Business advice news | UK Business Advisors

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.

Top tips to reduce business legal fees and prevent expensive disputes

March 3, 2019 By Tom Elek

Litigation should never be embarked on lightly. There is no such thing as a “clear-cut case”. Most lawyers will rarely give even the strongest case more than a 70% chance of success. There are a number of questions which you need to ask yourself before seeking to resolve a dispute by embarking on litigation:

Is the dispute one which you need to address? It is important to look at any dispute dispassionately and without emotion.
Have you looked at every possible way of resolving the dispute?
Can you afford to lose the case, which could involve you having to pay not only your own costs, but also a large portion of the other side’s costs?
Is there a significant disparity between the respective financial strengths of the 2 parties?
Will you be able to withstand the attacks you and your business will face from lawyers experienced in our adversarial legal system?
Can you afford the distraction that a lengthy court hearing could cause?

I will address each question:

Disputes can often be triggered by hostile personal relations. It is important to try and be objective and to avoid allowing feelings of personal animosity to influence the interaction between the parties.
Until fairly recently, commencing proceedings at the early stages of a dispute was considered a sensible strategic approach. However, the cost of issuing a Claim Form has increased significantly in Court fees alone with a claim in the High Court costing 5% of the amount claimed above £10,000(or 4.5% if issued online) up to a maximum of £10,000 for claims of £200,000 or over. Every possible way of resolving a dispute must therefore be considered before embarking on litigation.
The changes introduced by Lord Woolf in 1998 in the Civil Procedure Rules have also acted as a disincentive to anyone contemplating embarking on litigation. One of the cornerstones of these changes has been to encourage parties to a dispute to seek mediation at an early stage. Failure to do so can be penalised by adverse costs awards against any party refusing to consider mediation for no good reason, even in cases where such party has won his case.
Those with deeper pockets will not only be able to afford higher quality lawyers, although more expensive does not necessarily mean better, but more importantly have greater staying power. It is often difficult to predict how proceedings will progress and one has to expect the unexpected. Running out of funds in the middle of a case can be catastrophic, as one would probably have to pay the other side’s costs, in addition to one’s own, in order to pull out. It is also important to bear in mind that even if you are successful, it is unlikely that you will be able to recover more than 70% of your costs from the other side.
One should not underestimate the hostility that our legal system allows and to a certain extent encourages in our adversarial system. Being cross-examined by an experienced barrister is not something that should ever be taken lightly.
Being involved in litigation is time-consuming and distracting and can cause serious damage to small businesses where senior executives find themselves unable to give their companies all the attention that is needed.

Conclusion

Every dispute requires very careful consideration before embarking on litigation, whether you are the plaintiff or the defendant.
Every effort should be made to resolve a dispute at an early stage without resorting to the courts. This can often mean having “to swallow one’s pride”.
A carefully prepared letter can often nip a potential dispute in the bud. If this fails, try not to lose direct contact between the parties.
Sometimes bringing in a third party to act as a mediator on an informal basis can help avoid litigation.
Once solicitors become involved you must ensure that you receive a very clear indication of costs throughout the process and ensure that you receive regular progress reports. If possible give one person within your organisation the responsibility for acting as the point of contact with the solicitors on your behalf and ensure that such person has a clear understanding of how solicitors charge fees.
Always try to find a way to maintain contact the other side, either directly or through your solicitors.

The time when everyone was entitled to their day in court is long gone and the consequences of doing so now can have unexpected and damaging consequences. If you want to talk this through, why not contact Tom Elek by e-mailing tom.elek@hcbusinessadvisors.co.uk calling on 07768 772148.

Essential steps when acquiring a new business 1

March 3, 2019 By Peter Kroeger

Part 1 – What is your strategic reasoning for acquiring a business?

Why you want to buy a business, where to search and what to look out for.

To start with, it helps to be clear about why you are buying. Acquirers can have diverse motivations:

a carefully thought out strategy
opportunistic e.g. see a competitor of a failing business is up for sale
a belief that, by acquiring, you will be able to generate a value significantly greater and faster than the alternative of continuing organic growth.

