Why we should deal with the present to look after the future of our business

Posted on November 25, 2009 by Jon Stow

We are coming to the end of another year, and of course all the predictions for 2010 and beyond are already upon us. As with the social media “experts’” forecasts, most of these will be wrong or else they will be stating the blindingly obvious. We really do not know what will happen in six months’ time or on a micro-management scale, even tomorrow. However the pundits earn their living doing this sort of thing and I have no more faith in them than I do in Mystic Meg (sorry, Meg!).

We hear forecasts that the economy will improve at the beginning / middle / end of 2010 or by 2011. One of these might be right, but it is akin to saying during a period of rainy weather that the sun will come out soon. Of course it will, but if you have a leaky roof or are under threat of flooding you should be prepared and take necessary measures.

In terms of your business, you may have a damaging cash flow problem. It needs to be dealt with now before you get swept away. Tighter and more forceful credit control (I don’t mean sending the boys round) may be the answer, or perhaps talk to your bank or a proper hands-on business adviser about short term help.

Marketing people will tell you that you should do just as much marketing or even more than you did when times were better. That is absolutely true, and they will also tell you to keep testing new ways of marketing and know what works and what doesn’t so that you do not waste your valuable time and worse, your money. Depending on your business, it may be online marketing, off line activities or networking. Take advice if you are not sure.

Make sure that your business is efficient as it can be. Cut your overheads including utility bills, and if you do not know anyone who can help you do this, then ask me or any business adviser with whom you feel comfortable.

The point of this piece is not to lecture about specific issues. You have enough on your plate, as we all do, to have to put up with someone going through the basics.

Relying on the economy improving is akin to Mr. Micawber saying “something will turn up ”. He went to debtors’ prison. We have to look after ourselves and our businesses now. The economic sunshine will come out, but we need to be there to enjoy it when it does.

© Jon Stow 2009

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Why we need to assess the risk in our business assignments and projects

Posted on November 18, 2009 by Jon Stow

In my last piece I talked about the danger of adapting business agreements and contracts when we do not have the specialist knowledge as lawyers, or indeed as (in my case) a tax practitioner. I suspect that those who are driven to do this are either out to impress their clients or are motivated by the prospect of getting a larger fee than if the work is shared with a professional in the relevant field.

However, even for those who may be very well qualified in terms of understanding what is required in an agreement or contract or other project of any description, the risk in undertaking some assignments may simply be too great. It is sometimes best to pass on a project, and, I believe, take a commission as long as we are up front with our client as to what we are doing.

Let me give you an example. When I was in the larger corporate world the sort of work I did included devising share plans for companies to reward their staff. The idea was that the employees would receive bonuses in the form of shares in their employer, and at the same time the company would save a great deal of money, particularly in terms of tax, in doing so. One project I did took me about three weeks working exclusively, and I remember that my employer’s fee was about £50,000. During the period I was developing the share plan, whilst I knew what I was doing, I had the benefit of peer review and also checked with lawyers that I was on the right lines and that the plan was “watertight” and that it would work.

The client company was looking to save millions, so their Financial Director was not worried about the fee they were paying, and my employer stood to make a tidy profit.

Now I am a principal of a small business. I still have the expertise to do a similar project. What I lack is the opportunity for sufficient peer review and the backing of a large corporate employer. I would not undertake such an assignment and would pass it on to a bigger player, of whom I know a few. After all, it is not just when we mess up that we might get sued. If other things outside our control go wrong it is human nature (and all businesses are run by humans) to look for someone to blame, and even being on the wrong end of misdirected litigation can be very expensive and very worrying. We are also unlikely to have a sufficiently large professional indemnity policy to save ourselves or our company and reputation from ruin.

My message is that not only should we not undertake business activities outside our professional competency, even if we believe that we can rise to the challenge intellectually, we cannot afford to take the risk if there is a lot of money at stake. With a small business it is better to refer on to a larger provider with a more considerable financial clout and be happy with a commission. Our clients will respect us more for our professional approach and we do not need to let our pride line us up for a fall.

