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Key to success in today’s competitive market

What’s the key to success in today’s competitive market?

In the majority of businesses in the UK today, the biggest figure on the cost section of any Profit and Loss Statement is almost always; wages and salaries. The challenge facing most business leaders is to make sure that this cost on the Profit and Loss is actually an investment and not just a cost.

One of the major reasons for keeping this a cost in many businesses is when you have the wrong people in your business. Having the wrong people can create a number of challenges which directly effect efficiency, customer service and profitability in the business.

To start with, let’s have a look at the different kinds of people you can end up with in your business and the possible effect they could have on your business.

The first group you just don’t want or need in your business are those that can turn almost every positive into a negative. They love to go around sharing their feelings of doom and tell people millions of reasons why things cannot be done or achieved. They suck every aspect of enthusiasm and energy from the business and can have a major effect on a business or department. As a leader, I am sure you have met these people and just imagine trying to inspire them to help you achieve goals or results.

Then we have those who have the answer to every question, well that is until you ask them to go and implement the answer. They are always free with their advice and can’t wait to tell everyone about how fantastic and clever they are, however, they never ever seem to get going and actually do or achieve anything. These people have a habit of frustrating any team they are members of and reducing the capability of the team to reach its targets. How would you go about driving change or new ideas into your business with one or more of these wonderful people around?

The next candidates we can experience in our business life are those who make sure you know they are around and will appear to support you and tell you how wonderful things are to your face, but the minute you leave the office; they get their knives out and start the stabbing. They have great ability to split teams, drag others away from focussing on the goals and slow every process down as they are masters of misinformation. Often they are admired and respected by other members of the team as they believe that they have the boss’s ear and that they have great powers of influence over any decisions. With their powers of dividing the team, often energy, focus and direction are lost in the teams or businesses they are members of. As a leader with these types of people in your business or group, how will you inspire the team to a continuous level of increasing success and results?

The last group of people we really need to watch out for in our business or departments are those high flyers who appear to achieve great results but who break every rule and rarely follow company systems or processes. They are happy to step on colleagues as well as clients to make sure they fuel their own egos and get the results they are looking for. They are not team players and will often break teams down as all they are looking for is their own results. They do everything their way and as such; the overall result of the team or business is often of very little importance to them. As the leader of a group with these types of people in them, you could have an enormous task trying to pull the team together and inspire them to new levels of success and achievement. It is vital that you recognise this type of people, as once they are in a business it is often difficult for business owners or leaders to get rid of them as they are fearful of losing what they think are highly skilled and effective people. Almost every business I have worked with which had one of this type of people in it, the owner knew in their heart what was going on but were just too scared to lose the person that they turned a blind eye to the effects they were having on the team and the business as a whole.

Now that we have highlighted a number of different types of people which we don’t want in our business, what types of people do we want in the business to make sure we can run a business which is happy and consistently achieves the results we are looking for?

We need to build a business made up of people who not only have the skills we require in the business, but who also engage with the goals and vision of the business, but what is more, people who understand and can live with the culture of the business.

So how do we go about dealing with any of those types of people who we do not want in our business, but are sadly already in the business?

The most important strategy to implement with all people in your business is to have relevant measurements for each position and person in the business. These are often called KPI’s, Key Performance Indicators. There are two common errors that many business owners and leaders make with their people!

One is that they often do not measure all the people in their business. It is vital that all people are measured in the business so that if any reviews or appraisals are to be carried out, the owners or leader can deal with real facts of the performance of the person and not just subjective feelings. It is also a great deal easier to follow disciplinary processes when hard facts are in place.

The second error is that when they do measure a person or a role, they often measure what they do and not what the role is expected to achieve. It is important that all roles are measured against the results that the role must achieve and not just on activity.

To take your business to the next level of success and growth in today’s very competitive market place, the performance and quality of your people in the business are most often the reason that makes your business stand out from your competitors.

What are you doing today to make sure your business has the right people in the right roles to ensure the growth and sustainability of your business?

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Does your recruitment process include the right filters?

The key to sustained growth and success in the modern business era, is having not only the right people in your business, but inspiring them to deliver results and improving success while enjoying what they do.  The most common statement I hear from business owners and leaders is the challenge they have to interview and recruit the right people for their business. Understanding how to recruit effectively is now one of the key skills for any business. What I am looking to do in this article is provide some key points that will help all people involved in recruitment gain a deeper understanding of how to develop a better recruitment process.

The majority of recruitment processes I have seen, focus almost entirely on determining whether the candidate has the right skills to do the job and whether they have had experience in the required field, whilst very little, if any time or effort is placed on finding out if the person being interviewed will actually fit into the business or department.