Often, the expected benefits will include one or more from:

geographic expansion
customer base
customer spread, i.e. for a manufacturer a number of blue-chip customers, such that there is no undue reliance on a small number of customers
contract durations
repeat business patterns
skill-sets
technology
intellectual property rights
depth and quality of management
uniqueness and competitiveness of products and services
scalability of products and/or services
market position and brand
systems and processes, particularly relating to winning new business
distribution
quality of service
the “halo” effect, the extra revenues and profits that can be gained from e.g. cross selling to one another’s customers or improved supply etc
to build the business in advance of selling it.

For each of these, the key question is – “what would it cost and how long would it take to add these (the “extra” criteria that you have that means something to us) to our own business ourselves, organically?” The right Acquirer, for whom the Seller provides the most amount of value, may well be persuaded to share some of the value with the Seller and reflect that in the purchase price.

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

Develop the value enhancing strategy
Action-focused Business Planning
Assistance with what follows next – a Business Support Programme to help you implement and deliver the plans
Fund raising and acquisitions assistance

Next month I’ll share my top tips on searching for a new business to acquire. Please feel free to get in touch with me at peter.kroeger@lgbusinessadvisors.co.uk or on 07904 766230 if you’d like to find out more.

How to identify and manage risks in your business

March 3, 2019 By Edward Tudor

When you start a business you need to be aware of the risks you are taking.

Government statistics show that 97% of new start-up businesses fail within 3 years.

To prevent this from happening to your business you need to understand RISK.

By understanding Risk you can apply yourself to the areas of the business which are really important for the survival of the business.

Risk Management is a process of analysing what can go wrong with the business and what can be done to alleviate the problem in a cost-effective manner.

Entrepreneurs need to be familiar with the likely occurrence of a risk and the consequences of such risks if they happen.

Please see the diagram below:

Quadrant 1 risks have the least impact and the least consequences to the business, whereas Quadrant 4 risks have the most damaging consequences and the highest likelihood of occurring.

Therefore all risks need to be mitigated if the business is to be successful.

Let’s discuss the four Quadrants:

Quadrant 1: Minimal Risks

Risks in this quadrant need minimal attention because they will have the least impact on your business.

e.g. The light bulb in the stock room fails. You can replace the bulb at any time, but your shop can continue to operate.

The cost of the replacement bulb and fitting it is minimal and the business can continue even with some inconvenience.

Quadrant 2: Irritating Risks

The risks in this quadrant are ones you need to be prepared for.

e.g. You are giving a presentation and when you arrive at the venue your laptop with your presentation on will not boot up.

The Laptop can be repaired but there could be a delay in giving your presentation.

The solution is to have the presentation stored on a hard drive or memory stick that you take with you or in the cloud so that you can run it on another computer.

You could also print the slides as handouts and deliver your presentation from this printed copy.

The solutions here are having a “Plan B”

Have a set of procedures or a checklist to ensure that you have everything you need to complete your task.Ensure that you always have spare ink cartridges especially when you have an important document to print.

I order ink cartridges for my printer in threes and I re-order when I put the second cartridge in. This means I always have a spare cartridge.

Quadrant 3: Insurable Risks

There are risks that can and should be covered by insurance policies. Underwriting companies can provide specialist insurance for many risks.

One of my clients is a Tree Surgeon and therefore he has a policy which covers the damage if a tree should come down not as planned.

Usually the Risks in this Quadrant can be costly. You should make sure you hold all the policies you need to be legal:

General Liability Insurance
Property Insurance
Business Contents
Business Equipment away from the premises (Laptops, mobile phones)
Business Interruption Insurance
Public/Product Liability
Employers Liability (Compulsory if you employ staff)
Professional Indemnity Insurance

These are the usual policies required for a UK business. However if you are in a specialist trade then contact your Professional or Trade body to ensure you have all of the insurances you need.

Quadrant 4: Damaging Risks

These are the Risks which could close your business.

Many of these Risks look non-threatening. If these unmitigated risks are allowed to accumulate then even a FTSE 100 company could be brought down.

The consequences of these risks are especially dangerous to a new start-up or a small business.

Examples of Damaging Risks are:-.

