It is Friday.  I usually spend Fridays in the office to ‘provide support to staff’, which actually means I get recharged in their lovely company and get very little of the actual work done.  It is good for my soul, like a mini family reunion.  I travel to clients’ sites much of the week or work from home to keep focused, so seeing my team on Fridays is a welcome change.

It is less good for my diet.  Clare, our illustrious bookkeeper and payroll specialist – also a WeightWatchers queen – brought cream apple turnovers today. This is on the day when I was actually quite good and packed carrots and grapes alongside my sandwich (on granary).   I ask you!

It was Clare’s idea that I start this blog.  Now, I don’t know whether this is a good idea.  Having said that, none of Clare’s ideas so far were bad, so maybe I should listen to her.

It is really difficult for me to listen to Clare (or anyone else for that matter) because I am a professional adviser and I am supposed to know it all, right? (ha!)  Does asking other people and following their advice means we are not competent enough?  That we haven’t got the answer?

I’ve come to the conclusion that the idea of ‘competence’ or feeling that one must have answers to all the questions is fundamentally flawed.  What it creates is a closed mindset, where our only source of ideas is ourselves (and let’s face it, a shallow pool it is). 

I admire our clients who ask me to sit on their Boards and challenge their ideas.  Or clients who come to us admitting their finance is in a bit of a mess and asking us to help them.  If the discomfort I felt today at asking for help was anything to go by, I can only conclude it takes great strength of character to admit vulnerability and imperfection in a bid to grow oneself and one’s company, to learn and to improve.

Maybe I should listen to Clare more – she does have some cracking ideas.  Come to think of it, even the apple turnover wasn’t such a bad one after all.

Sometimes being a business owner means making tough decisions. This week, I had to say a couple of good-byes. 

No matter how we dress it up or how justified the cause, partings are always difficult. They signify a death of something. They can, and often do, resonate with our earlier experiences of loss. They are tough, both for the initiator and for the receiver of the news.

We often avoid good byes, because fundamentally we are nice people and we don’t want to upset anyone. It is one of the reasons conversations about performance never happen, issues are buried and skirted round, negative feelings are never acknowledged and dealt with. Instead, we get on with it and hope the issues would resolve themselves somehow. It takes courage to recognise that, despite all reasonable effort, things are no longer working and call it quits.

What happens then is a burst bubble effect – the break-up is unduly harsh and does not afford the opportunity for both parties to talk it through, show respect for one another and part gracefully.

In business, all associations are partnerships. Be it an employee, a business partner, a supplier, a customer, or a service provider – everyone offers themselves up as a human being, with their gifts, talents and humanity, in a ‘give-and-take’ relationship. Sometimes what is given does not equal what is taken, or what is given is not what the business requires, and the partnerships have to end. 

Not all break-ups are bad. Some are necessary and avoiding them harms both parties. If that is the case, prolonging the break-up can be an excruciating experience, like dying a slow death.  If there is a recognition that partners must travel different paths, a quick break-up is infinitely better than a slow fading-away. We owe it to each other not to prolong the agony and to allow the grieving process to take place.

In my business, I invest myself fully in the partnerships I form. I seek emotional connection and similarity of values. I think this is what gives my work meaning. Personally, I find it heart-breaking when partnerships end, because the struggle of split loyalties is palpable. Do I stay true to my values and my mission, and ultimately to myself, or do I compromise to keep a partnership going?

In the past, I have ignored my intuition, dithered and delayed the inevitable because it was too painful. I hid from it, even though I knew it was the right thing to do. Inevitably, this made the subsequent parting unnecessarily more difficult and hurt me and my business in the meantime.

So, if a ‘break up’ is something that is on the cards for you, my advice is – do it swiftly and gracefully. Allow yourself time to grieve and be sad. In 100% of cases, letting go means a start of something new, for both parties. What it doesn’t mean is a wasted journey – simply that from now on, each of you must travel their own path.

Like most business owners, I am often preoccupied with how I can create a better customer experience for my customers. With customers’ expectations increasing all the time, the bar against which our services are evaluated is higher than it has ever been. Today, I have experienced first hand what it is that takes customer services from ordinary into extraordinary.

