New VAT rules

You may be aware there are changes to the VAT rules. Here is a brief summary of what section applies to most of my clients. If you want any further clarification please contact me and I will be happy to explain what's going on.

All invoices will be required to be sequentially numbered by law. This is the only aspect of the changes that affects every VAT registered trader, and as many of you already number your invoices, there will be no change.

However, businesses which "restart" their invoicing sequence each financial year will now have to ensure that every single invoice has a unique number, and that number sequences are not repeated. Where businesses use separate sequences for different customers or product types this is acceptable, provided each sequence is identifiable and unique. Using customer prefixes is also fine, provided the sequencing is discernable. Any system under which invoice numbers are duplicated for whatever reason is unacceptable.

What happens if you get rid of unprofitable customers?

One day I was discussing ways of increasing their profit with one of my clients. One of my recommendations to him was to “sack” some of his customers. (Those of you familiar with the 80:20 principle will know why!)

My client couldn't comprehend how anyone could ever talk about "sacking” a customer".But the reason we were talking about it, and the reason why I'm writing about it today, is because I regularly get questions on the subject. Generally the customer facing the bullet falls into one of two camps:

(1) The unreasonable.If you can afford to sack consistently abusive, non-paying, and impossible-to-please customers, do it. But first, make sure you've not passed the buck. Blaming the customer is too easy.

And if you decide you have no option, bear in mind the twin danger that (a) you lose the "customer is always right" mentality amongst your employees and (b) you end up with a vindictive ex-customer rather than an unreasonable customer.

(2) The unprofitable.Some customers might carry a loss. If you have customers that are unprofitable, you need to work out why:

(a) Usually it's a result of charging too low a price "just to make ends meet" in the early days. As I've said before, pricing low is the most catastrophic error small businesses can make.

(b) Sometimes it's because you've taken on customers that are outside your niche or just a bad match for your business or your core skills.

(c) For the big business, the reason many customers end up unprofitable is because sales people are more interested in revenue-based commission than truly profitable customers. That shouldn't be a problem for anyone on this list.

(d) Lastly, perhaps you've used samples, money-back trials,"all you can eat" promotions, or loss-leader products, and have ended up with some customers who cost you more than they spend.

As with sacking unreasonable customers, you face a twin danger if you choose to give your unprofitable customers the heave-ho.

First, and this applies particularly to customers recruited by method (d) above, you may cut off the very hand that delivered your most profitable customers.

For sure, your local curry house may have the odd customer who eats his or her bodyweight in chicken tikka masala on "all you can eat" night. But if you water down the offer with caveats, don't you also lose half of your profitable customers? The cost of your freeloaders is simply a marketing investment that helps you acquire profitable customers.

And second, it's hard to look at the past and say with much certainty which of your customers will be good and bad customers in the future.

If you sack an unprofitable customer, you also burn the investment you made in acquiring that customer, and in the relationship you have with that customer. Even though you may be making a loss on the customer right now, you still have a loyal customer on your books. And in many cases that loyalty can be turned into profitability in the future.

Five ideas for pubs

The BARventure Top 5 Basics - these are aimed at pubs but a lot of these ideas could work for YOUR business too!

Rule 1: The Customer Really Is Always Right.Ok!
I know this isn't really the case. They want the one product you don't sell. The dessert you took off the menu months ago. They haven't booked and want their 'usual table'. Obviously there are many situations where the customer is absolutely, 100%, utterly wrong. However, there is absolutely, 100% utterly no point in telling them so.

You are never going to find a customer who turns around and says "Oh thanks for pointing out how wrong I was. I shall never do that again". In fact all that will happen is that they shall leave and go and find someone who does sell what they want, has the dessert they loved or always manages to find them that 'special' table.

Without customers you have no business - just a shell - so get into the mindset of thinking that they're always right. It's amazing what solutions you can think of if you really want someone's business.

Rule 2: Consistency is Key
Lucky streaks are great; they can provide big windfalls and give you a real buzz. But ask any poker player and they will tell you that they would rather play consistently good odds each hand than land the odd royal flush. This is why the same players keep appearing at the final table of the world series. Not because they are luckier than everyone else but because they play consistently good poker. Looking at the odds, making good judgment calls and then occasionally getting that whopping hand.

So open your doors, provide great service all the time, deliver what you promise and what you advertise. Build up your reputation. The worst thing you can do is lose consistency. You'll end up giving a lovely couple the best time in the world and then they'll re-book and bring their friends and if you don't provide the service you had previously they'll feel embarrassed and let down. All of a sudden you've lost double the customers you made happy. Gain two - lose four, this is non-profitable mathematics! Be consistent. Always.

Rule 3: You get what you pay for. As a customer and as an employer.
Whether you have one person working for you or 50 give them the maximum remuneration you can not the minimum amount you think you can get away with. I can't praise enough the benefits of top quality waiter or waitress that costs you £7 per hour over the student working filling up their time on minimum wage. The return you'll get in upsales, repeat business and simple peace of mind will far out-weigh your additional costs. Its not only wages that count though, what else can you do for your staff? Days away? Employee of the Month awards that offer something more than a bottle of wine - is it really that expensive to pay for a weekend for two in Rome or Paris? Not really - if you shop around about £200.