A business owner I worked with for some years summed up recruitment in probably one of the best ways I have heard. He said that before gaining an understanding of what needed to be done in a recruitment process, he had spent most of his time in an interview trying to sell his business to the candidate, now he goes into every interview with a completely different mindset, he sits there thinking, “Why should I give you a job, how are you going to help me achieve the goals of my business?”

We need to recruit people who not only have the skills we require in the business, but who also engage with the goals and vision of the business, but what is more, people who understand and can live with the culture of the business.

So how do we determine this and then include it into our recruitment process so that it filters out all the types of people we don’t want in our business and lets through those who are going to help our business move forward with increasing results and success?

Let’s look at the key elements of a well designed recruitment process.

Firstly, we need a well thought out and documented job role. It is vital that when we create a new role in any business, we start with what we want this role to produce, namely the output of the role. It is amazing how many job roles we regularly come across where the role is made up of bits and pieces of many roles, which causes communication breakdown and confusion within the business.

The majority of job roles we see consist mainly of the actions and things the person needs to do, with very little emphasis on the outcomes each area of the role need to deliver.

Other important aspects that a job role should include are who the role reports to and how the role will be measured.

Secondly, a very important component to have in place to improve your recruitment process and build the right filters is the vision or goal of the company. With this in place, you will be able to question any candidates very deeply to see if they connect emotionally to the vision of the business and whether they will able and interested in helping build the kind of successful business you are looking for. This will help filter out all the kinds of people that are just looking for a job and are not really interested in helping you build and achieve the goals you are looking for. The key to making this part of the recruitment process successful is by asking in depth and open ended questions.

Thirdly, we need to have some culture or value statements for the business. What I mean by this, is the core things that the company stands for. As an example, a business I know had three key core aspects in their business; Excellence, Elegance and Exceptional care and in the beginning of the interview, the owner would ask any candidate what they understood by these points and to give some examples on how they had in their past delivered on these points.

Fourthly, we need a well documented and written process which includes all of the above points to make sure that whoever is involved in the recruitment process does it consistently in the same way. Once the process has been documented, the creator must train all other people on this process and make sure that they truly understand why each step is in the process and why it is important that they follow the process.

Lastly, we must focus on the key skills and experience required for the role. To evaluate these can involve practical testing and evaluation, however so many business owners are reluctant to include these tests because of the time they take up. Just ask yourself this, would it be more beneficial to take an extra hour or so during the interview and increase the chance of getting your selection correct, or rush the interview and have to live with the wrong person in your business for months or years?

Recruitment is probably one of the most difficult but most important processes for any business owner to get right as the success a happiness of any business is built around the people within the business.

Having the right people in the right positions in your business can mean the difference between long term profitable growth and struggling to keep the business moving forward. We all know what impact a person with the wrong attitude or mindset can have not only on their own job, but on the happiness and productivity of those around them.

When last did you review your recruitment process?

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Is Your Marketing a Cost or an Investment?

We know that to grow our business we need to market effectively to generate new customers, however, as soon as business slows, one of the first things to go is the marketing budget! Why is that?

One of the main reasons for the marketing budget being cut as soon as money becomes a little tighter is because very few business owners actually understand whether their marketing is working for them or not.  Unfortunately, some professionals, such as accountants and bank managers will often tell business owners that their marketing is an expense and when cash flow becomes tight, they recommend that expenses are cut.

What if we could really understand our marketing strategies and be able to measure them in such a way that we knew with certainty which strategies were generating excellent leads that are in turn generating profitable sales. When our marketing budget generates profitable sales regularly, then our marketing budget stops being an expense and becomes an investment.

So where do we start to convert our marketing budget from an expense into an investment?

The place to start is with an effective marketing plan that is built on sound market research and involves a clear understanding of who our ideal clients are for each market. For more information on how to do this, please read my articles on, “Marketing, the forgotten piece” and “Outside In marketing.” Once we have this plan in place, we must also include a process for measuring each strategy that we use so that we are able to quickly measure if the strategy is working or not.

Measuring market strategies always seems to be a big challenge for the business owners I meet as they all seem to believe that measuring their marketing is very difficult, if not impossible. In all the years I have been teaching marketing principles, I have yet to find a strategy that cannot be measured. One of the keys to being able to effectively measure marketing strategies, is to make sure that all members of your team are involved with the marketing plan and that they fully understand why each of the processes are important. In the majority of businesses we come across, any marketing strategy seems to often be a spur of the moment decision by the boss and very few other members of the team seem to even be aware of the strategy, so any measurement process becomes hit and miss which feeds the belief that measuring marketing is very difficult. When the team are involved with the marketing plan and each of the strategies in the plan, it is considerably easier for them to understand why it is necessary for them to ask new prospects how they heard about the company and to record the results. One of the reasons why measuring new leads is very difficult for many businesses is the fact that very few even have an enquiry form for team members to complete, most of them just use a book or any scrap of paper lying around. When building a marketing plan for your business, it is vital that you have an enquiry form that has all your various marketing strategies on it to remind team members to ask the question and to record the answer.