© Jon Stow 2009

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Why we SHOULD reinvent the wheel – business agreements and contracts

Posted on November 8, 2009 by Jon Stow

One of the most irritating cliches I hear is “I don’t want to reinvent the wheel”.

It is a favourite refrain amongst many well-meaning business owners and business advisers who will typically ask for a template for a sale agreement, partnership agreement, shareholders’ agreement or some such thing. One of the worst which gets me upset is a request for a template share option agreement.

Why am I concerned? Well, all of these documents are legal agreements. They are contracts. People fall out and resort to lawyers. An amateur document may not mean what it is supposed to mean or may not fulfil its desired purpose. Indeed it may not be fit for purpose at all and will give lawyers a field day, and an expensive one at that.

Something that is also not considered is that these documents which are legal agreements do not travel well internationally. The law is not the same everywhere. There are different laws of succession, different family laws,and of course different commercial laws and different tax laws The last is why share option agreements which are tax-efficient and beneficial in one jurisdiction may be disastrous in tax terms in another.

I guess this is returning to one of my favourite recurring themes which is that there is no substitute for paid advice from qualified professionals. Some people might think this would be expensive for their clients or themselves, but professional advice up front has great value in being cheaper by far than expensive litigation. Do not be tempted to re-hash someone else’s document for your own purpose. Invest in a bespoke agreement from a specialist backed by someone else’s professional indemnity insurance rather than yours. Sleep easily at night.

© Jon Stow 2009

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Why arrogance has no place in business

Posted on November 1, 2009 by Jon Stow

I have been reflecting recently about the danger of arrogance in our business lives. I think it can come to some people through complacency. They feel that they know what they are doing, they have been doing it a fair time, and they know best. An attitude like that may lead to bullying too.

An arrogant person may indeed know his or her subject very well, and be very good at teasing out the finer points in their analysis of problems they seek to solve, but an arrogant person is also someone who does not communicate properly with the people who most need their help. An arrogant person ultimately is someone facing the risk of failure, because without being able to talk to or persuade people, any solution proposed will not be heeded.

Some of you may be familiar with the TV series “House” starring Hugh Laurie as a brilliant doctor and diagnostician. The premise of this very good programme originating from Fox in the US is that Dr House hardly ever sees patients because he in not interested in them, only in the diagnosis of their illness. He is very self-centred and very rude to almost everyone, but he is protected by his team of doctors who deal with and talk to the patients as well as carrying out any necessary tests. Dr House is also a bully, though he always thinks that his bullying is for the victim’s own good. Of course this is entertainment, and one needs to see a few episodes to enjoy the in-jokes and characters, and like many beers the series is an acquired taste.

In fact the premise of the progamme is not so absurd. I understand many doctors do become very arrogant, though perhaps not usually quite to the degree of the Dr. House character.

I am sure most of us have known arrogant but clever people in our working lives, including some who were bullies too. Imagine if we small business owners and employees adopted this attitude with our clients and customers. We cannot rely on our team to protect us. Imagine we believed we knew everything there is to know, and our clients were wrong and did not know what was good for them. Suppose we did not listen to them. We might understand their problem and make a diagnosis, and we may know how to fix it and provide a solution, but if we just told them – barked it out – they would feel intimidated and shy away. We would lose business that we should have gained and our clients would not get their solution unless they found someone more amenable who was as capable as we of delivering it.

Arrogance can be the price of experience and of knowledge but a little humility can go a long way in engaging our clients both in the formal way and in helping to solve their problems.

© Jon Stow 2009

“House”

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Why your brand and your USP are important

Posted on October 22, 2009 by Jon Stow

Have you ever been confused by a marketing message or an advertisement that seemed out of place with the product? My on-line and sometimes off-line friend Rod Sloane quite rightly described McDonalds’ current TV ad in the UK as “bonkers” which was exactly the word that had come to my mind.

