This month, we shall consider how to optimise your new business search.

Having decided why you want to buy a business, summarise the base criteria:

the broad locations where you want the acquired company to be and also whether you would ideally want to move it to your own location.
the size of company – revenue, profits, assets etc and what you can afford.
produce a profile of the target company as well as a profile of your own company.

Then you need to start the research for companies that fit these criteria. Make a list of companies you know that:

Directly compete with you
Do what you do but are not direct competitors because they are in a different geography or a different niche
Have approached you for any reason in the past
You have partnered with

Then use Google searches to find similar companies to expand your search universe of companies that match your criteria:

approach UKTI to set up a project to find companies outside UK
source lists from research organisations (e.g. from Institute of Directors if you are a member)
approach the appropriate Trade Association for a list of members
talk to your personal and advisory networks and ask them to introduce prospective targets
approach advisory companies that specifically act for buyers – such as Langcliffe Merger Connect www.mergerconnect.co.uk or Chelsea Corporate www.chelseacorporate.com and engage them to assist in your search

What LGBA/HCBA Acquisition Planning advisors can do to assist your business. Real life experience, strategic advice and tactical support.

Assistance with what follows next – a Business Support Programme to help you implement and deliver the plans
Assist with developing the profile of the target and of your business
Perform the desk research

More to follow next time. Please feel free to get in touch with me at peter.kroeger@lgbusinessadvisors.co.uk or on 07904 766230 for more information.

See also:
Essential Steps When Acquiring a New Business
Part 1 – What is your strategic reasoning for acquiring a new business?

The Cost of Poor Strategy Execution – Can you afford it?

March 31, 2019 By Paul Fraine

I am often asked by clients what is the real cost of executing a strategy badly? In this short article, I will provide some highlights and lookouts on the implications of executing strategies poorly.

Good v Bad Strategy Execution Planning

Every business needs a plan or strategy whether you’re a global corporate or a £2m turnover single entity business. When we talk about strategy planning and execution, we are specifically referring to how a set of strategic objectives will be achieved. Strategy execution defines the overall approach and plans required to efficiently achieve the outcome. What then makes a good strategy execution plan versus a poor one?

A good strategy execution plan should be logically coherent, easy to understand and as simple as possible; it traceably aligns all activity to the company vision and objectives whilst providing visibility, purpose and clarity to the relevant stakeholders involved in execution of their tasks and responsibilities.

We sometimes observe business owners or leadership teams agreeing on a vision of where they want their organisation to be in the future but struggle with creating and then linking a detailed execution plan to their long-range objectives, which would otherwise enable a smooth and efficient transition to their desired end point. A further common mistake involves creating a vastly complex set of delivery activities which aren’t clearly linked to objectives or business vision and therefore fatigue the organisation and fail to deliver the outcomes efficiently.¹

Commercial Impact of Poor Strategy Execution

Setting a clear strategy at leadership level is important but executing it efficiently within your organisation is critical and can often be much more challenging. It is widely documented within leading business publications, Harvard Business Review, INSEAD, Wharton and McKinsey for example, that well over 50% of strategic implementations fail in execution and here are some of the reasons why: ²³⁴

Excessive change in strategic priorities
Lack of knowledge and experience
Acceptance of poor performance or failure to deliver on objectives
High levels of bureaucracy resulting in slowing down the process
Lack of delegation
Under resourced
Frequently missing deadlines and deliverables
Poor communication across stakeholders
Cultural resistance
Lack of monitoring and progress

This high failure rate can come at a significant cost to an organisation such as employee morale, brand damage or ultimately the demise of the business. However, in less extreme cases the commercial and financial implications fall in to two areas.

Failure to achieve expected top line revenue/benefit
Increased execution costs through poor planning and inefficient use of resources

Failure to achieve expected top line revenue/benefit

Failure to achieve budgeted top line revenue could have multiple impacts on an organisation. A shortfall or reduced top line revenue could result in restricted growth, cash flow issues, poor shareholder and employee confidence, long term impact to future business plans and credibility damage with banks and lending houses. Less cash in the business may also mean abandonment of other strategy planning which could have a deepening impact on business operations and future growth. Rationalisation and divestment can also be a consequence of missed or reducing revenues which can often take some time to recover from.

Increased execution costs through poor planning and inefficient use of resources

Strategy execution plans that stall due to poor organisation comes at a cost. Trying to turn around or realigning strategies that are not being executed correctly will undoubtedly increase execution costs as businesses spend additional time and resources, either reconsidering or completely re-planning their approach. Without proper monitoring, most organisations will revert to throwing more resources at failing strategic activity plans, which often compounds the issues rather than solving them as in most cases, resources aren’t the problem, it’s the ill-conceived plans that is often at the root of the problem.

In addition to the cost of failed strategies, the commercial impact is often compounded by the non-realisation of the intended strategy benefit. This additional hit can significantly increase the total cost to the business.

Summary

There are many ways to avoid the above pitfalls such as detailed planning and alignment, strong communication methods, tracking and tooling as well as engaging with professional and experienced resources. If you would like to discuss your approach to strategy planning and execution, please contact Paul Fraine by emailing paul.fraine@lgbusinessadvisors.co.uk or by calling 07889 600811.

