The Business Plan

9 April 2014

This blog is intended to explain the full potential of your business plan.

We have just updated our Business Plan and wanted to share some insights as to why these are important for the growth and success of your business.

You may have put one together when you started your business and it is now collecting dust in the drawer, next to the filing cabinet.

How about if we told you it can be adapted to be used as a positive tool to be developed as your business develops.

You maybe three years into your business, you have changed both as a person, and as a business in that timeframe. What was important three years ago, may not be so important, you may have other ideas, now you’ve dipped your toes into the world of entrepreneurship.

Why Do This In The First Place?

To focus on specific goals you wish to achieve, have something to aim for.

To take on a planned approach to your daily routine. The successful companies plan everything.

To know your customer better 

To know your competitors better 

To work on your threats and weaknesses . Stand out from the crowd.

Lets break it down.

Your Mission Statement

What do you want to be?

What do you want your business to be?

What is your Unique Selling Point, what is your business goal all about?

Why are you doing what you are doing?

Update the business plan with these new inspirational ideas.

SWOT Analysis

You have now been in business for while. You now have experience with what you are doing. You may have made some mistakes along the way, but have learnt from them using that knowledge to better use.

The SWOT analysis is all about where you are today, and how you compare with your expectations and more importantly against the competition.

Strengths - you have first-hand experience of running a business. What have you gained from your time doing it.

Weaknesses – you listed these in your first business plan, did you manage to eliminate some. Have you gained new ones?

Opportunities – No matter how big or small your business is there are always opportunities to promote and sell your product. Use your contacts you have now built up. They may be able to put some work your way. Give you access to that contract you’ve been chasing. Its not necessarily what you know, its who you know.

Threats – Whether you own the local shop down the road, or run a large corporation.

Three main threats to your business survival. The economic environment, cashflow and the competition. Embrace and learn all you can about them, be one step ahead.

The Products Or Services You Offer

What services or products do you offer ?

What is your Unique Selling Point ?

How saturated is the market place ?

How big is your market, what is your potential piece of the pie?

Is it local area or a global market ?

Can you make a profit from what you are doing?

The Marketing Strategy

How am I visible to the market place 

Website development 

Online presence 

Advertising in the local press 

The Directories 

Word of mouth 

Business contacts 

Referrals 

Looking at the competition and your customer base, the target market. This should be taking up the main part of your business plan Your strengths and weaknesses against the competition Your target market

How your marketing campaign has been working so far, track what works and what doesn’t. Some Number Work Set yourself a detailed budget and compare to actual figures Put together a cashflow statement.

Whatever youre doing always keep an eye on the cash and profitability.

Check and triple check your costings.

Nicola Cross 9 April 2014

This blog is intended for information purposes only and is only advice from past experience, you may have other suggestions of your own. It is not intended to be used to make all of your business decisions but as a guide only.

Theres been a lot of news coverage regarding the political parties getting ready and promoting their manifestos for the next election to encourage you to choose our next government.

Whichever party is your preference your destiny and your business success is completely in your own hands.

We have as accountants a short timeframe of seasonality before everything hots up again in April/May. We use this opportunity to look at our systems and see what we can do to improve our service to our clients and make efficiency savings, we have found it highly rewarding to see the changes over these last five years.

We also actively speak to our clients about changing their systems to make themselves more efficient to take their businesses to that next level of growth.

Ways that can be useful.

• Purchase higher specification software to make the service a lot more standardised.

• Look at the process itself and find ways of doing the same job for less time.

• Negotiating with suppliers for a greater discount, certainly if youre spending more on that product.

• Get to know the customer better so that you can tailor the service better

• Take out the human element, if a machine can do it cheaper use it, this will save a lot of cost on a volume product, and probably better too as you’ve taken away the potential for human error.

• Create a little production run, and run through it with your staff, can there be short cuts, or cut out duplication. Review it and make it smarter. Particularly good with the restaurant and pub industries as well as manufacturing.