Possibly McDonalds feel that their burgers have to be portrayed as a wholesome product made with 100% British beef but the ad does not even show the product, only pulling us back at the end with the familiar McDonalds banner. Otherwise it is along the line of some of those car adverts where we think “what on earth was all that about?” Of course I understand that the healthy option food police have suggested that burgers are dangerous with all that cholesterol, but let’s be sensible. Healthy sports can be dangerous. As a fit though not talented skier I did myself a lot of damage once. I do not think we should ban skiing and I do not think we should ban Big Macs or that McDonalds should almost pretend they do not sell them.

I have more than one business, and perhaps I should not tell you so as not to confuse you. I think if you are here then you are more likely to buy into me and my personal brand (this is not a selling blog of course). However, my businesses are marketed separately and distinctly, and I hope people are not confused between them. We need to keep our propositions simple. If someone is a landscape gardener who also knows a lot about keeping coy carp and goldfish, and excavates and sets up ponds, it is probably better to keep the propositions separate. Otherwise potential clients will say “is he / she a gardening expert or a pond expert?” They might think that they are looking at a gardener who dabbles figuratively and otherwise in ponds, and it blurs the offering. Of course a person can be very good at more than one thing, as I think I am, but for someone who does not know the business owner, it can be very confusing and that person may go to whom he or she considers the “expert” rather than to a supposed dabbler.

So I believe that when we market our business by whatever means, we need to keep our product or service clear and distinct, and whilst we may talk about the problems we solve, we do not need to get involved in the fluffy stuff such as McDonalds’ pastoral scenes and bucolic frolics. McDonalds are selling fast food, aren’t they? They should stick with their USP.

© Jon Stow 2009

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Better to have a business plan than have your dreams shattered

Posted on October 10, 2009 by Jon Stow

I was shopping in our village this morning and found the butcher’s shop was closed. There was a notice in the window, presumably put there by the shop landlord, which announced that the shop owners had paid no rent since they started trading last April, six months ago.

I always try to support our local shopkeepers, especially on a Saturday when I always go the village, sometimes with my wife. It is hard-going for many local traders. We are blessed with a very successful hardware shop who seem to sell virtually anything from light bulbs through egg-timers and fire guards to those things you use to unblock toilets. The business has been in the same family for 100 years and they know exactly how to cater for the needs of local people. Recently they have expanded into the shop next door.

We also have a successful baker’s shop. They do a roaring trade in the morning and also make sandwiches for the lunch time trade from local workers from the offices, shops and the factory units we now have down the road. They again cater for a known need.

Until a year ago, the village butcher’s shop was occupied by a local family of butchers, who also own a “farm shop” a couple of miles from the village in which they sell local produce – all the usual things you would expect a butcher to sell, including game. They closed the shop last Autumn because as they told me, the overheads in the village were just too high, and whilst the shop was quite busy they were not making very much money. They had decided to concentrate on the business out of town where they owned the premises on the farm and had more control.

The sad reality is that many people now prefer the one-stop shop available at the two large supermarkets within ten minutes drive and where parking is free. In the village, unless you know where to park, you will have to find 60 pence even for an hour, which of course discourages people for shopping locally even with the high price of fuel used in driving to the supermarket.

The people who took the butcher’s shop last April should have asked themselves why an apparently successful business from down the road could not maintain their village venture profitably. The likelihood is that the rents and business rates prevented the shop from being viable. Such a shop would have to rely on a very high turnover to cover the costs, which frankly they were never going to be able to do in the face of supermarket competition, and of course the farm shop owners who were their predecessors.

It reminded me of the cafe owners in a local town who asked me a couple of years ago to help them make their business profitable. They had a dozen tables, but were paying an annual rent of £17,000 as well as a large amount for utilities given that they were cooking all the time. It was clear that they could never make a profit even if they employed no one else. The figures did not stack up and never could have even before they opened. Rents based on floor area tend to reflect a higher expectation of profit often through a turnover of higher valued items. If you have a cafe you have to have a fantastic following or be really exceptional to stand out in a seaside town with numerous similar offerings. My clients lost the business they should never have started.