Unidentified Market need
Unimplemented Innovation
Unforeseen Costs
Losing to the Competition
Company mismanagement
Not Managing Credit Control and Cashflow, which can lead to Bankruptcy.

Anything that you think will be detrimental to your business is Damaging RISK.

If you ignore these risks you could lose your business.

We know that in order to survive as a business and not be one of the 97%, we need to mitigate risks.

We know there are many risks that have to be dealt with and some may be difficult to understand.

However, we at Home Counties Business Advisors have the skills and experience to help you identify and overcome risks, especially in that all important 4^th Quadrant. For more advice on managing risks in your business, why not get in touch with Edward.tudor@hcbusinessadvisors.co.uk for an exploratory meeting or phone call.

Getting Brexit Proof: Tips for researching new Markets for 2019

February 3, 2019 By Gavin McWhirter

Concerns about how Brexit might impact export expansion plans are completely understandable, but it should not hold you back. You just need to get serious about how you research and plan your export strategy.

That strategy should form an integral part of an up-to-date business plan, which must include your business objectives for the next 2 to 3 years. I always find setting a target is good place to start, as without it you have no objective measure of whether you have succeeded or not. Once you have a clear goal you can then work through the steps of what needs to be done. A revisit of the business plan should include an updated assessment of risks, as well as the opportunities, ensuring the business is as resilient to external shocks or changes as it can be. So while the final shape and terms of the Brexit deal are still unknown, your business will be significantly better prepared for whatever transpires if you take the following action.

Your Strategy

A strategic analysis of your business can take a numbers of forms. It is helpful to involve someone external to the day to day running of the company, not because they have a magic box of answers, but they can help you step back and see a bigger picture.

A simple tool is a SWOT analysis (Click here for a helpful, free guide from Hubspot). If you are working on an export plan, you may want to centre the SWOT analysis on the product or service you want to export. If you do this, make sure you consider the potential negative impact on the rest of the business. For example, allocating your best sales person to focus on this new export market could affect domestic sales.

Another great strategic tool to use is the Business Model Canvas. This requires you to summarise the key aspects of your business on one page, breaking it down into 9 components. This includes defining the value proposition and clearly articulating the value that your customers derive from using your product or service. Understanding that is critical. If you are looking to export, the value that customers derive from your product in that new market may be completely different to the domestic experience.

The combination of these two tools helps to provide a framework to assess the competitive strength of your businesses in your target market, as well as your resources and capabilities.

Your Team

It sounds obvious, but be very wary of the seemingly well-connected stranger you meet at an exhibition or trade fair who is looking for an exclusive deal to be your local distributor. It is surprising how often something like that happens, and rarely works out well. Another classic mistake that is ripe for failure is taking on a lone, local sales person who you manage remotely. Four months of high activity, three months of excuses, and two months getting rid of them – and then you’re back at ground zero having wasted tens of thousands of pounds and hundreds of hours of management time.

Make sure you are aware of local employment laws. In some markets it can be hard to get rid of people, even if they are clearly under performing.

Who in your team will be leading the export plans and who will be supporting them? What impact will this have on their existing roles? What experience or knowledge already exists within the business of this new market, for example have you asked if anyone has language skills? Does your management team have experience of growing exports in to other markets? You need to realistically assess their ability to deliver on your objectives.

It is a good idea to identify at least one advisor with knowledge and experience of the market who you can trust to support you in your growth plans. It is better if this is someone you identify through your own research and connections, rather than someone who finds you.

Your Market

Selecting the right market to focus on is clearly important. Make sure you take account of the real basics, such as the cost of getting there, any language skills required, and the cultural differences (more on this below). Extensive market research is essential when assessing a place you hope to export to. You can do this yourself, and there are some fantastic resource available (including via the British Library) and a UK Government service to help develop your export Action Plan.

If you want to ensure you have covered all the bases and done a robust job, then it is advisable to get someone with experience to complete this task for you.

The research work you conduct will need to include a detailed look at your target customers, the channels to market, and should also highlight considerations that will influence your local sales & marketing strategy. Thought needs to be given to ensuring you gather useful market intelligence and your ability to respond to this data. Relationships that you probably have with customers at home can provide valuable feedback, so be aware of the potential for your business to lack that kind of interaction in an export market, particularly if your route to market is different than at home.