How to design a robust profit-sharing bonus scheme for 2019

January 24, 2019 By Stephen Cowburn

In the last newsletter we talked about what to do about awarding a Xmas bonus. [If you missed it click here to find it] Now we talk about putting a bonus scheme into place for 2019.

If your financial year-end is say March, the next few months could be a good time to develop and trial a scheme before launching it in April.

What should l incentivise people on?

The profitability of the business is a simple way to measure business success. If there is a large minority of support staff then you might also consider cost-savings/efficiency savings as being the other side of the profit coin.

You might be tempted by the achievement of individual objectives. Our general experience in the SME space is that staff appraisals don’t happen consistently enough so we wouldn’t recommend a performance pay system based on the achievement of individual objectives, as MDs usually haven’t the infrastructure in place to make this watertight.

What do l need to do first?

You will presumably have a business plan and a budget. Interrogating the likelihood of achieving a sufficient profit to be able to afford a profit-based bonus is the first step. If your assessment is that the profit figure is going to be insufficient consider the criteria for your top people as a pre-cursor to offering a wider profit-sharing scheme.

You need good data so you need accurate monthly management accounts to monitor profitability and to be able to communicate progress easily, to your management team and then staff, post launch.

You may have bespoke software if you run a sales based, or project-based, organisation enabling quick assessment of profitability if looking to incentivise individuals.

If you don’t have either of these, this is the immediate focus. Inaccurate data is guaranteed to lead to issues later on – employees will think one thing, you as MD will think something else and trust and credibility will dissipate in the event of misunderstandings or disputes.

Anything else pre-launch?

Test the model you are proposing. Does the maths work? Are there any unintended consequences? Are there grey areas? (if so tighten the scheme up). Will it clearly drive the behaviour you are looking for? Test it with other Directors or advisors to ensure the outcomes you seek and that the wording is clear with no ambiguity.

Plan the communication – what are the goals? What are the rules going to be? (For example, is there to be a hurdle rate before any bonus is paid out? What are you going to offer joiners or leavers within the period of the bonus scheme?)

Use worked examples so people can see what needs to happen to qualify for a bonus and how the scheme is going to work in real life.

Rather than say there will be a predetermined formula for distributing a fixed percentage of profits, we would suggest an approach where there is a company profit threshold below which no profits will be distributed and that there will be maximum limits set on the proportion of profits that will be distributed (say 5%) and/or the percentage of salary that will be distributed as a profit share (say 10%).

Having launched, what do l do then?

Regularly communicate performance at monthly management meetings and provide a general status update (verbally) to all staff on company performance ideally quarterly. The purpose here is three-fold:

To manage expectations if performance is below expectations
To give people a steer as to what needs to be done to get back on track.
To encourage staff retention by communicating the likelihood of a bonus pay out

Ensure that you pay the bonus when you say you will.

A chunk of our work comes from resolving disputes between employees and the Owner. It usually comes down to poor wording or a misunderstanding on how to get a bonus. The scheme rules are important but they need to be watertight pre-launch. You are likely to run into trouble if you try and change the rules midway through the year because of ambiguous wording.

So wherever you are in your business cycle, and whatever you want to do, if you feel the need for a fresh, neutral pair of eyes give us a call for an initially free consultation.

Contact stephen.cowburn@lgbusinessadvisors.co.uk or 07974 425361, for a focused discussion.

Top Tips for Foreign Nationals Setting Up Business in the UK

January 24, 2019 By Richard Wickes

In December 2018 Forbes Magazine placed the UK as number 1 in its list of Best Countries for Business. There is no doubt that the UK offers tremendous opportunities for businesses to be set up and to thrive. However the fact that this is so well recognised means that it is also probably the most competitive country on earth for businesses. You need to make sure that all aspects of your UK operation are run to the highest professional standards in order to succeed.

The aim of this article is to give you some tips as to how to setup a company in the UK.

Visa. If you do not already have the right to live and run a business here you will need a Tier 1 Entrepreneur Visa. For this you will need to invest a minimum of £200,000 in your new business and employ yourself and take on at least two members of staff in the first two years.

Business Idea. You need to start with an idea of what product or service you want to sell. The first step is to think who might buy your product and why. You need a USP (Unique Selling Point). You must think very carefully about why anyone would buy from you. It may well be that your home country has products or skills that could be useful to businesses or people in the UK.

Business Name and Registration. You will also need to choose a name for your business. You will probably want to choose something that stands out and perhaps describes the business you have in mind. In most cases you will be setting up a Limited Company. You will need to register that name with UK’s Companies House so you need to ensure that there is not already a company with your chosen name. UK Company registration details are in the public domain. You can look at the Companies House website for individual names or download a complete list for free here.

Banking. You will need to set up a bank account for your business. Banks are keen to attract new business customers, but stringent money-laundering regulations mean they will need to satisfy themselves that your business is genuine. They will be even more rigorous if you are transferring money from outside the UK. At least one director of your business will need to have their main residence in the UK.

Finally. There are many things you have to do before you start trading here. It is unlikely that you will have the skills to do all of them yourself. In those areas where you do not have experience it sensible to seek professional advice from specialists who have the relevant expertise. United Kingdom Business Advisors (UKBA) is an excellent source of skills in all aspects of setting up and running a business.

For more advice on setting up a business in the UK contact Richard Wickes at Richard.wickes@lgbusinessadvisors.co.uk or call him on 00 (44) 20 7731 0853

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