The lesson is to always have a business plan. A business plan is not just something we put together for the bank to raise finance. Sometimes we have to look past our romance and our dreams and think whether we really have a shot at making our ideal business work. If we have not done our sums properly and have not thought about contingencies for our teething problems and things that go wrong, our dreams can become nightmares and our hopes can be wrecked, as well as our financial security. A business plan is not just for the bank manager, but something that has to be carefully thought out, and adhered to. It can be changed as circumstances alter, but always has to make sense, otherwise starting a business will just be a leap in the dark.

© Jon Stow 2009

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Social media experts

Posted on October 10, 2009 by Jon Stow

The word “expert” is not a word I am comfortable with. One of the sites to which I am contributor, and for which I am grateful because of the additional exposure does describe me as an expert author. Whilst this is a sort of compliment, I write about what I know through experience. After all, I write this blog about small business life because I have a small business of my own (well, three actually), I help other small businesses, and I have formal training in addition to my experience to assist me in finding resources which I cannot supply myself for the businesses I help. I am not a salesman, though I have learned a lot about marketing, I do not sell quality control marks or broker finance, and I do not provide support on health and safety (or risk and safety as I understand is more appropriate). However, I know people who can do this. So, I am not an expert on all aspects of running a small business, or indeed a big business.

I have a tax practice too. I advise people on taxation issues; I advise both businesses and individuals. I am the first port of call for many who have problems with direct taxation or simply need compliance. I know my stuff, I do my CPD religiously and I enjoy it. However, ask me about customs duties, petroleum revenue tax, landfill tax or even some of the finer points of VAT, and I will find you a specialist. I am not a tax expert because that is too general a term. I am very strong on most day-to-day direct tax issues and I advise other tax practitioners and accountants, but I do not profess to know everything about taxation, and actually no one does. I am a facilitator or conduit for provisions of services outside my own area. You would not expect a biologist to be a whiz on particle physics or an astrophysicist to know all about plastics production, but the specialists in these areas are all scientists, aren’t they? Some of them may even have trained in the same basic disciplines once upon a time.

So, I am a tax specialist. If you had asked me twenty years ago where taxation in the UK or internationally would be today, how it would have been structured, and about inter-government cooperation against tax avoidance and evasion, I would not have had a clue and I doubt anyone else would. Ask me today where taxation will be in twenty years time and I will decline to answer, because I do not know.

Ask an economist where taxation or indeed the economy will be in twenty years time and you may get an answer, but I doubt it would prove very accurate. One of the reasons it would not be accurate is that such predictions are modelled on what has happened previously. In the current recession and following the banking crash, people tend to look at the aftermath of the 1929 Wall Street Crash. That was a another time though. One of the knock-on effects of the poverty and difficulties in Europe coupled with events in the USA led to the rise of European dictators and eventually the Second World War.

The situation is different now, and part of what has changed the world is the media explosion of mass instant communication which started with the much greater availability of the telephone, through to the internet. It is more difficult to pull the wool over the eyes of the public even in modern totalitarian regimes. How many media “experts” of twenty years ago predicted the internet as it is today? Some might have forecast the real-time communication element but not the vast heaving chatter of Twitter or even that (nearly) every serious business should have a website.

We have specialists in media technology, those geeks and early adopters who try every new gizmo and gadget, and who are currently trialling Google Wave. I read their reviews avidly and and appreciate their technical knowledge and insight. They are specialists but do not know what will happen in twenty years time or even five. Twitter was founded only just over three years ago and even the guys who started it cannot have known where it would lead in so short a time.