Once we have the front end measuring process in place, we can then design how we trace enquiries through the business so that we allocate and measure sales against each of the strategies we employ. At first reading, this may seem very difficult to do in your business, but I have found that in the majority of cases a simple solution can be found by just making a few easy changes to the current process you are using.

Some of you reading this may be wondering if it is really worthwhile making all these changes to your current sales process just to measure the various marketing strategies you have in place. To answer this question, just stop and think about how much money you have invested in the many marketing strategies you have put in place over the years and then ask yourself how many of these strategies could you hand on heart say really generated profit for your business? So many business owners have invested thousands on a strategy without knowing if this strategy was generating any business for them or not. On the other hand, I worked with a business owner who cancelled an advert they had been running because they thought it had become old and stale. Within two months their sales had started dropping off at an alarming rate, so we put the advert back with a measuring process in place and sales started streaming in again, measurement showed that this advert costing just £200 per month was generating 19 sales per month with an average margin of £60 per order, a return of £1140 of profit against an investment of £200.

Once you are measuring your marketing strategies you are in a powerful position of being able to use your marketing investment wisely. At a glance you can tell which strategies are working and which need to be changed or withdrawn. At this point your marketing budget has moved from being a cost into being an investment as you can measure the returns. While you are running marketing strategies without knowing whether they are working or not, you are just throwing your hard earned profit at opportunities without measuring the return, the same profit that you have had to work really hard to earn.

But just think of this, if all your marketing strategies are working well and generating profitable sales, what is your marketing budget? Every time you invest £500 into your marketing it is making considerably more than this in gross profit off all of those sales you are generating. At this point, your marketing budget becomes self funding as whatever you invest generates considerable return for you.

Marketing your business successfully is one of the key points in any business to master if you are looking to take it to another level of success, but it is absolutely vital that you understand and measure your marketing activities so that they do not become a huge expense on your profit and loss account.

Build your understanding on how to market successfully, measure every marketing activity you engage in, keep the ones that generate profit, change or get rid of those that don’t and soon your marketing budget will become an investment that helps your business grow profitably.

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How Much Value Does Your Sales Process Add?

The key strategy to grow any business has to be how effective it is at converting leads to profitable orders, or in other words, sales.

There are a wide range of beliefs held around sales people, from, “it’s what you do if you can’t get a proper job” to the pride and joy in being able to communicate with people and virtually write your own salary cheque. The most amazing thing I have seen is how little time and effort is invested in thinking about the sales process the business follows, how little time is spent training and developing the sales people on this process and why it is important.

Many business owners and sales directors still believe that to be successful at sales, you need people who have a good technical understanding of the product or service and who have the ‘gift of the gab’. They then spend most of their time managing their sales force around getting more and more activity completed, but very little time working on a sales process that adds value to both the prospects and the business itself.

So what do I really mean by a sales process? Many of you are going to immediately think about a heavily structured and scripted document that allows the sales people no scope for their own personality to shine and techniques to be used. Others may think immediately of the numerous telesales companies that call us many times a day with their very rigid scripts which allow for very little interaction. In both of examples, the only focus seems to be on getting a specific sale. Very little time and effort is placed on building a long term relationship and actually helping the prospect find a good solution to the problem or need that they may have. Sadly, many of the sales strategies being used today tend to create more of a negative feeling with people rather than a positive one.

With some of the more negative aspects of various sales processes out of the way, let me explain why I believe that having an effective sales process is so important.

I am a very strong believer that in business, the starting point for any strategy starts with the outcome you are looking for. A sales process must create a positive emotional experience for every customer or prospect that goes through it. 5 key areas a sales process must focus on are;

1. Filter out the prospects the business does not want as clients and focus time and effort only on the ideal prospects.
2. Deliver profitable sales by solving prospects and clients problems and needs.
3. Build long term relationships that keep customers coming back time after time.
4. Create customers of the business, not the salesperson.
5. Be simple and effective for both the prospects and the salespeople.

I am sure that many of you may be really interested with the wording of the first point, to filter out the prospects that the business does not want to sell to. Many people I have helped with their sales process have been alarmed that any sales process should want to get rid of any prospects, but just think to yourself, how much time have you or your salespeople invested into prospects where nothing has happened time and time again with the same people or company? Where would the sales performance be if we could find a way to focus on the real profitable prospects?