When you research your competitors, it can be helpful to consider not just how they operate now, but how they might respond to your efforts to take some of their market share. You do not want to be defined by your competitors but you need to know you compare against them, where you are stronger, as well as where you are weaker.

Your Commitment

Exporting is not easy. But if you have proven your business model can operate successfully in the UK, which is a highly sophisticated and competitive market place, then there absolutely will be market opportunities for you elsewhere in the world. However, do not under estimate how long it may take to become established in these markets, and how much it may cost. You need to consider what resources you can allocate to developing export sales, and then understand what success will look like in 12 months from now, or 2 year from now.

Existing customers

You have existing customers, and they may well be operating in other countries too. You should ask their advice on how they built their businesses in these markets. If they use your products and services locally, they may well be willing to introduce you to the operating companies in the other markets. And even if that does not work out for you, the fact that they are a customer in your local market may mean you can reference them as a customer and the brand or company name may be recognised and respected to give you instant credibility in the export market.

Business culture

We have all seen the HSBC adverts that highlight the cultural differences between the UK and China, underscoring how important it is to understand local cultural issues. I like to think of people I know from different parts of the UK, whether Welsh or Scottish, Liverpudlian or southerners… I have perceptions of these area of the country and the people who live in them, and know that everyone else does too. And that is just the UK. The rest of the world is like that too, with regional differences within nations, and national traditions and ingrained ways of behaving that are different from our own.

Understanding, respecting and adapting to those cultural nuances can be the difference between success and failure.

Geography

The UK is a relatively small country, physically (the straight-line distance from Land’s End to John o’ Groats is 603 miles), but even here many companies do not actively target the whole country, or even the whole of England. France is about twice the size in terms of square miles, although the population is about the same as the UK.

When you look at a large target market, you may want to consider an initial focus on one region. Look for clusters of expertise aligned to your own business area, and understand why that cluster exists where it is. That may make it the ideal starting place for your business, or the best place to avoid!

Do not overstretch your resources and capabilities by taking on too much at one time. It may be impossible for one partner, agent or employee to handle multiple territories.

Currency

Currency can cripple a business and this will not change with Brexit, but the Brexit debates have contributed to some significant currency variations, and that and other shocks may well continue. So you need to understand the potential impact; consider how your goods and services are priced; know where your costs are incurred (locally or in the export market); and how to efficiently repatriate funds.

Conclusion

At home you will know the profit margins of your products and services. When starting on an export journey you need to consider all the elements that could affect that margin, and plan how you structure and manage your operations to ensure you remain profitable. There can be additional costs associated with exporting, whether that is transport, dealing with returns, additional customer service costs for multiple languages, tariffs, customs paperwork, compliance with local regulations and tax regimes, or currency fluctuations. All of these can all eat through the profit margin. Map out a range of scenarios, from worst case to best case.

There are obviously advantages to exporting as well. Sometimes margins are higher, costs lower, and the business can benefit from efficiencies of scale. Having sales in multiple markets also means you are less exposed to local downturns in spending.

Contact Gavin McWhirter on 0773 6060230 or gavin.mcwhirter@lgbusinessadvisors.co.uk to discuss your growth plans, whether looking to research a potential export market or expanding into the UK.

Gavin McWhirter has over a decade of experience working with SME’s to develop sales, marketing and market research strategies, and supporting the execution of those plans.

Are successful business leaders born or made?

February 3, 2019 By Lesley Anne Rubenstein-Pessok

The answer to this poser invokes the old, ‘nature’ versus ‘nurture’ argument. Maybe we need to study twins who were separated at birth, where one became a business leader, and determine what happened to the other? In the real world, business leaders, like any other leaders, come in all shapes and sizes. If you studied a group of successful business leaders from various industrial sectors, I would hazard a guess that they would have different personality traits and backgrounds.