Support you staff, treat them as well as you can and in return they will support you. They will tell their friends how great it is to work for you and recruitment will get easier. They will turn up for work on time. They will stay on when you need them to. They will feel involved in the business, taking ownership and giving the customer that 'WOW' factor service.Unless you're the only person in your business your staff are your representatives. Treat them like yourself.

Rule 4: Life is Unfair
Yes.Its official. Life is unfair. If it was then Elvis would still be alive and all the impersonators would be dead (I know...I know not my line! I don't know who said it actually so if you do please drop me a line...if it was you - please don't sue!) Not only is life unfair but there is also nothing you can do about it. Sometimes things are going to go wrong and it won’t be anyone's fault, or at least they won't have purposefully made the mistake. You could stamp you're feet, have a fit and throw your toys out of your pram. But life will still be unfair, you will still have the problem and you just be a little bit more stressed. As hard as it is, take a breath, learn from the situation and move in.

This is the second time I've had to write this page because I accidentally deleted it the first time over. I could have got really upset, angry that I had lost all my writing but would it have helped me? Not really. Instead I made a cup of tea sat back down and started re-writing. And you know what, this version is better. I've got a funny little anecdote to add to this rule, this page is better than it was the first time over.

Life isn't fair, but if you're calm and relaxed you'll often find you can turn mistakes and disasters into benefits and profit.

Rule 5: Stop, Look and Listen
Not only a rule that will keep you alive when crossing the road but also a rule that will keep your business alive with fresh ideas. Take a moment to stop taking. Shhh. Listen to that. The world you're in is full of great ideas bumping around in peoples heads. Or in the bar you're sat in, the cinema, the casino, the coffee shop, the supermarket. In fact everywhere you go. On holiday, at your friends house, at a motorway road stop. No matter where you go you'll find ideas that you can use or sparks of ideas that lead to your next big thing.

Listen to your customers and they will tell you what they want Listen closely and they'll even tell you what would make them spend more money. Ask your staff, their ideas might not have the business acumen you're looking for but I bet they give you something to work with. Use the people and places around you and keep your mind open to new ideas



Copyright © BARventure 2007

One way to avoid paying inheritance tax

LOOPHOLE OF THE MONTH

‘Double dipping’or How to pass investment assets down through the generations tax-free.

One of the starkest contrasts in the whole of taxation is between the treatment of predominantly trading businesses on the one hand and all other types of asset on the other, for inheritance-tax (IHT) purposes. While most forms of trading-business assets are 100% relieved from IHT, other assets are liable to tax at a rate of 40%, subject to the £300,000 threshold.

Double dipping is a way of effectively getting 100% relief on pure investment assets, and the best way to illustrate it is with an example.Mrs Widow has just lost her husband, and he has left her all the shares in Trading Limited, which are worth £1 million, and £1 million cash. There’s no tax on his death, of course, because all bequests to a surviving spouse are IHT-exempt. But both Mrs Widow and her son, who is actually running the business of the company and stands to inherit everything, can see that this has done nothing but postpone the problem. On his mother’s subsequent death, her taxable estate will consist of £1 million cash (the shares being 100% relieved) that will, at current rates, give rise to tax of nearly £300,000.

So, having consulted a tax specialist, he goes in for a double dipping scheme as follows.First, the will of the late Mr Widow is varied to leave the shares in the trading company direct to the son.

There is still no IHT even on the varied will because the shares in Trading Limited are 100% relievable.After a decent interval, though, Mrs Widow approaches her son with a view to buying the shares in the company for their full £1 million value.The son makes no capital gain on selling the shares to his mother, because he is treated as having acquired them at their full £1 million value.So the situation now is that Mrs Widow has £1 million worth of the shares in Trading Limited and her son has £1 million cash.

On her subsequent death, assuming nothing has changed, she leaves the shares in Trading Limited back to her son and her estate value is precisely nil, because of 100% relief on the shares.Hence, the same shares have effectively passed down from generation one to generation two twice, picking up business-property relief both times, and the net effect is that the £1 million cash is also passed down tax-free. Mrs Widow doesn’t even need to survive seven years, because the transaction she entered into with her son was at arm’s length and not a gift.Neat, if you know how!

Courtesy of The Schmidt Report

20 Free Marketing Ideas

• 
  If your marketing offends someone it will probably be a success
• Get someone to tell a friend. Hopefully someone will tell another friend and it will become viral
• Collect email addresses from prospects so that you can build a relationship (with permission, of course)
• Everybody makes marketing mistakes, learn from yours
• Give a sample away for free.
• Perform an outrageous publicity stunt
• In some instances it is better to co-operate with a competitor rather than compete
• Create a company blog
• Ask clients for written testimonials
• Study the marketing techniques of your competitors. Do what works for them
• Be seen as an expert in your field by writing Ezine articles
• Write a press release and submit it to newspapers and magazines
• Differentiate your product. Just know that your product also must be good. A different product that is crap is useless
• Give something of value away for free via a contest
• Put your logo and website URL on everything
• Learn from the pros. Read Seth Godins marketing blog. Read Seth's books on http://www.sethgodin.com/
• Don’t just make a promise in your marketing message.
• Deliver on your promise or you will be seen as a liar
• Sponsor a popular local event
• Use the new media
• Follow your gut instincts