How well is your process and sales people focussed on solving problems rather than just selling as many products or services as quickly as possible? If it is just focussed on getting products and services out of the door, how does this make you appear different to your competitors? If you want to do a quick and rough check on how much value your sales process and people are adding, work out what percentage of all the enquiries your business handles involve a request for a lower price! If you have a fairly high percentage of requests for lower pricing, how much value are you adding to your prospects? Focus on adding more value in the sales process and just see how that margin creeps up.

One of the higher costs in any business is the client acquisition cost. This is not just measured in purely money terms, but also time. After a business has spent all this time and money on getting a prospect to a customer, it would be such a waste it if that customer only purchased once from that business. This is why it is vital that your sales process is designed to wow the customer the first time, but has a well designed follow up process that keeps consistent but acceptable levels of communication with the customer. This follow up process is probably the one area that the majority of businesses I come into contact with, fail on.

Probably the most challenging part of any sales process is the strategy that is needed to be developed to make sure that all customers become clients of the business, rather than just a client of a person in the business. How many businesses live in fear that if one of their sales people leaves, a bunch of customers will follow them to their new employer? Design this into your sales process from the start and you will lose considerably less customers if one of your salespeople leave. What is more, you will add value to your sales process as the customers will receive excellent service from whoever they deal with in your business.

Lastly, but very importantly, this sales process must be effective but simple to use so that communication between various departments within the business is easy to understand so that new employees can be quickly trained. It has also been proven, that simple processes always work better as people understand them quicker and they are easier to use.

If reading this article has challenged you to think about your sales process and wonder how much value it is adding to both your business and your prospects, or if you just want to grow your sales without employing loads more people. Go through the sales process your sales people are following and then ask yourself at each step if it is addressing the points I have listed above.

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Marketing.. The Forgotten Piece

I am surprised by the way the majority of businesses I come into contact with approach their marketing strategy.  I met with a business owner last week who wanted to discuss their latest marketing ideas with me so that I could help them develop a brand new marketing plan.

I started by asking them the question “So where are you going to start?” They looked at me with a great big smile and said, “Just to show you that I listened to you last time we met, I have already identified my target markets, so that is where I am going to start.”

This is an excellent place to start with any marketing plan, but it was the next few steps that I was most interested in, as it is in these next steps that the majority of businesses make the biggest mistake, or should I rather say, their biggest omission.

When building a marketing plan or strategy, we need to know who and where we are going to target, but the next bit is the crucial bit- what are we going to tell them and why? When I asked the business owner this question, they started telling me about their latest new product range and all the accreditations it had. They also could tell me why it was so important to each of the target markets they had selected. That was when I hit them with the killer question, “What is your information based on, fact or opinion?”

The business owner looked at me with a puzzled look and then said with a great deal of indignation, “Well fact, obviously.” My next question made even more indignation to appear on their face, “Excellent, but where exactly did this fact come from?” They then proceeded to tell me how they got all the salespeople, product developers and management team together to discuss the answers. Now this is probably the way the majority of companies approach their marketing strategy and planning, however, this process has one major drawback, none of the people involved in developing the marketing material will actually ever use the marketing to purchase the product or service and probably none of them have ever bought the product or service. This is a term I refer to as “Inside Out” marketing and is one of the main reasons why the majority of marketing carried out by businesses is generally ineffective.

I shared these reasons with the business owner and then watched their face drop as I said, “Well then, I guess you have based your strategy on opinion then, not fact.” I then explained to them that they had left out the same major step the majority of businesses leave out, true market research. In order to market to new ideal prospects, we must truly understand why our current customers purchase our product or service, not what we think are the reasons from inside the business, but really getting to grips with why they choose our product or service over a competitor’s product or service.

I then explained how many years of research had confirmed that 80% of any purchasing decision is based on emotion and only 20% is based on logic and that this was true for marketing material and messages as well. The market research they needed to conduct had to dig deep into the emotional reasons the clients use in making the decision to keep dealing with this company, from this we could create really effective marketing messages which would attract many more customers just like the ideal clients we had conducted the research with.

The business owner then explained to me that they regularly ask their customers to feedback on their service and product quality via a questionnaire, so they knew what their customers felt about them as a business. They were actually conducting a marketing survey on how well their systems and processes dealt with the customers. This is extremely important but did not give the vital emotional information needed for marketing.

Conducting effective market research is not as easy as it may first sound, how the questions are presented to the key customers is absolutely vital and the questions themselves are just as important. If either of these steps are not thought through carefully and approached in the right way, then all you will collect is a great deal of meaningless answers which will offer no help to your marketing strategy and material.