The variants are likely to be greater still according to discipline. Successful business leader in the financial sector are unlikely to have the same personality characteristics as one in the high technology sector or in the hospitality arena. An accomplished executive in the insurance sector, however, may very well have more in common with a leader of a banking institute. I’m making some assumptions here, but I wouldn’t be surprised if you are in agreement.

Are business leaders born or made?

Before we answer that question, let’s list some of the traits we would expect to find in a great business leader:

Visionary
Decisive
Motivational
Confident / Assertive (but not a bully!)
Likeable
Mindful
Collaborative
Inspirational
Great listener
Integrity
Intelligent
Respectful
Empathetic
Ability to prioritize
Create emerging leaders
Flexibility
Non-judgemental
Empowering
Optimistic

Can we learn to become a better business leader?

There is nothing in this list that cannot be learned or improved upon by a determined individual. One can read books, study, attend workshops, take drama classes, do mental exercises, etc. to gain many of the qualities listed. One can even be trained into ‘thinking big’. Mentors will often determine a CEO’s mental obstacles to growth and ask pointed questions to help him/her see what is holding them back. For example, now in its tenth year, the annual Women into Leadership conferences is a key event for all those interested in seeing leadership opportunities for women enhanced. Women into Leadership 2019 will examine how female leaders, at any grade, can enhance their skills to become the leader they aspire to be.

Acquiring listening skills

In my own ‘Effective Leadership’ business workshop, we spend time in an interactive exercise to experience both good and bad listening skills, and what it takes to become a good listener. Listening and empathy are crucial leadership qualities to my mind. The core skill is not just to listen but also to learn to interpret what is said, both verbally and non-verbally.

How important is it to have empathy as part of your leadership skill-set?

A simple way of describing empathy is when we can visualise, identify being in the other person’s situation, and being able to communicate our feelings to the other person. Sometimes, to show understanding, we need to show vulnerability and describe something we have experienced which may not be showing us at our self-assured best. Think back to the last time you were upset about something you felt was important, and you expressed your feelings and the person you were confiding in understood and empathized. How did that make you feel?

What about confidence?

Listening and empathy are important, but confidence is also an essential leadership trait. As mentioned above, there are mental exercises to acquire several of the traits listed and practise does make perfect. ‘Fake it till you make it’ is another way of saying this, although I’m not sure I particularly advocate that saying as I don’t like anything fake. But if we take ‘confidence’, for example, and practise acting confidently in a drama class, it would be something we could pretend even if we aren’t feeling particularly self-assured. No-one will take direction from a dithering leader in a crisis, and the ability to hide one’s emotions where necessary and appear confident, is a crucial quality in a great leader.

Born leaders

Some people, however, will be perceived as ‘born leaders’, either because they make it look easy, and/or because from an early age they presented leadership qualities. I’m sure we can all summon up a picture of a child in the playground telling the other youngsters what to do and how to do it, and envisage those children following the instructions. Does that mean the child is a born leader? I would argue that some traits may come naturally but many will be determined by life experiences and education in both home and school environments. If a child is bullied, for example, that same child will often become a bully; though this will not apply in all cases. Chains can be broken. Note: not even great business leaders are infallible, and no-one always gets it right and, on occasion, we may mistake luck for great leadership.

In conclusion

Whether or not you are fortunate to have been born with some, most, or all the leadership qualities mentioned in this article, you can work on, and exercise, your leadership skills your entire life.

So, are business leaders born or made? It is not possible to give a conclusive answer, but either way, you can strive to be a better leader and never stop improving. Being a great business leader will serve you well in all walks of life. It’s up to you!

About the author

LGBA Associate Lesley Anne Rubenstein-Pessok, has spent her whole career in executive roles, working with and training start-ups and SME businesses, helping them to become more efficient, increase turnover, improve profitability, cost effectiveness and create strategies that pay off. She is an approved mentor for the London and Partners’ Business Growth Programme, as well as for other public funded programmes. To find out more about Lesley’s mentoring and business advisory services contact her by email at Lesley.rubenstein@lgbusinessadvisors.co.uk or call her on 020 8868 3163.

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.

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

Your Strategy

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Conclusion

What should l incentivise people on?

What do l need to do first?

Anything else pre-launch?

Having launched, what do l do then?