• If youre wasting time doing the little things and not getting the bigger picture tasks dealt with, maybe you need a member of staff. Use someone cheaper than yourself so that you can concentrate on the improvement of your income.

• Outsource, if you either don’t have the time or the expertise, definitely look at this for marketing and finance particularly.

Larger companies have a lot of duplication in them, don’t let that be you, it’s the quickest way of increasing the costs.  If get yourself in this routine whilst your small, youll never suffer from large company syndrome and make more money than your counterparts.

This blog is intended for information purposes only and is only advice from past experience, you may have other suggestions of your own. It is not intended to be used to make all of your business decisions but as a guide only.

We covered looking at your balance sheet some time ago, and wanted to refresh you on why it is so important.

Building up your balance sheet can help you with your future with the business, if you were ever to sell your company on to a potential buyer, this is an important area that the buyer will be looking at.

Its not just about profitability and turnover, the balance sheet is an indication that you are growing your branding, a business that has thought about strengthing and building up the balance sheet is worth considerably more than one that focuses just in the present.  ie turnover and profit.

The example we have below, is fine for a small business and will probably have a good credit score as its positive in both the net current assets (Working Capital) and the overal value.

But if youre talking about a business thats worth selling you are going to need a plan, this could be a 5-10 year plan, its certainly not short term.

Will need to be assets in both the fixed assets sections and current assets, this could be by buying equipment or machinery to make yourself more efficient and do a higher volume, buying a company with skills or equipment that brings Goodwill into the assets section, quite a lot of larger companies do this, they purchase mailing lists, and client lists, from smaller companies, to rapidly increase their net worth, and increase turnover.  

Current assets would be building up your turnover, and therefore your debtors increasing. Keeping an all important eye on the costs, and keeping the creditors to a reasonable level.

Long term liabilities are usually loans that are paid more than one year ahead, and maybe the director loans, if the owner hasnt taken back all of their investment.

The balance sheet value needs to increase tenfold, and self sacrifice for the owner is a must for this kind of exercise.  Its not all about your current year anymore, but your long term future, and future sales opportunity.  Think of it as a potential pension plan?  Investment for the house by the sea, whatever your dream future this is your opportunity to make it a reality.

This blog is intended for information purposes only and is only advice from past experience, you may have other suggestions of your own. It is not intended to be used to make all of your business decisions but as a guide only.

Most business owners don’t realise that unless you have secured your name and logo through registering a trademark that you may not actually own your own brand.

Registering at Companies House is not enough to stop somebody else using your logo and claiming it as their own.

Please take a look at the following website.

http://www.ipo.gov.uk/types/tm.htm

The Intellectual Property Office, are spending time informing business owners of the benefits of registering their business logo as a Trademark,. If you get the opportunity to go along to one of their seminars it is highly recommended.

Business Wales have advisors that can also help you with Intellectual property or patents as it was formerly known. http://business.wales.gov.uk/

To register a trademark is quite simple and costs £170 for 10 years, then you renew after that. You don’t need to be Kellogg’s or Tesco to see the Importance of this registration, the trade mark registration will increase the value of your business should you wish to sell it, plus you will definitely need it if you have planned to set up a franchise of your business, again this increases the value of the business.

If you have ever watched Dragons Den, it is one of the first questions the Dragons will ask the owner of the business. There are many options for you to protect but starting with your name should be the first point for increasing your business success, and definitely its value.

This blog is intended for information purposes only and is only advice from past experience, you may have other suggestions of your own. It is not intended to be used to make all of your business decisions but as a guide only.

When you are running a business whether a new company or a well established one, getting the costing of your products or services costed correctly is crucial to your success.

Service Companies

Creating the Sales price.

Your main component of cost is going to be heavily on labour. You’re going to have to make sure that not only have you covered your labour cost, ie Cost plus employers NI. Contribution to overheads plus that all important profit.

A service company needs to have a mechanism for keeping track of those labour costs versus quoting for a job, at the fingertips at all times. The easiest and simplest route to finding this out is to keep timesheets, or cost the time of every element of each procedure. You always compare the timesheet for a particular job, ie the project, versus the original sales price. This will give you an average hourly rate of the job as a whole. You very importantly need to know the average hourly cost of your overheads. Basing this on the number of hours you have available as a maximum for every member of staff.

