BUSINESS ADVICE
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 wellorganised , 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 !
The second risk is if you let slip a comment on someone ’ s race , religion , sex , attractiveness , colour or sexual orientation etc . Even in jest . If such a comment merely passes your lips , you are probably in deep and expensive trouble . Discrimination cases have no cap on damages and no qualifying period so they can be brought one day after someone joins your business .
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NOV / DEC 2020
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