22 | SEPTEMBER 2020
Installer Support
HOW TO AVOID
SLEEPLESS NIGHTS
One of the banes of life when running your own business
can be sleepless nights. Although this isn’t a regular
occurrence if you are well-organised, it is an ever-present
risk. Benjamin Dyer, CEO of app developer Powered Now,
looks at how you can head off the big issues at the pass.
It is of course hard to predict all of
the different things that can go wrong in a
business. What I thought that I would try
to do in this article is try to identify some
of the major ones.
Don’t wait for bad things
to happen to you
Having the ability to manage risks is an
important part of running a small business.
Starting the business is a risk in its
own right, but there is more. Taking time
to specifically think about and understand
risks can be time well spent.
Make sure you don’t
cross the taxman
The taxman is an ever-present threat to
the small business person and I would like
to highlight three areas of concern.
The first is the annual tax charge on
profits. As a sole trader you should probably
set aside around 20% of your income
each month to pay the tax man. Once you
employ people or become a limited company,
then probably your bookkeeper or
accountant should keep a running tally of
what you need to be saving for tax.
The second is VAT. Once you cross the
£85,000 sales threshold you must charge
VAT and make quarterly returns and payments.
Of course, there are various options
but there isn’t room to explore all them
here. If you don’t register for VAT when
you should have done, you could end up
paying the VAT you should have charged
your customers. HMRC have sophisticated
computers that look for patterns of evasion,
so follow the rules.
Finally, there is CIS (Construction
Industry Scheme). CIS comes into force
whenever you use another trades person
to subcontract for you. The rules are rigid
and the fines for not making CIS returns
are extremely penal. For example, if you
failed to submit CIS returns monthly for 6
months when you should have done, this
would lead to an automatic fine of £2,100
plus other charges. The fine is £100 for
each monthly return for each month it is
late. And the additional fine added each
month would continue going up rapidly.
Make a profit!
There is nothing more depressing in
business than working really, really hard
and then finding you are hardly making
any money. So, it’s very important that you
make sure your prices are sufficiently high
to make a decent profit.
The big danger is where you provide
fixed price quotes. Some people are naturally
good at estimating their effort and
provide great quotes while making a good
living. Others are always too optimistic
and frequently underquote. It means plenty
of work but a very low hourly rate. Still
others are simply poor at estimating. This
means that when they over-estimate they
don’t get the work, someone else does.
But when they under-estimate, they always
win. The result is patchy work that is unprofitable,
a very bad combination.
If any of these issues apply to you, you
should always add an extra percentage
on. Or maybe you should try to focus on
smaller jobs where you are always paid by
the hour.
Watch the cash flow
I’ve tried to stress this issue previously
in articles in Pro Installer, but I probably
can’t stress it enough. Going bust will destroy
your sleep and peace of mind as well
as having severe consequences for you and
your family’s future.
The way that you go bust is that you run
out of money and can’t pay your bills. It’s
a horrible experience with people chasing
you for everything, dragging you to court
and maybe worse.
The way to avoid this is to always be on
top of your finances and understand what
is happening. If you can’t do this yourself,
you need to find someone who can help.
Letting your customers down
People who are good in the trade care
about doing a good job. This is why it
can be distressing if a job goes wrong
and your customer isn’t happy. Short of
advising people to do good work, which is
obvious, my next advice is to price work
high enough so that you have the capacity
to occasionally redo work without worry.
You aren’t ripping customers off. You are
effectively providing insurance so that
if something goes wrong, you can put
it right without bringing family finances
under pressure.
Follow employment law
If you employ people, it’s all too easy to
sail through a number of years without an
issue, then face a really serious problem.
This can arise when an employee is incompetent,
is stealing, takes unauthorised
time off and so on. Then you challenge
or discipline them, but do not follow the
exact letter of employment law.
You may think this is a low risk and
wouldn’t be too stressful, but unfortunately
you would be wrong. It can definitely
cause sleepless nights as it eats into your
time, puts significant money at risk and can
even lead to unwelcome local publicity.
The two big risks are when you have
a completely reasonable case against an
employee but fail to follow what would be
deemed a fair process. So even if you have
incontrovertible evidence that they have
been stealing, if you don’t give them notice
of a meeting to investigate the issue, allow
them to have someone with them and so
on a dismissal can be deemed unfair and
result in compensation. Yes, really!