Ie You have two members of staff, each work 40 hours per week for 5 days work. As a yearly average that’s 4,160 hours at your disposal or 347 hours per month. Your overhead for example is £2,000 per month which equates to £5.76 per hour. A cost of this nature would be labour cost per hour, plus £5.76 overhead plus % profit.

Every business and industry is different, and you’re dictated quite a lot of the time by market rates, or competitors. By knowing your average overheads and labour costs, you will know the price you cant go below or face making a loss.

Hotels have this down to a fine art. They are mainly in the services industry again heavily focused on labour costs. When you have booked your room for the night. They will know ahead of time, the number of rooms they have, the cost of an empty room, and the cost of a full room. They will have broken down in their costing mechanism

The length of time to make a bed!

Cost of cleaning the room, length of time for each room!

Cost of washing the bedding/ towels!

Cost of the tea/coffee facilities!

Heating and lighting for each room!

Your breakfast cost!

Plus a contribution to fixed overheads, and % profit

Whether your service business is hourly project based or procedure based, you need to know the cost of each element.

Manufacturing and product based sales

Again as above you are dictated to by market rates, you might be a low volume business that can charge a premium fee for your product ie Apple Iphone.   Or a high volume business that charges sales at lower margins of profit but has to sell a lot of them. Ie Walkers selling crisps

When costing a product you need first know

Cost of the materials for the product!

Labour time to make it!

Cost of energy to make the product!

The more volume you make the cheaper it should be per product as you will become more automated in your processes plus you are likely to have more negotiation power with supplier costs. You need to build in a little slack as no-one or machine can work at 100% capacity all of the time. You do need to track efficiencies and always look at how you can make things better and demonstrate you are always trying to reduce inefficiencies. This is usually where profit can go down, if a business does not look to always improve its offering.

Supermarkets have just done this in the last 18 months, by offering the self checkout facility, they’ve saved both wages cost, time and rates bills.

The main thing to realise that this is not a static job to do, as you grow and develop or change your product offering you will need to keep monitoring these costs, or you could end up working twice as hard, for a lower gain.

Always be one step ahead.

This blog is intended for information only, you may have other suggestions of your own.  Please treat this as a guide only.

For anyone who is looking at taking on a an employee in the next 12 months, then this article is just for you.

There is a good budget at the moment with assistance with wages for both apprenticeships and graduate schemes.

ACT Training is providing training and assistance to young people aged 16 - 24 years.  Take a look at their website on /www.acttraining.org.uk/apprenticeships-2

Paying £100 towards wages on a full time placement for the first six months, followed by £50 per week for the next six months.  There is also funding for training available.  Take a look at this website its got some useful information the helpline is good too.

Jobs Growth Wales again is offering placements for six months, paying the national minimum wages for the first six months.

website is wales.gov.uk/topics/educationandskills/skillsandtraining/jobsgrowthwales/?lang=en

Lastly the graduate scheme at Go Wales.  I recently attended their 10 year anniversary event, this organisation is actively seeking employment for students.  There are two schemes in place the placement scheme where the student stays with you for a six month placement and Go Wales supports the wages bill.  

Or you can have the taster sessions where the student get a small taster of your business which is great for if you have a project in mind to be finished, or are unsure whether you can employ a person.   The taster sessions are normally free of payment.

www.gowales.co.uk/en/employer

Think of this article as taking a look into the future and growing your business, you are also giving a young person the opportunity that you once had.  So go on what are you waiting for?

Thanks Nicola

Financial stability is crucial to any business. It is extremely important that you protect and enhance it. Cashflow of your business is vital. You need to be aware of how much money is coming in and how much money is going out of the business. You will need to have a plan in place to cover any shortfalls.

Governments are having their own challenges and not always there to help us in a crisis, we have to stand on our own two feet, to see ourselves through these challenging trading times.