I went to get a haircut. What do you expect when you go to get a haircut? You expect a good quality cut, a cup of tea and a feeling of being pampered. Long gone are the days when a good haircut alone was enough. My local hairdresser, aptly called the Hairclub, is a lovely little boutique where everyone knows your name and remembers what you told them last time you visited. If I’d been asked ahead of time, I couldn’t have thought of what else they could have done to make my experience better.

But today was that little bit different. When a cup of tea was made for me, I was asked if it was sweet enough. When an assistant took me to one side to wash my hair in preparation for the cut, she offered to make me another cup of tea in case the one she made for me not 5 minutes before was getting too cold. My next appointment was arranged while my haircut was being finished, saving me precious 5 minutes at the end of my visit. And, when I casually mentioned that I was walking home that day because my car was being serviced, the owner of the boutique offered to drive me home.

They were just a few little extra touches, not strictly necessary in the process of delivering a quality haircut. As a customer, however, I felt that there was nothing more important to the Hairclub than my needs, wants and unspoken wishes at that moment in time. Note – none of the touches were in response to my requests; they were all offered pro-actively.

While Michael Gerber is right in insisting that we codify the extra touches in our systems and our processes, the effect created today was only possible because of the people striving to do their best and the culture created by the owner. Needless to say, my customer loyalty increased about ten-fold today. If the owner decided to raise the haircut prices, I am quite sure I would be very happy to pay, making me a price-insensitive and a highly desirable customer. And which service business wouldn’t want all this for a few pro-active customer-focused little touches?

I am asked quite often whether a business expense is ‘ok’.  Let’s clarify…

If you are a sole trader (i.e. you are self-employed), the law does not distinguish your business from you personally.  There is no Board of Directors, no shareholders – only you.  As an individual, you can pay for whatever you like.  The significance of ‘allowable’ business expense is in the context of the tax computation.  Tax is levied on business profits, and in calculating profits, only certain expenses are allowable – the others are, in effect, ‘owner’s drawings’.

Your accountant will be eternally grateful if you are able to keep your ‘allowable’ business expenses in your business books, and non-allowable in your personal accounts – although I admit this is not always possible.  To help you decide which is an ‘allowable’ business expenses, HMRC have helpfully produced a list, with some examples!

List reproduced from http://www.hmrc.gov.uk/factsheets/expenses-allowances.pdf

Further guidance is available at http://www.hmrc.gov.uk/incometax/relief-self-emp.htm

Everyone has a slightly different approach to business planning and there have been lots of credible articles written on the subject.  Over the last few weeks, I have been working on my own business growth plan and I’ve found that 10- or 14-step instructions are far too long for a document that needs to be short, snappy and to the point.  I am used to seeing business plans that run to 50-60 pages long, which is a sure sign that they will never be read, let alone actually used to grow the business.  Also, an important point for me (and no doubt any investors looking at your plan) is that a business growth plan ties in your delivery plan with the all-important figures.

I will follow the ‘Rule of 3’ (see an interesting article about this here – but after you’ve read this blog!) and offer a roadmap to build a business growth plan in 3 steps.

Step 1 – Where will the growth come from?

OK, so you want to grow – where will your growth come from?  There are a series of questions to answer here.  Will you develop a new product or service in addition to what you are selling now?  Will you offer this product to your existing customers or will you go for the new markets?  A well-known Ansoff’s matrix is a handy tool to think through your generic growth strategy:

If you are a landscape architecture company, do you intend to get the local market to re-design their gardens (market penetration), to offer garden maintenance service or design of roof gardens (product development), to offer your landscaping services to new geographic areas (market development), or are you considering branching out to running a garden centre (diversification)?

If you are developing a new product or service, is there a current market gap for it?  What does the competition look like?  Are you entering a crowded marketplace?

Once you’ve decided on where your growth will come from, do you wish to grow organically or will you accelerate growth via partnerships / acquisitions?  For example, a professional services firm may grow its client base through introducing a referral scheme, by partnering with providers of complementary services (e.g. accountants or independent financial advisors) or by buying an existing practice and its customer base.

If you’ve thought about growing your business, you will have thoughts of all these questions and will probably have the answers ready.

To complete this step, you need to quantify your growth ambitions.  Will you grow by 20% a year, or by 100% a year?  What is your end goal? Be realistic.  Organic growth is always slower than growth by acquisition.  Create a timeline, showing when your new sales will come in (don’t aggregate with the existing sales).  In project management terminology, the new sales are a benefit you are trying to achieve.  Here is a simplistic example:

Step 2 – What do you need to do?

