Unwise business assumptions

Snow Leopard
Image via Wikipedia

I remember when I was starting out in the workplace, I took a client file I had been working on to my immediate boss for review. I remember he picked on something I had done and asked about it. I don’t remember the detail but I do know that I said that I had made an assumption about an issue. I remember he boomed at me “Never assume! Always check your facts.” Of course he was quite right and it was a lesson I learned.

In business there is another expression which can sound rather trite, which is that we don’t know what we don’t know. Of course this also applies to our general knowledge. There was a recent short series on BBC Television about the Lost Land of the Tiger which was about looking for and finding (Bengal) tigers in Bhutan, from the forest up into the high Himalayas. Now I had not ever thought much about whether there would be tigers in Bhutan, but watching the programmes I also learned that Bhutan had clouded leopards, golden cats, flying squirrels and more conventional (in my mind) spotted leopards. Now I had assumed I knew that flying squirrels were Australian marsupials and spotted leopards were only found in Africa. I suppose I had no basis for these assumptions, but I thought I knew these assumptions as facts. It turns out there are species of flying squirrel in many parts of the world.

In business there is a great danger of stumbling alone and trying to deal with difficult issues and assuming we know just what to do, or that we know there is no solution to our problem. Most of us have done it. Usually there is help at hand if only we ask for it. We should never assume that we know all the answers, because no one does know all the answers. However, collectively there will be people who between them do know practically all the answers. We only have to ask our network and someone will be there to help. Our network is part of our business team.

Apple Mac enthusiasts will have been disappointed that the Bhutan expedition did not film a snow leopard but only found the remains of a yak a snow leopard had half eaten. Just the same the series was a reminder to me not to assume anything which is outside my area of expertise. What do you think?

© Jon Stow 2010

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Why you should define your offering as a freelancer or consultant

In these challenging times with regard to the state of the economy there are a lot more people without full-time employment who find themselves looking for freelance work and who are seeking to offer one form or another of business consultancy. In my world I meet quite a lot of such people, many of whom are new to the fold of the independent worker, having run a business or been in a settled job for many years.

One of the expressions I do not want to hear when a freelancer introduces himself or herself is “I am a generalist”. Why? Because it is important to take into account what the singular or multiple audience hears, and what they hear is “I am not really good at any one thing”. The corollary of “Jack or Jill of all trades” is “Master of none”.

If someone has been the owner of a business or a senior director or partner or whatever, that person tends to think they know all about business because they think they have seen and done everything. That may be true in terms of having a grasp of a business, but it really will not impress a potential buyer of services, who wants to hear what the freelance consultant can do to satisfy their immediate business need.

Everyone is good at something and can offer a special knowledge. If you have been an owner of a business or an employee, that business specialised in something, whether it was engineering, manufacturing, food processing, importing toys, plastic moulding or accountancy. There must be an area the freelancer is most comfortable in. That is going to be the way to get in to sign a decent contract to help. Once in, you can offer your other skills on the back of your perceived competence in what you have achieved so far. However it is important to get in, so do not ever call yourself a generalist, and concentrate on what makes you happiest and is most financially rewarding.

© Jon Stow 2010

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

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

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

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

Why we SHOULD reinvent the wheel – business agreements and contracts

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

Better to have a business plan than have your dreams shattered

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

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

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

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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Enterprise and risk

I have been talking about risk recently in another context. I was a little dumbfounded yesterday when my Mum said she was told by a family member that she should not sign up to Facebook because there was a risk of identity fraud. Of course there is a small risk. I am indebted to @royatkinson for this link and it could be said that I and all of us who are active with profiles on-line run some risk, but what is life without risk?

The reality is that most small businesses which offer services of any kind and very many who are making and / or selling a product need an on-line presence, and what is more, need to engage with their network. In fact, you need to be on-line to get a network beyond a comparatively small number of friends, which is not enough people to refer you. I was just trying to list how many websites where I have a profile. In terms of business and social networks I have at least ten, and must have more I cannot think of at the moment. I have four blogs: two for business and two personal.

The point is that we have to give some of ourselves in order to be noticed. There are then several steps until we get to business. We need to enhance our reputations (or hope to) and be helpful and give useful information to others, but we need a public presence on-line to get known to further our businesses.

I think the contrast between me and our relative telling my mother not to sign up to Facebook is that I am in business on my own account. The relation has been in a large, safe, cocooned corporate environment for thirty years and is involved in IT security, and she clearly cannot see beyond the small risk to her employer (“more than my job’s worth to access Facebook at work”) to allowing my Mum to have a bit of fun making friends and signing up to her favourite jockey’s fan appreciation society.

There is no success in business without risk. If we are in the front line with our own businesses then we assess the risks and take them if necessary, looking at the likely though seldom certain outcome. It will be hard for those coming out of large corporates in the recession job losses, because they may be too risk-averse to start well in the freelance world. Those of us who have been round the block have learned to live with the risks, which reminds me that I will help my Mum sign up to Facebook next time I drop in.

© Jon Stow 2009