When starting the market research with your strategically selected customers, it is vital that the research is positioned as beneficial to them; they must see benefits in giving the feedback you are looking for. Once you have the positioning statement finished, it is vital that you create questions that are thought provoking and that unlock the emotional aspects of why the customer purchases from you and what your service or product means to them and their business.  It is also very important that the person asking the questions listens intently to the answers. Especially for the emotive words, and then asks deeper questions around them. Many excellently structured market research questionnaires have lost the majority of their impact by people just rushing through the questions and not unlocking the true emotions.

Once we have asked a good selection of customers these questions, it is vital that we sit and compare the answers and look for common trends and comments, many times the answers can be totally unexpected. As an example of unexpected answers, I remember a client conducting market research on a number of his clients to find out why they chose his graphic design company over others in the market place. The most common answer he received by the majority of the customers, was that he really listened to what they told him. He proudly fed this back to me that he listens really well and that he was going to use this in all his marketing communications from now on. I asked him just one question; “What benefit do they get from you listening really well?” He had no idea, so he had to go and ask them again. The answer was very interesting, they all told him that he asked loads of questions about what they were looking to achieve, what they liked, didn’t like, who their target audience was and so on,  and then designing the material for them from this. They said that the other graphic designers just asked a few questions and then came up with designs that reflected more what they liked rather than the customer. This client has grown his business substantially based on this marketing message.

So if you are looking to grow your business by attracting profitable ideal clients, are you leaving proper market research out of your marketing strategy and communication? Proper market research takes up some time, it will give you a considerable improvement in return on the money you invest into your marketing.

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Selling A Business- Valuation

Business Valuation

Having spent time getting the business ready for sale the business owner will wish to extract as much value from the business as possible. There are many ways of valuing a business with some valuations based on a multiple of recurring income or possibly on gross profit generation but most use a calculation based on recurring net profits. Often a calculation is made of the recurring net profits of the business say over a three year period and a multiple is placed to this average of say between three and ten times the average profit depending on a number of factors such as:-

  1.  The position of the vendor in its chosen marketplace.
  2. The type of business being conducted with some industries achieving a higher multiple than others.
  3. What is happening in that particular marketplace i.e. is there consolidation or a particular appetite for acquisitions in the chosen marketplace.
  4. What is happening in the current economic climate.
  5. The appetite of the purchaser to buy that particular business.  It is possible the purchaser might be trying to grow his own business fairly quickly or expand in a different marketplace and may be inclined to pay a premium to achieve his aim.

The resultant figure using the average profitability and the multiple is termed as the goodwill of the business and the business usually adds the value of shareholders funds in relation to the balance sheet and adjusted for any changes in the value of assets shown in that balance sheet and for any hidden liabilities that do not appear in the balance sheet such as contingent liabilities and potential staff redundancies etc.

Depending on the parties the definition of net profit that is used in the valuation may vary but usually it is net profit before corporation tax and after adding back any excessive management remuneration (this is the amount being paid to the existing owner over and above what was agreed will be paid to a similar management team in the open marketplace) as well as any one off or abnormal item that appears either as income or a cost in a two year average under review.  Some valuation models also add back interest paid and depreciation which would give a higher average net profit that may affect the multiple being applied to the valuation.

It is evident however that whatever basis of valuation is used based on net profit, the higher and more consistent the profits are before sale the better the value.

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Selling A Business

My business is my pension” has been repeated time and time again by Business Owners over the years!

However, very few business owners build a business that is capable of being sold and even fewer achieve a sensible and rewarding price in the marketplace. There are many reasons for this and what is clear is that a business will have little value unless the business owner specifically builds a model that will be capable of a reasonable valuation and a business that would be attractive to other potential purchasers. There is another old adage which says “a business owner spends more time getting his car ready for sale than his business” and potential purchasers of businesses identify this time and time again as a very good reason why they lose interest in businesses or offer unacceptable purchase proposals.

It’s interesting that over 75% of businesses advertised for sale never go through to completion.

Some of the more common reasons as to why a business may not be saleable are as follows:-

  1. Unrealistic valuation by the vendor.
  2. Lack of profitability.
  3. Lack of a cohesive team within the business.
  4. Lack of reliable financial information.
  5. Evidence of a “lifestyle business” where family members and friends are employed or involved in the business who may prove to be difficult for the purchaser to remove.
  6. Absence of a unique selling point.
  7. Insufficient customer loyalty.
  8. Outdated pricing policies.
  9. Lack of taxation strategy which may result in the purchaser potentially being responsible for future taxation liabilities.
  10. Unattractive arrangements relating to business premises such as onerous leases and property commitments.
  11. Insufficient investment in modern fixed assets and information technology meaning that any purchaser would have to embark on a significant investment program to obtain the best out of the business being acquired.
  12. Onerous supplier contracts or outdated supplier and customer terms and conditions.
  13. Lack of liability on the value of major assets particularly stock and work in progress.

