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Who moved my cheese?

April 18, 2011 by Mike Southon

The recession is grinding towards its inevitable end game, with announcements of public sector redundancies, rising consumer prices and likely increases in interest rates to combat inflation.

While this particular crash is considerably deeper and longer lasting than previous ones, those of us who have been around the block several times know this is just the way of things.

In 1997 Gordon Brown made a bold assertion of “no more boom and bust” and despite his subsequent claim of actually having said “no more Tory boom and bust” it did seem too good to be true at the time. Recessions follow booms just as winter follows summer; the key is to be ready for it.

Recessions are always preceded by unnatural stock market activity inexplicable to ordinary people, who have a sneaking suspicion that insiders are manipulating the system to their own benefit. The next time this starts to happen, my advice would be to reduce your debt radically.

A sensible entrepreneur knows that cash is king, and while it is very tempting to take on debt in the good times to expand the business, this can backfire horribly when the banks suddenly change the rules.

Many of my good friends found their companies wound up by the banks when the recession began to bite two years ago. It could be argued that this is a good and natural part of Darwinian evolution, the survival of the fittest, especially for serial entrepreneurs who tend to be adept at bouncing back from adversity.

Those entrepreneurs who managed to survive the recession by a combination of good cash management and redoubled efforts in sales and marketing, are now painting an optimistic view of 2011/2, so long as the dreaded “double-dip” does not actually happen.

But for those in the public sector, now is the time of voluntary and forced redundancies as local authorities take a long hard look at how to reduce costs while focusing on delivering key services.

For those with long service and a good redundancy package, this might represent a very welcome early retirement and the opportunity to pursue hobbies or become more involved in charities and social enterprises. Others tell me they will be receiving a year’s income, thus enabling them to take a long family holiday and then have a fundamental re-think about their career and long-term aspirations. There will even be a lucky few who leave their employment on a Friday only to return to exactly the same job as an external consultant on a significantly higher day rate.

But for those who are not in those fortunate positions it will be a time of uncertainty and self-doubt, with a pressing short-term requirement to generate income. My advice to these people is to ask their exit counsellors for as many psychometric tests as possible to understand their own strengths and weaknesses, and to determine whether they are more suited to working for someone else or becoming self-employed.

Required reading is Spencer Johnson’s Who Moved My Cheese?, a simple parable about some mice that arrive one day to find their cheese is gone. Some wait for the cheese to return, while the more enterprising mice go and look for some other cheese.

Six months after redundancy many people will still be bitter and angry. Others will, in retrospect, admit it was the best thing that ever happened to them. My role in this difficult human drama is to show that becoming self-employed is not rocket science. It only requires a little confidence and the support of family and friends, who will probably also be your first customers.

Originally published in The Financial Times. Copyright ©Mike Southon 2011. All Rights Reserved. Not to be reproduced without permission in writing. Mike Southon is the co-author of The Beermat Entrepreneur and a business speaker. 

Does your ‘About Us’ website page connect?

April 14, 2011 by Fiona Humberstone

Why do you click on ‘About Us’ pages when browsing a website? Idle curiosity? A desperate attempt to find out ‘who’ the company is and what they do? A desire to find out more about the person or people behind the brand and connect further?

In my case, all of the above apply at different times.

I’m the first person to say your website copy should be about your customer and their challenges rather than your business. But the same rules don’t apply to your ‘About Us’ page, which is your opportunity to talk about yourself as much as you darn well please.

It’s a bit like being at a party. You do all the right things – ask the right questions, listen, strike up a rapport and then the other person asks about you. You need to answer. On your website, your ‘About Us’ page provides the perfect opportunity to reinforce your brand position, qualify why you’re ideally placed to provide your product or service and most importantly – connect with your reader.

Photographer Vicki Knights does this brilliantly. She talks from the heart – reassures me, provides a little about herself with which I can identify and explains (without boring me) why she’s qualified to do what she does so well. Importantly, she’s also got a great photo – eyes at the camera, looking relaxed, engaging and reassuring.

Take a look at your website’s ‘About Us’ page and ask yourself – is it easy for people to see why they should do business with you? Can they see, literally see, who is behind the business? And have you reinforced your brand position? 

Fiona Humberstone, Flourish design & marketing

What can start-ups learn from readymade cake mixes?

April 13, 2011 by Ruben Kostucki

In the early 1900s, a company called Betty Crocker pioneered the concept of readymade cake mixes. The product was aimed at housewives and its key selling point was a tasty treat could be rustled up with minimal effort. The product had been carefully developed and when launched, market conditions were deemed optimal, in short – a recipe for success.

And yet, the expected sales boom didn’t occur. Why? Although simple solutions were sought after, Betty Crocker’s new readymade cake mix made things a little too easy. So easy in fact, that using the mix felt almost like cheating and the hardworking housewives of the time felt scared and threatened. It essentially made them feel as though their role in the kitchen was jeopardised.

Simple problems require simple solutions and in this case, the solution was very simple: powdered eggs were removed from the mix. The simple act of breaking an egg and adding it to the mix was enough to deliver that proud feeling of having baked a homemade cake. A minor detail, yet one with dramatic consequences.