To stay on top of cashflow, it is best to speak to your accountant about cashflow projections. We have also got examples of how to get the best of cashflow on our website, click here to find out more.

We have examples of cashflow and budgeting here.

So, what can be causes of cashflow issues?

The number one issue we see is when a supplier has increased their prices significantly. This is when you need to decide if there is something you can scale back on or is it time to start shopping around. Talking to your suppliers if you notice increases, we’ve all been facing this over the past 18 months.

Track and monitor your costs, by carrying out management accounts, comparing this year with last year, you can see instantly what has changed for you and your business.

Late payments from customers can lead to cashflow issues too. This can sometimes cause tension as you do not want to ruin relations. The following tips can help tackle these issues;

·        Ensuring your invoices are accurate and on time can help avoid late payments.

·        Giving gentle reminders as it approaches credit term limits.

·        Providing easy payment solutions such as bank transfer or a direct debit system

·        Check your customers credit score, giving too much credit without looking into your customer bill paying activities can lead to bad debts.

·        Discounts for early payment to improve the timing of when the cash will be paid in can help too.

We all dislike to pay tax, but it is a part of life. Tax planning helps to keep your business financially healthy. We must ensure we have the funds to cover the tax payments. This is why it is crucial to work with your accountant so that you know well ahead of time how much your tax bill is. Not paying the tax bill in full and on time can add to the cost. Penalties and interest will incur and can make this less manageable.

There are allowances and reliefs out there to bring the tax bill down. Getting this done correctly will ensure that you pay the lowest but accurate amount over to HMRC.

Set up a savings account, and slowly build up the cash towards any tax bill, you don’t get surprises when its time to pay the bill then. Any surplus in that account, could pay for something you want.

Businesses that plan ahead, traditionally do better than those that don’t plan and work in the dark.

There are approximately 5.6 million businesses in the UK, of which 98% are considered small to medium sized businesses. So, we small businesses are crucial to the UK economy, there is no denying this.

Whether you are a start-up and excited for the times ahead, or an establishment renewing your challenges, we all want to be successful with our business. In our latest blog, we talk about tips we think are vital to any business.

We all have a vision in mind, of where we’d like to see our business in the future. This vision needs to be translated on paper as your business plan. A business plan is a must for all business owners. This can help outside investors get an insight of your business, for if ever you need funding to grow your business.

Business Plan

A business plan should consist of;

·    Summary – What is your purpose, what is your vision?

·    Target market – Who are you likely to sell to

·    Competitors – What is your rivals weakness? Why are you different?

·    Staff – Do you need people to help run your business. What level of skill and pay is required?

·    Suppliers – Who will be your main supplier?

·    Marketing Plan – How will you advertise yourself to the world

·    Operations – Which is the best way to run your business.

·    Finance – How much money do you need? Determine the profitability of the business.

Business Structure

As well as a business plan, you will need to have a business structure. Sole trader, partnerships and limited companies all have their own pros and cons. Deciding which structure to choose is not always straightforward. If an asset is owned outright, then you would need to consider retaining personal ownership on incorporation. If you’re not sure which structure model you should go for, then here at Cross Accounting we can give tailored advice to you.

Year End

We cannot stress enough the importance of doing your year end as early as possible. Once completed, this will give you peace of mind as you will not have to worry, until next year. It will also give you more time to budget for your tax bill. You will not be in a rush to find the money for the tax bill and not kill your cashflow. Keep all receipts for your expenses, these will all help lower the tax bill. If you buy equipment or tools, mobile phone bills, petrol, these are all deductible. HMRC can conduct random spot checks, so it’s important to keep paperwork, recommended for 6 years.

Budgeting

Having budgets in place for your business can help you predict the near future. This allows you to have a spending plan, so you can make sure you have money for the things you need and the things that are important to you. You can see what is eating up your cash and avoid spending on unnecessary fees. Below is an example of a very simple budget.

These tips will keep you motivated and more importantly give you an idea of where your finances lay, helping you to quickly identify if there are rainy days ahead.