The list above although by no means exhaustive clearly shows there are major pitfalls for a business owner who does not plan to build a business that can be passed on to a purchaser as quickly and cleanly as possible whereby extracting the maximum value. The business owner therefore needs to “clean” the business and one of the advantages is that there is greater likelihood of more of the sales consideration being paid up front with less “deferred consideration” or “earn out” than a business that has not attended to all the relevant constituent parts that can affect the valuation.  A business valuation can also be enhanced if a business can be disposed of which operates completely independent from the business owner.  Many business owners attempting to dispose of their business are effectively trying to get the purchaser to buy the owners job and anticipate them paying the previous owner an income for several years.

How can a business owner enhance the value for the potential sale of the business?  Some of the most important matters to do that are as follows:-

  1. Take at least two to three years to get the business ready for sale.
  2. Demonstrate a reasonable position in the chosen marketplace.
  3. Demonstrate that reasonable gross profits can be generated in line with or exceeding industry averages.
  4. Demonstrate that business overheads are under control and in line with the bench mark in the relevant marketplace.
  5. Ensure that there is a consistent and if possible increasing profit record of at least three years before the intended sale.  Profit is generally accepted to be earnings before interest, corporation taxes, depreciation and any abnormal items.
  6. Ensure that all fixed assets are properly owned by the business, in use and properly valued.
  7. Ensure that all current assets, stock and work in progress, debtors and other amounts owed to the business are valued accurately or are collectable.
  8. Ensure that all current liabilities are fully disclosed in the accounts and that any potential liabilities, such as taxation and legal matters, are disclosed at an early stage.
  9. Ensure that all commitments to the crown such as Pay as You Earn, Value Added Tax and Corporation tax are correctly calculated and up to date.
  10. Ensure that there are no onerous restrictions relating to long term liabilities such as business loans, commercial leases, hire purchase contracts or equipment leasing etc.
  11. Ensure that terms and conditions with customers are reviewed and brought up to date.
  12. Ensure that all supplier contracts are reviewed and brought up to date.
  13. Ensure that all contracts of service for employees including directors are up to date with current employment law and fully adhered to.  Taking over existing employees often causes the purchaser great difficulty or can seriously affect the business valuation.

What is clear is that if a business is going to attract maximum value it needs to be presented to a potential purchaser with all matters as clean as possible and with the minimum of liability passing to the potential new owner. The potential purchaser will assess the transaction as relatively low risk and provided that he can see that there is potential in the market place and a reasonable profit stream he will then be happy to pay a price at a higher end of expectations.  Furthermore the vendor will have greater armoury for discussing the method of payment particularly the resisting further consideration for future earn outs as these almost always seem doomed to failure or end up in litigation.

It is also usual for the vendor of a business to indemnify the purchaser for any potential liabilities that may occur during the time that the vendor owned the business. It stands to reason therefore that if the vendor has spent a good deal of time preparing the business for sale, the likelihood of a major liability arising should be significantly reduced and therefore indemnities to the purchaser can be minimised.


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Selling A Business- Taxation

Taxation on a Business Sale

For many years in the United Kingdom there has been a system of capital gains tax which levies tax on profits made on capital sales.  There has also been for many years a system of relief designed to give a lower tax charge on the sale of business assets.

Never however has the taxation regime relating to the sale of business assets been more generous than at this current time.

Currently capital gains tax is charged at 18% for transactions involving basic rate tax payers and 28% for transactions involving higher rate tax payers. However if the sale of assets can be proved to be the sale of a business asset then the effective rate if capital gains tax is reduced to 10%. This method of calculating capital gains tax on business assets is known as “entrepreneurs relief”. Although there can be some complications in calculating the relief such as a sale that involves some business and some non-business assets, it is generally a relatively simple relief to understand. Basically if a UK tax payer has owned a business asset for at least twelve months then disposes of that asset and makes a capital profit then the tax rate is effectively 10%. This relief applies to the sale of shares in private trading companies, the sale of freehold commercial premises owned outside but used in the business provided that this asset is part of the business rather than merely a business asset or simultaneously when the business is disposed of. The relief however is not available to limited companies disposing of business assets and is only available to individuals.