A similar situation occurred when Pinnacle Foods tried to introduce the Duncan Hines range of readymade cake mixes into the Japanese market. Despite extensive market research and product development, once again, the expected boom in sales didn’t occur. The problem? Japan has a cooking culture predominately based on rice, and although the market was ready, homes were not. Indeed, the majority of Japanese households were not equipped with conventional Western ovens, rendering the cake mix effectively useless.

These stories reflect the need to spend the necessary amount of time to get things right from the start. So here are two simple rules of thumb I’d like to share.

1 Build your brand according to your unique values

Same as for a date, you need to think wisely what to wear and where to go. So when you think about your brand, your checklist should include everything from your dress code and website to your tone of voice in your communications. Are you too serious? Do you stand out? If not, think about the Purple Cow.

To be thought of as more professional, I use a telephone answering service and have customised business cards.

2 Give your time and expertise for free

As well as feeling amazing about it, you’ll create much more word-of-mouth marketing than you have ever imagined possible. Go speak at school and universities, help charities and promote other businesses. Timebank is a great example of an organisation that can help you give your expertise away for free. Doubt it’ll work? Check the Jojo Project and you’ll see how quickly you can establish a brand and grow it.

Ruben Kostucki of 

Should you turn your sole trader business into a limited company?

April 11, 2011 by Elaine Clark

Since 1 April 2011, the tax paid by small limited companies (Corporation Tax) is the same as the basic rate of income tax – 20 per cent. In addition, the increase in Class 4 National Insurance contributions (NICs) should prompt sole traders to review their business structures for potential tax savings.

Why are you a sole trader?

Maybe you decided to be a sole trader because you thought it was easier. Deciding which business structure to go for isn’t always simple. There isn’t a ‘one-size-fits-all’ answer.

Your personal circumstances should determine your choice – and only you can decide.

Putting aside the misleading perception that a limited company gives you greater status or credibility then, in my opinion, there are two major issues to consider when deciding your business structure.

Limited or unlimited liability?

As a sole trader there is no distinction between you and your business. You do not need to have a separate business bank account. All the debts of the business are your debts. If the assets of the business do not cover the debts, your personal assets could be used to pay the debts – and that includes your house.

The debts of a limited company belong to the company, which is a separate legal entity. Except in cases where personal guarantees have been given, your personal assets will not be used to pay the company’s debts. Maybe this is a more attractive proposition than a sole trader or unincorporated business structure.

What tax do sole traders pay?

The second reason for a limited liability business is based on tax savings. As a sole trader you pay:

  • income tax on profits over your personal allowance, assuming no other income
  • Class 2 NICs at £2.50 per week
  • Class 4 NICs on profits over £7,225 at a rate of 9 per cent up to £42,475 and 2 per cent thereafter.

If your profits are below the personal allowance of £7,475, in all likelihood it would be better to operate as a sole trader. You will pay no income tax and will only pay a very small amount of Class 4 NICs if your profits exceed £7,225.

If you profits are below £5,315, you can also apply for an exemption to Class 2 NICs.

What tax do limited companies pay?

A limited company pays Corporation Tax at 20 per cent on its profits (up to £300,000, after which the rate rises).

Profits can be withdrawn from the company by way of a salary for the director(s) and dividends for shareholders. Again, this assumes that the directors/shareholders have no other income.

Sole trader or limited company?

I’ll illustrate with an example… Say your business has profits of £15,000 and you have no other income.

Tax as a sole trader would be:

  • Income tax (£15,000 – 7,475) at 20 per cent = £1,505
  • Class 2 NICs (£2.50 x 52) = £130
  • Class 4 NICs (£15,000 – 7,225) at 9 per cent = £700 (rounded)

Total tax = £2,335. So profits after tax are £12,665.

Tax as a limited company would be:

  • Pay a salary of £589 per month = £7,068 [allowable expense from the profit].
  • So the profit becomes £15,000 – 7,068 = £7,932
  • Corporation Tax on the profit is 20 per cent = £1,587 (rounded)

The profit of £7,932 is distributed from the company as a dividend and no further income tax is due on the dividend, because the total income is below the higher rate threshold.

The total available after tax is the available profits + salary – Corporation Tax = £13,413. With profits of £15,000 you would be better off as a limited company to the tune of £748. If your profits are higher the savings may also increase.

Some may argue that this would be wiped out by an increase in accounting fees – I usually respond with “not if you are using”.

One final thing….

There may be the opportunity to sell your sole trader business to your limited company. In doing this you may realise significant tax savings. It would be inappropriate of me to give a specific example here, because savings are absolutely dependent upon your circumstances.

So my advice is to get someone to review your circumstances and work out a specific projection for you.

Elaine Clark,

Further information:


Damned if you do and damned if you don’t

April 07, 2011 by Fiona Humberstone

Fiona HumberstoneLike many women I meet, having my daughter was the turning point for me. It made me realise I wanted to get off the corporate treadmill and start my own business.