If you need expert tailored advice, please do get in touch as we are always happy to help.

There is always new rates and thresholds that come in to place in the new financial year.

The National Minimum Wage rate has gone up, however, the personal threshold has stayed the same.

Personal Allowance

The personal allowance is the amount you can earn without having to pay any tax.

This financial year 2023-24 is £12,570

National Insurance Rates

As an employee, you will pay Class 1 NI rates. If you earn above the primary threshold, then you will play Class 1 NI. The primary threshold for 2023-24 are £242 a week, or, £1,048 a month, or, £12,570 a year.

You will pay an additional 2% if you are in the upper earning limit. The upper earning limit are £967 a week, or, £4,189 a month, or, £50,270 a year

As an employer, you will have to pay national insurance on your staff members. This includes if you are a sole director on payroll. The rate applies to earnings above the secondary threshold. The secondary threshold for 2023-24 are £175 a week, or, £758 a month, or, £9,100 a year.

Employment Allowance

Employment Allowance allows eligible employers to reduce their annual National Insurance liability by up to the annual allowance amount. For the year 2023-24 this is £5,000

National Minimum Wage

The National Minimum Wage is the minimum pay per hour all workers are entitled to by law. These rates apply from 1 April 2023

SSP Statutory Sick Pay

Employees are entitled to SSP if they are off work for 3+ days. The same weekly Statutory Sick Pay rate applies to all employees. However, the amount you must actually pay an employee for each day they’re off work due to illness (the daily rate) depends on the number of ‘qualifying days’ they work each week.

If you want to ensure you are not breaking the payroll rules with NMW and SSP, message us to see how we can help.

If you do not understand the personal allowance threshold give us a call on our Cardiff or Bridgend office where the team will be happy to help. 

A couple of weeks ago we highlighted main aspects of the previous chancellors mini-budget. A lot has happened in the house of parliament recently and the new chancellor, Jeremy Hunt reverses most of the mini-budget tax cuts.

Below you can find the updated version from Jeremy Hunts statement.

National Insurance

One of the few things that is staying, is the reversal of the National Insurance social care levy. From 6^th November 2022, the extra 1.25% will no longer be added to National Insurance contributions. This means a saving of £330 per year for nearly 28 million people.

Originally the extra 1.25% was introduced to fund the NHS, however, this will now be funded through general taxation.

Income Tax

The biggest reversal is in the rates of income tax. The ex-chancellor said that income tax will be down to 19% from April 2023, however, this will now not go ahead. It will remain at 20% for now.

The abolition of the 45% higher rate income tax has also been reversed. The 45% higher rate income tax band now means that the higher rate earners will pay income tax on earnings over £150,000

Corporation Tax

The reversal on corporation tax for companies means that the increase from 19% to 25% will go ahead after all. This will come into action from April 2023. Only businesses with profits of £250,000 or greater will be taxed at the full 25% rate - about 10% of companies in the UK.

Any companies with profits of £50,000 or lower, will pay at the 19% rate

Benefits

Rules around the benefit system will remain and unchanged. Benefits can be reduced if people don’t actively search for job commitments. Around 120,000 more people on universal credit to be encouraged to actively seek more work, the over 50’s to be given extra time to work with coaches to help them in the return to work.

What else has been cancelled?

Other measures that have been cancelled include:

·         VAT-free shopping for overseas visitors,

• A freeze on alcohol duty. Planned increases in the duty rates for beer, cider, wine and spirits will now go ahead
• Cuts to the tax paid on shareholders' dividends - the increase introduced in April will now stay in place

Energy

A typical household using both gas and electricity would pay no more than £2,500 annually for two years the government said. However, the energy price guarantee now only covers this winter. It will be in place until April next year. A review will look at what measures should be put in place after this date.

Stamp Duty

Stamp duty will remain in place. In England, no stamp duty is paid on first £250,000 and for first time buyers, this is increased to £425,000. To check out Wales’ stamp duty rates, please click here

These rules seem like they will stay in place now but, as always, we will keep you up to date with the latest