Apart from the effective tax rate, one of the things that makes entrepreneurs relief so exciting is the fact that each UK tax payer has a lifetime allowance of £10 million as far as this relief is concerned.  What this means is that UK tax payers can individually create gains on the sale of business assets up to £10 million at an effective rate of 10%. By its definition as a lifetime allowance the relief is accumulative so that in theory a business owner could sell ten businesses over a period of time at a gain of £1 million each time and only pay an effective rate of 10% on each transaction. When you consider that the most successful business owners have personal tax rates are often 40% and in some cases 50%, it is clear to see the advantage of using the entrepreneurs relief wherever possible.

It is not a requirement that the business owner needs to sell the whole of the business in order to obtain entrepreneurs relief. It is perfectly permissible for a business owner to dispose of part of the business and take advantage of the relief but it does need to be an identifiable part of the business and not merely the sale of business assets.

It is evident therefore that whilst the current personal tax rates prevail in the United Kingdom, it makes absolute sense for any owner of business assets who wishes to dispose of some or all of these can plan a strategy to take advantage of entrepreneurs relief.

Note. Tax rates and relief correct at time of writing. Please check with your advisors to check on current taxation rates and reliefs.

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Key Factors that Make People Buy

So what are the key factors that make people buy?

In today’s competitive market, the ability of businesses to sell effectively often determines the successful growth of a business.  If a business is generating large quantities of great leads, but cannot convert these into sales, that business will struggle. So before we start looking at the key factors that make people buy, let’s firstly get a clear understanding of what sales is.

In any sales process, a minimum of two people are involved, one selling and one looking to buy a product or service. Sounds simple, doesn’t it, but let’s dig a little deeper. In this interaction between the buyer and the seller, where will the decision always be made?  The only person who can place the order and then pay for the goods or service is the buyer, nothing happens until the buyer says, Yes.  So with this in mind, surely the focus should be on helping the buyer make their decision!  So much sales training available in the market tends to focus so much on sales techniques and ideas on how to question and close a sales deal, yet forgets the fact that the decision maker is not the salesperson, but the buyer. In fact, it could almost be said that there is no such thing as sales, only buying.

It has also been proven that any buying decision, no matter what the product or service is, is 80% emotional and only 20% logical.

With this all in mind, should the definition of sales not be; helping buyers make easier and more effective decisions?

With the above points all in mind, I would now like to take a look at the key emotional factors that will influence people’s decision in making a purchase.

I will only be looking at the emotional factors here and accept that the logical factors such as price, size, delivery and availability do all play a part in the decision making.

So what are the emotional factors all sales people need to consider when helping a person make a purchasing decision?

  • Making a positive connection with the prospective buyer.

They say that you only get one chance to create a first impression, and nowhere is that more true, than in a face to face sales appointment. How many sales people believe so much in the gift of the gab, that they forget to focus on the most important person, the prospective client. When first meeting a prospective new client, look around; take note of what you see that links to the person, read their body language, are they nervous, confident, how are they talking, tone, speed etc. From this the salesperson needs to decide their own approach to the sales meeting that puts the prospective buyer at ease.

This is one of the most crucial parts of any sales meeting, whether it is face to face or over the phone, get it wrong and no matter how good your sales technique may be, the sale could be lost.

  • What problem are they trying to solve?

People only buy something when they need to solve a problem. It may be new equipment to manufacture, parts for manufacture, a service that will improve their business or anything else. What is very important to understand at this point, is that it is very often not the product that is most important to the prospective client, but what it represents to them. The focus of the sales person is to find out what the true nature of the problem they are trying to solve and what type of solution they are looking for. The key to finding this out, are very good questioning skills and attentive listening.

  • What is the buyer’s perception of the product or service?

When people purchase a product or service, salespeople need to understand that the majority of people will have some kind of picture in their mind of what the experience is going to be like before they meet the salesperson. As a professional salesperson, it is important that you find out what thoughts or picture is in their mind so that you can choose the right strategy to follow for that meeting. The more a buyer is put at ease and dealt with as a human being who has thoughts and feelings, the easier the sales process will become.

  • What past experiences has the buyer had with the product or service?

One of the first things to find out as a salesperson, is what past experiences has the buyer had with buying the product or service. This is important as past experiences will have a large affect on how they react to the salesperson. This may not appear to be fair, but as humans we have behavioural styles that are fashioned from past experiences and we go into these styles without even thinking about it.  These past experiences also set up expectations in the buyer and as a professional salesperson it is important to find out what these expectations are.

  • What have they heard others say about the product or service?

This point is very similar to the previous point, but often comes where the buyer has not had many or any past experiences of purchasing the product or service, but has been told the past experiences of friends and colleagues. These will also set expectations with the buyer.

  • What will the product or service allow them to do or achieve, that they currently can’t do?