So what about social media? Are there any experts? I think there are specialists, but nobody knows where we will go, inextricably linked with the technology. The most successful networkers are those who understand about people. That is nothing new. A few are trained in psychology, which is about understanding behaviour. Most are just natural networkers. They understand human nature and that giving should always come first, but that idea pre-dates all technology and was reinforced by Dale Carnegie and others in the thirties and since.

I am not knocking the leading social media networkers. There are several I would count as dear friends and many I know well enough to trust implicitly. However, they are not futurologists any more than I am, and those who write or make a living talking about social media or even just Twitter are advising from their own experience and knowledge as I do in my fields. Even then some social media environments are so new that we need to form a view based on a basket of opinions, because some may be wrong. In the end we are engaging with human beings on-line, and are acquainted with far more individuals than we could have dreamed about only a few years ago. As long as we remember they are people and treat them as we would our traditionally-acquired friends and good neighbours, we shouldn’t go far wrong.

© Jon Stow 2009

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Responsibility in leading

Posted on September 26, 2009 by Jon Stow

In my last piece I talked about getting the best out of our employees and co-workers, and including giving them some responsibility for their work. Delegation is great, and as long as people do not feel out of their depth they should feel more energized. We will have more time to run and further the interests of the business and think where we are going, knowing that work is getting done on our behalf.

However, just because we have given our workers responsibility does not mean that we have given up our responsibility. It can be difficult working on one’s own as an employee in a larger organization especially, because bosses and senior managers will want something done in a certain way. It is important to check that those responsible to us are happy in what they are doing, and understand what is required of them. In particular, if they come to us and ask, we must listen and help them. It is no good waiting until they have finished the task as they see it, and then telling them we did not want it done that way, or they had misunderstood what was needed. If they have got it wrong, it is our fault, not theirs, and our responsibility for cutting them adrift.

I was reminded of this recently when I was asked to undertake a local project for a client with a particular brand, and I ended up on the wrong end of a poor relationship. Yes, I could and have completed the task in hand, and it will run quite effectively as it is. The frustrating part is, I can see ways of making it better, providing a better service to customers and giving them added satisfaction through feeling wanted, so increasing loyalty and reducing churn. The only cost will be in terms of my time, and I can get my reward directly through increasing my share of the revenue. The trouble is getting the brand owner’s permission to tweak as it will make the service slightly different but better than in the other areas in which the business operates. Of course if my idea were to be rolled out more widely, it would in my opinion make the whole brand better. However, unfortunately despite my best efforts I get no feedback, which is very frustrating.

So, do not leave your employees, workers or contractors high and dry after giving them that initial responsibility for their task. Listen to them and seek their feedback if you are not getting it. Otherwise you may be disappointed, and worse, may not allow them to improve on your original idea.

© Jon Stow 2009

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How to get the best out of our employees and co-workers

Posted on September 18, 2009 by Jon Stow

In the late seventies, when of course I was very young, Britain organised a recession all for itself. It was punctuated and marked by industrial disputes and strikes, notably by the seamen, the public service workers, and of course the rail workers. I need to say that this is not going to be a union-bashing piece or even a Government-bashing piece, though we have a scene now in a new recession which is quite reminiscent of those bad old days. People now forget the strikes of the seventies were the raison d’être for the confrontation with the miners during the Thatcher years. There was an understandable feeling of “never again”. With hindsight, the approach might not have been quite right, but the thing about hindsight is that you do not have it until after the event.

At the time of writing we have threats of a national strike by the postal workers (threats of staff cuts and modernisation of working practices), and a strike by Corus steel workers (closure of its final salary pension scheme to new entrants, i.e. mainly people who have not joined the company yet). One by National Express Rail workers (pay offer above inflation deemed insufficient) has been settled. One supposes that all these disputes are over genuinely perceived issues without a political agenda.

These strikes make me feel quite uncomfortable in that they can make the recession worse, affecting productivity through travel difficulties and raw material supply, as well as cash-flow, so important to many businesses including especially, small businesses. It really shouldn’t be funny, but there is a comic absurdity in all this, at a time when even the TUC is forecasting that there will be 4 million unemployed within the next year or so.