Six years ago, at the age of 26, I began searching for a more rewarding, fulfilling role that I could build around my family commitments. I wanted to get back to the things I was good at, be my own boss, call the shots and start something that would give me more financial freedom than being employed could.

When I put it like that, it’s been a real success. I run a design and marketing agency – Flourish – which specialises in creating engaging brand identities and websites for small businesses. We have a great reputation, some really inspirational clients and a fantastic team. I genuinely love what I do and find my work fulfilling and rewarding. The business has grown by 30 per cent over the past year and while I’m unlikely to ever be a millionaire, I’m really happy with the balance between my income, the work we do, the team we’ve built and the hours I put in.

I’m simply not prepared to work 70+ hour weeks and sacrifice many of the things that are important to me in the name of business growth or so called financial success. There’s more to life than work, and that’s something for which us women (and especially mums) who run businesses should give ourselves more credit.

That said, running a business and being a good parent isn’t easy. My own mum gave up work when she had me and has only just resumed her career in the last ten years. She devoted a huge part of her life to bringing us up and although I didn’t appreciate it as much as I should have done at the time, I now fully realise the value of what she did for us. I often feel guilty that I haven’t chosen to do the same thing for my own children.

Having my first child at 25 was always going to mean we weren’t as financially settled as many of my friends ten years older than me. We chose to live in one of the most expensive areas of the country (Surrey) and I can’t imagine ever moving. But that puts a lot of pressure on me financially. My husband is a policeman, so it really is down to me to earn (in three days) the bulk of our income.

I’d be kidding myself if I didn’t feel enormous pressure to ensure the business performs financially. I don’t just have my own family to worry about, but a team of seven, an office in Guildford and some pretty staggering overheads. Some of the team are starting to have their own families; there are mortgages and rent to pay. People rely on my business for their livelihood. Sure, they could get other jobs but they have become a part of my life and I don’t want to let them down. I wonder if non-mums feel that same responsibility towards their team?

Like any working mum, I am also constantly juggling the demands of work and home life. Am I spending enough time on the business? Am I being fair to the team? Am I doing myself an injustice by not working today? And by the same token, have I spent enough time with the children? Should they have watched TV while I wrote that blog post? Shouldn’t I have been just playing puzzles with them instead? And so it goes on…

I’m not sure I’ll ever catch up with the admin, letters, permission slips and requests for money that regularly come home from the school and various clubs. There is never enough time in the day. And while I only officially work three days a week, I will often catch up on emails or blog posts in the evening or – until last week – while my youngest sleeps at lunchtime. I have no idea where that time’s going to come from now!

But enough moaning. I’ve developed a business I’m passionate about, with a team I love, doing work that inspires and motivates us. We’ve sought out the types of clients we really want to work with and I’m now financially secure enough to live in a lovely house in a lovely village and get to every assembly or sports day without feeling the need to answer to anyone.

I do feel guilty that I work. I’d love to devote myself to my children full time in the way my mother did, but I think you’re damned if you do and damned if you don’t. As my own mum said to me when I’d just started my business: “I don’t think you ever look back and feel you got it right”.  

Fiona Humberstone, Flourish design & marketing

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Mother’s pride

April 06, 2011 by Ola Laniyan-Amoako

Ola AmoakoWhen I first heard the term ‘mumpreneur’ I chuckled a bit and instantly adopted it because I felt it was a term that totally described me, an entrepreneur with another full-time responsibility – motherhood.

Women should be proud of the term because it instantly highlights how much harder mums have to work, because being a busy mumpreneur involves an awful lot of juggling and battling with your conscience.

For me, I think the biggest challenge is the lack of freedom – freedom to do what I want, when I want. As a mother, before you can commit to anything, the first questions you ask are – “Who will be able to look after my child?’ and “Is it fair for my child to be with X for this length of time?”.

As a busy working mum, you’re always evaluating how your decisions will impact on your children, you can’t just say “yes” at the drop of a hat to random meetings and events and unfortunately – this can lose you business.

They say that when you have a lot going on something eventually has got to give and in my first year as a mumpreneur, I’ll admit it, my domestic duties gave way. My house was a complete mess at times. Balancing domestic and business commitments effectively is unbelievably stressful and I have found you have to be super organised to ensure everything gets done. It took me a year to learn how to juggle my responsibilities successfully and even now, some weekends I’m still close to tears because I’m so tired, but I’m a mumpreneur and that’s what I do.

In the past few years, a lot more women have been able to go into business, partly because of the internet has helped them to push their amazing ideas to global levels. There are also many more networks and government initiatives encouraging women to go into business. And many mumpreneurs are making significant amounts of money, which means many people – including men – must take them far more seriously. The many success stories are highlighting the potential that many mums have in the world of business.

What is the key to being a successful mumpreneur? Think of yourself as Superwoman – full of amazing ideas, doing what others thought was impossible, efficient and ready for the world’. But when business is over for the day, you must be able to become a more earthly and homely character.

The main piece of advice I’d give to any mother who wants to go into business is this: if you have a passion for it, then go for it. It’s only passion – genuine passion – that will drive you to work as hard as you will need to work if you are to become a successful mumpreneur.

Ola Amoako, Urbantopia

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