With a clear goal in mind, begin thinking about what you need to do in order to achieve it.  Start from the end goal and break it down:

• Do you need to develop a new product or service?  How long will you need?  What resources will you need?
• How will you reach your market?  Advertising?  Which channels?  What about social media?  Referrals?
• Capital – what will you need?  Will you need new people? How many?  What about new premises?  Equipment?

Once you are confident that you have a good grip on what you need to do or get, quantify the responses (how much will it cost?) and plot them on a timeline.  Your timeline is likely to be a lot busier and more complex than a simple sales timeline.   This timeline will become the backbone of your delivery plan and the figures you identified will become the costs of implementation.  By doing this first (in some detail), you will ensure that any cost implications are linked to the delivery plan and form a correct cash flow picture.

Step 3 – Do the financials

This is the step which many people start with, but to me the financial plan comes second after the delivery plan.  Granted, the delivery plan may need to be amended if you discover you are running out of cash!

In step 3, build a cash flow forecast using the timelines you have created in the first two steps.  The resultant picture will help you with two things:

1. Evaluate the financial merit of your idea.  How quickly will the investment be paid back?  Do you have a positive net present value?  Ultimately – is it worth it financially?
2. Understand the degree and timing of the cash you will need (see my earlier blog on Financing Your Business Growth).  Here you will need to think about how you finance your cash needs: working capital?  Equity? Debt?  If you need to raise finance, be sure to add this to your timeline of ‘things you need to do’.

If you struggle with this bit, get a good accountant to help you.

By this point you should have a pretty good idea of what you want to achieve, what you need to do to get there and whether it’s worthwhile.  Good luck!

Your relationship with an accountant is likely to be a long-term commitment, so you need to choose carefully. What are you looking for from this relationship?

If you run a steady-state lifestyle business, are not looking at any major changes, feel you’ve got a good handle on things – then a high-street accountant who does your taxes and  year-end accounts is probably all you’ll ever need.  You need to be sure that your accountant is competent (i.e. member of one of the professional accountancy bodies and relevant experience) and provides a basic level of customer service (returns your phone calls, keeps promises, takes reasonable time to do the job).  Other than that, you are likely to be interested in price above anything else.

If you are looking to grow, however, then your demands for a relationship with an accountant should be much higher.   Your accountant needs to be able and willing to:

1)      Help you grow – this means going beyond compiling the figures.  She should be able to tell you a credible story about what the figures are saying and identify areas where business changes should be made to improve profitability.  Should your working capital be improved?  How?  Should you re-consider your service or product mix and focus on the areas with the highest margin?  Which one of your customers should you nurture, and which should you leave behind?   Your accountant should help you find answers to all these questions, and many more.

2)      Care about your business – your accountant is unlikely be a specialist in your business, but you should expect your accountant to try and understand your business and care about it.  If he doesn’t care about your business and you as a business partner, question whether you are in the right relationship.  

3)      Challenge you – if your accountant truly cares about your business growth, you should expect her to challenge you (constructively, of course).  You should expect your accountant to look for, find and act on any anomalies, early warning signs and potential opportunities – pro-actively.  If your idea is unlikely to help the business grow, you should expect your accountant to tell you so.  You don’t want a wet rag who agrees with you and just counts the beans, do you?

4)      Practice what he preaches – if he advises you to look for customer feedback, does he ask for yours?  Does he understand and respond to your needs?  Your accountant should speak out of experience when it comes to business growth.  Your relationship with an accountant should be a two-way street, with challenge both given and graciously received.

5)      Earn your trust – your finances are close to your heart and a topic you would not discuss with just anyone.  You should meet and like your accountant and feel that you can trust her.  If you feel no spark, look for someone else – the relationship will only blossom if there is a genuine connection.

Recommendations of those you trust are a good starting point – however, what works for one person may not work for you, as you will have your own style and may have different needs.  If you are growing, you may want to consider a management accountant (look at Your Management Accountant site or check out the Chartered Institute of Management Accountants to find one in your area), who will provide a combination of accountancy expertise and commercial skills.  Meet with at least three different ones (unless you find love at first sight) and ask questions.  Trust your gut feel and go for it!