BREXIT : what it could mean for YOU and YOUR business

What BREXIT could mean for YOU and YOUR business. Whatever your view on the recent “in, out” referendum, there is no denying that this is of huge significance to the UK, both politically and commercially. Within this article, we’re not going to talk about the “rights or wrongs” or present a “view” on the result, but offer strategies about potential, likely events and how best to prepare UK business for these. As I write, the pound sterling has just hit a 31 year low against the US dollar, David Cameron has resigned as Prime Minister (with effect from Oct 16) and no fewer than 14 Labour shadow cabinet MP’s have resigned. What’s the relevance to us? The implications around this aren’t neccesarily that we will miss the prime minister or that we even recognise the resigned labour MP’s names, but what it does, is create a huge amount of UNCERTAINTY…… …and one thing is for sure; people, consumers, markets and governments dislike UNCERTAINTY. This has huge effects on our behaviour as consumers or investors. Interest Rates Immediately following the announcement of the UK’s referendum, Mark Carney (governor of the Bank of England) issued a statement saying that they will take the necessary steps and measures to protect the UK economy, this may include adjusting interest rates. Whether interest rates will increase or decrease is unknown at this point, BUT, If changes in interest rates have a significant impact on your business you should now consider what the impact of a rate rise or fall is to you. For example, businesses who may be sensitive to increasing interest rates may be; Businesses with significant amounts of debt Businesses within the leisure and entertainment sectors* Home improvement business (builders, property developers) *the impact of interest rates on your customers, if the general public’s monthly mortgage payments increase as a result of higher interest rates, there is a pretty good chance that they will reduce their “general spending” potentially on items seen as “treats” or “leisure activities”   Exchange Rates As at 1:22 pm on the 27th June 2016, the £ is currently trading at an exchange rate of $1.3694 to the £1 – a 31 year low. If your business imports goods from the rest of the world, the vast majority of these are charged in (or at least “pegged against” the US Dollar), which in a nutshell, means that the cost of businesses buying goods, and bringing them into the UK to sell has just increased, overnight. “For example, a UK business purchasing $25,000 of stock (prior to the referendum) would have cost in the region of £16,667, the current cost of the same $25,000 of stock would be £18,256 – An increase of £1,589” The importing business then has a decision, does it put up prices to cover its increased costs at the risk of losing customers OR does it leaves prices as before and continue to sell goods but at a much lesser profit margin? On the basis that […]

Pricing your products or services – a different perspective?

Pricing – no pain, no gain! Pricing is one of the key challenges when starting and running a business – what price could you or should you charge for your product(s) or services?? Pricing policies help you to think about and determine what and who you are competing against – for example if your product or service is of the highest quality, why set your prices based upon your competitors? – You’re better than them, and surely this should justify a premium? Alternatively, if you’re operating in a market where the products you sell are “commodities” (i.e there is no discernible difference between your product and your competitors) then your competitive edge may well boil down to price. When considering and setting prices you could: –          Copy the prices of your nearest competitor (or under cut them slightly). –          Look to add a specific “mark up” to your products purchase cost. –          Target a specific profit margin on each product or group of products? Whatever decision you take, you can be sure that any decisions that you make around pricing will be absolutely fundamental to your business. Start too low and it may be difficult to raise your prices later, start too high and people may consider you too expensive.   When pricing, what are we trying to achieve?…… As much profit as possible? The highest price that the market and customers will bear? Just low enough that we are cheaper than competitors?……. ….Possibly, but ultimately, the question we are trying to answer is “what value do customers place on our products or services”? If we give customers value, they’ll purchase our goods right? Well, what about this as a thought…….why not compare the value of your goods or services to one of the bestselling products within the UK – and consider how many times better or worse your product is? The “Coffee Comparable?”     Or “Costa Index??” One of the most popular “products” on the market today is COFFEE, look around EVERYONE is drinking it! So why not compare the value of your products to a Coffee? Let’s take the typical value of the humble cappuccino at say, £2.50 OK, so I’m a restaurant looking to price my various courses, and considering pricing “starters” at £5.00 – using a “coffee comparable”, is a starter course, in a restaurant, worth twice the value of  a coffee – seem reasonable? Probably…..yes. OK, what about the “Mobile Measurement??” A typical mobile phone contract these days is what, £40.00 per month? Applying the same logic, if you’re a marketing consultant or an architect you would expect your monthly customer charges to exceed the value of a mobile contract surely, by two, maybe three times?? Ultimately pricing is about “value” what value does a customer get from purchasing YOUR product or service? Whilst we’re having some fun with this logic, it may just be an interesting thought to have around your products and services…… how much better (or how much additional value is perceived) than […]

Is your company REALLY dormant?

Is Your Company Dormant? A dormant company is essentially one that doesn’t trade and has no transactions. Companies House describes a dormant company as: “…if it has had no ‘significant accounting transactions’ during the accounting period. A ‘significant accounting transaction’ is one which the company should enter in its accounting records.” WARNING! Many “dormant companies” with bank accounts will often (even if not trading) incur transactions such as bank charges and companies house filing fees which may affect the dormant nature of your company or the ability to file dormant accounts with Companies House. Companies House states that allowable transactions when filing dormant company accounts are: Payment for shares taken by subscribers to the memorandum of association Fees paid to the Registrar of Companies for a change of company name, the re-registration of a company and filing annual returns; and Payment of a civil penalty for late filing of accounts. HMRC refers to a dormant company as: “… a company that’s not active, not liable for Corporation Tax or not within the charge to Corporation Tax.” and gives examples of acceptable dormant companies as follows; A new company that hasn’t begun trading yet An existing company that has traded in the past, but is not currently trading A company that will never trade because it has been formed solely to hold an asset such as property. Time Limits? There is currently no time limit on how long a limited company can currently remain as “dormant”. Managing your dormant company Dormant companies are relatively easy to administer – statutory filing requirements are as follows: A set of dormant financial statements be filed with Companies House on an annual basis A companies house annual return to be filed each year A CT600 corporation tax return to be filed with HMRC (although if you contact HMRC in writing explaining that the company IS dormant, they will often waive the requirement of a corporation tax return until trading begins). WARNING! Even though the company is not trading, late returns and filings will incur the same fees, penalties and repercussions as a “live” trading company. Accountancy fees for managing a dormant company are relatively minor, for example, FD Analytical currently charges an annual fee of £85.00 to maintain and protect your limited company. Why Create a Limited Company…..if it is dormant? There are a number of answers to this, and the answer typically falls into one of three categories: Company name protection: if you form your limited company with the name “XYZ Limited” this name is protected – nobody else can obtain this name OR trade as “XYZ Limited”. This may be particularly useful if you trade as a sole trader and don’t want a competitor to take a similar (or the same name) and capitalise on your brand and goodwill. Intention to trade: many entrepreneurs will have an idea for a new product, design or business and wish to “start the process” of creating this entity, the company formation is clearly the first step […]