We recently picked the brains of one our Directors, Peter Hill, on the sort of conversations he is having with businesses right now.

Grab a coffee and take 5 minutes to read Peter’s answers to the key questions being asked right now by business owners.

Question 1: There have already been some business failures, particularly in retail and leisure with many other businesses feeling a little financially exposed right now. What would you advise businesses to do to minimise the risks as they move forward?

“Many business run a single entity that does everything. Employs people, buys stock, makes things, chases debts, borrows money, owns assets etc. If a catastrophe strikes and all your financial eggs are in one basket, you could lose decades of hard work. Covid is an extreme example, but I have seen many businesses go bust over a single large bad debt, a legal dispute, or an employee tribunal that doesn’t go their way.

All businesses should consider a two company structure as a minimum. A holding company to sit on top and own assets, brands, intellectual property, cash or anything else of value, and a trading business underneath to run the day to day activities. A catastrophe here could at least see the value in the holding company protected from creditors of the trading business.

*Complex rules apply so take advice!

If you agree two companies is sensible, then consider whether multiple businesses may be worthwhile to split different activities such as online Vs off line sales, or core trade Vs niche premium services.”

Question 2: The pandemic has seen many business owners consider the merits of just cashing in their chips. What sort of options for exit should business owners be thinking about? What are your warnings they need to consider?

“Certainly we have had more conversations with clients about exit options in the last year than the previous 5. There are many and very varied exit options and all come with very different pros/cons and costs. What is perhaps interesting now is that there is plenty of money in the system. Investors and Venture capitalists are desperate to find good businesses to buy or invest in, and money is cheap to borrow for management teams or other buyers.

Most clients I speak with see the options as… Sell the lot and retire, or keep going until they keel over. There are many many options for phased exits with levels of decreasing involvement. It isn’t an all or nothing choice.

The key point is to explore all your options and develop a plan now, even if you think an exit is years away. If your accountant isn’t up to this task, talk to us. We can work just on this issue and leave the routine work with your existing accountant if you want. One final word of warning. If you are thinking “I’ll just do another few years to build the value a bit bigger” you may find any increase wiped out by a much more aggressive tax regime. CGT rates on business sales are usually 10% or 20% and this will only get worse as the government seeks to pay the Covid bill (Note: There is an option that is tax free but with strings! – ask us).

So think and plan for your exit now.”

Question 3: The Government has thrown a lot of money at businesses to help keep them going. As well as future tax rises, are there any other issues businesses should be concerned about?

“Let’s just get right to the point here. If you claimed furlough payments but asked people to still work, or massaged the numbers so it was based on a higher than accurate income level, that may well be fraud. If you borrowed a Bounce Back Loan or a CBILS loan, but were a bit ‘creative’ with the information or have used the money to buy a flash car, clear personal debts or a deposit on a buy to let property, then that may also be fraud.

If you did your best with rapidly changing rules in a really challenging business environment, but have made a few mistakes, then that is understandable.

If you are in the first categories, then rest assured HMRC will come looking at some point. They are already looking at over 27,000 dubious furlough claims and had over 8,000 tip offs of employers breaking the rules.

One business we know claimed a BBL via the online portal for a dormant company, which is against the rules. The Bank uncovered this and froze all his bank accounts for up to 10 weeks whilst they investigate. Game over on his core business.

So if you pushed the boundaries a bit, take a good look and decide whether to sort it now, or keep your fingers crossed. Best case is a demand for immediate repayment of any money that you shouldn’t have had. Worst case may be much more serious as HMRC may well make examples of some to flush out others.”

Question 4: Based on your overall experience from previous recessions and recovery, and your conversations with businesses, where should any business be focusing their attention?

“I am going to keep this answer simple, so that there really is a clear focus. There are two areas most of my clients will need to do something about.

Sales. Even before the pandemic my experience was that sales functions lacked discipline and control and relied upon the ‘personality’ of order takers (they don’t really sell at all). They have not adapted to the new world of virtual selling and office or home based client management. They are waiting for the return to motorway miles, door knocking and expense accounts, that I am not sure will return at all or certainly soon.

Businesses need to fundamentally change the way they communicate with and serve customers and that includes the whole sales process.

People. Many clients have seen the pandemic highlight issues they sort of knew were there but had no enthusiasm to address. Over paid and underperforming employees. Hard to manage negative people that influenced others. If this sounds familiar, have a clear out. Be tough. Most clients I talk to did more with less people in the last year, and that is because some of them are holding you back rather than pushing you forward.

Next, decide on the people you need now or will in the future, and go hunting immediately. There will be a war for talent in the next few years, and those slow to the
party will lose out. Be bold and be decisive. A great team will do more to improve your chances of success than most other things you can do.”

 

 

If any of these issues resonate and you want to find out more, get in touch today.
Call 01752 220979.