The confrontation and posturing we see on both sides of these disputes between major employers and unions is certainly not the sort of behaviour we would want to see in small business, and indeed we do not see it very often. However, unfortunately management and workers can still take very entrenched positions, particularly over productivity and in respect of staff absence. It can happen in respect of pay too.

Fortunately the small business owner is in a much better position to do something about these problems and to put matters right. It involves taking a friendly approach which might be alien to the big employers and their workforce representatives. Being nice to someone is certainly never harmful. So, if there is a productivity problem we, our small business owner or SME director should say to the workers individually or together (it depends on circumstances) “I know that you are doing your best, but we really are not getting the results we expect. Do you have a suggestion as to how we could get through more work? Is there a problem you can identify and something we can change?” That way the staff will feel happy that they have been asked and feel more valued. We will be giving them some responsibility for their work and there may well be something the business could change to make the system better and get more work done. At the same time, the staff will feel more able to volunteer issues that concern them and give useful feedback without being asked.

In the case of staff absence, it is always best at the earliest stage to talk to the individual because there may be an area in which we can help. Again, the person will feel valued, and perhaps one could allow some flexibility on working hours if there is something which keeps the person away from work. Of course, common sense must prevail, but again we encourage collective responsibility. Even pay issues are best resolved by talking first, and individual incentives related to personal productivity can also encourage valuable feedback.

None of this is novel, but both small business employers and their staff can get into entrenched attitudes if they do not talk enough or at all. We have nothing to lose by being friendly and kind to those who work for us. I have always found that if our team members like us, they will respect us and try harder to please, which of course benefits them hugely, as well as our business.

© Jon Stow 2009

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Know your audience and do not rabbit

Posted on September 5, 2009 by Jon Stow

Last week my wife and I did something unusual for us – we went on what amounted to a coach tour. It was interesting and informative. Being a tour, we had a tour company representative or courier to accompany us, and naturally as we travelled on the bus she told us about what we were going to see and commented on the scenery and history. The lady was well meaning and herself quite well informed on most matters, but the trouble was she talked too much giving a vast amount of information, some of which was of questionable relevance.

Much of the historical detail we already knew because we and our fellow travellers were from the British Isles, and the tour was within the British Isles. Consequently we were all very familiar with most of the facts supplied, and the content of her talks would have been more suited to foreigners such as visitors from North America.

The second error the lady made was the the length of her presentations. It was as though she felt obliged to fill every moment of her and our time together talking to her captive audience. Much of what she said seemed unimportant, but if it had been important she would have bored us into paying little attention. I was not the only one who fell asleep during one of her lengthy discourses.

The third and most cardinal mistake our tour leader made was not to take into account the sensitivities and feelings of her listeners. Many of us had lived through quite a lot of history which would certainly not have left us untouched. Hence some of us including I on one occasion felt quite upset at some of the references made.

In a sense this is elementary stuff, but a useful reminder. I give presentations to several different groups. Some are in my own profession, some are fellow professionals in other disciplines, and others are potential customers or people whom I have met through networking. What we say and the information we give must depend on our audience. There is no point in my “blinding people with science” if they are not in my business or one allied to it. On the other hand, if I am talking to a business peer group, they will expect content of a higher technical level and perhaps very specific to their needs. One has to keep people interested and help them with the sort and level of information for which they are looking. Also, it is important not to go on too long, but to conclude when one has said just enough, and to still have the audience’s interest to ask questions. If they are snoring as I probably was in the coach, the speaker has failed, and even worse, has gained a reputation as a bore.

Much of this also applies when seeing clients or prospects. Of course, listening is then more important than talking, but when we do speak, it must be at the right level to give any information in a form which can be understood, and to make the person comfortable with us. Know your audience and don’t rabbit on!

© Jon Stow 2009

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