Often the way a product or service is positioned with a buyer is the key point on which a purchasing decision will be made, especially when all other aspects of the competition are fairly close. Positioning the buyer on the positive outcomes they could achieve with making the purchase will often make a stronger emotional connection and secure the sale. With some types of products or services it is vital that the salesperson positions the solution within the bigger picture of what can be achieved.

These are just some of the key emotional areas that many salespeople forget or are unaware to focus on when conducting a sales meeting, yet they are often the most crucial points that will set apart successful salespeople from all the others.

Many sales training courses focus heavily on the importance of asking questions in a sales meeting, but many do not give too much insight into what to ask questions about.

I hope that this article helps you improve your sales performance, but if you are looking to take your sales performance to another level of success, then give us a call and we would be delighted to come and help you.

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‘Outside In’ Marketing

Dramatically increase your business profits with ‘Outside In' marketing

I met with a business owner last week who has tried unsuccessfully for some years to break through a turnover figure which he has been desperate to achieve for many years. He has got very close in the last few years, without making that final break through which would bring him the level of success he was looking for.

Now there could be a number of reasons for this happening, but the answer he gave was very interesting, he stated that he felt the main reason why they have not broken through that magic barrier was mainly because clients and prospects just did not understand what his business truly did. If I could just have a penny for every time I have heard business owners tell me this, there would be no need for me to write this article. If clients and prospects do not understand what a business truly does, how hard is it for that business to deliver exceptional value?

So why is it that some businesses are so misunderstood that clients and prospects struggle to understand what value their product or service really brings to them? Just think to yourself how difficult it must be to create leads or sell the services if even the business owner cannot clearly communicate what it is that the business offers!

After years of careful research, we have come to the conclusion that the major reason for this happening is twofold;

  1. Most of the marketing is done ‘Inside Out'.
  2. Businesses do not truly understand the market place they are in and how their business delivers value to this market place.

1. So what do we mean with ‘Inside Out' marketing?

After years of research we have realised that the vast majority of business owners plan and execute their marketing plans on the views and opinions of the people inside the business looking out towards the market. So what is wrong with that? These people have often been providing these products and services for many years and understand how they work best for customers.

But this is actually the biggest problem, their knowledge and understanding of the product is so much higher than any customers will ever be and this often causes a communication breakdown.

The most important factor to consider is, what are the most important benefits that your product or service brings to customers, from their viewpoint, not yours. In our research we have found many times, that customers purchase a product or service for reasons the supplier has never considered. The only way to find out what these reasons are is by conducting proper market research with the type of customers who will bring you increased profitable sales.

And this is what we mean by ‘Inside Out' marketing, the majority of businesses approach the market with their level of understanding and opinions of how the product fits best, only to then find that the results they are getting are considerably lower than their expectations.

So where do we start with correcting this process and creating an ‘Outside In' marketing strategy?

2. How do we start to understand our own business?

The place to start to understand how your business fits into the market place is with something the majority of business owners neglect to do, proper market research.

So what do I mean when I say proper market research?  Many businesses do market surveys by sending out a short questionnaire which allows people to rate the various aspects of their business, like service, product availability etc. But how many of these questionnaires delve into the key areas of what makes a person decide to choose your product or service over another? Effective market research is all about getting the understanding around the emotional reasons why somebody makes a decision to choose one company over another and is probably neglected by so many as it is not that easy to do without the necessary training and understanding.

Part of this research must also include identifying your ideal client. This is far more than just geography or spending power, it must cover their wants, needs and aspirations so that we attract a customer that buys from us over a long term.

Only once we know who we want to attract and what it is they are truly looking for, can we even start thinking about marketing to them. At this point we need to understand what our point of difference is in the market, what we offer that is different to our competitors, and what do we do that is going to attract those ideal clients that will ensure our profitable growth and help us out perform the rest of the market place we are in.

This is no longer about creating or finding a niche as it was once thought of, creating a niche is often a time consuming and expensive activity which often gets copied very soon after it is launched. Creating this difference is an interesting process as in many cases the business is already delivering something that makes it different to its competitors, it’s just not aware of it and therefore does not communicate it.

The most important thing to remember when marketing is that your target audience measure your message and your business on the perception they create in their mind when they see any of your marketing material. The better your understanding is of what they are looking for and what it means to them, the more positive the perception you will create with them.

Creating the right perception with your ideal prospects is one of the key factors that are going to take your business to the next level of success and help you jump ahead of your competitors, but above all, it will relieve some of the price pressure you may be under, increasing your bottom line profits.

If you would like your marketing results to take your business ahead of your competitors and to the next level of profitable success, then give us a call and we would be delighted to come and chat with you about what could be done with your marketing.