Preparing your business for the future – and how to get there
It’s been a tumultuous year for business owners and while uncertainties will continue through 2021 and beyond – now is the time to prepare for long-term growth and sustainability.
In a recent webinar, ‘A new mindset for a new tax year,’ John McCaffery, tax partner at Alexander & Co, Alex Savage, independent financial advisor at Pareto Financial Planning, Rob Davenport, CEO of Shawston Holdings and our own Jim Truscott gave their insights on what steps businesses need to take not just to get back up and running, but become stronger and more resilient in the process.
Taking a look back at last month’s Budget in which the Chancellor set out the roadmap to recovery, John McCaffery, tax partner at Alexander & Co, said: “There were a raft of new measure to support businesses including super deduction available for businesses in terms of capital expenditure, there is more help from furlough schemes and grants in certain sectors such as hospitality, losses can also be carried forward which may help a number of businesses with cash flow.
“Coupled with that though the only real tax changes coming out was the increase in 25 per cent corporation tax which comes into effect in 2023.
“In addition to that, the big winner in the region was Liverpool which is getting a Freeport which means there are some significant tax benefits for investment in that area including no stamp duty, employment opportunities, lots of training, exemption from national insurance, enhanced capital allowances, and tax deduction in fixed assets.
“Taking that into account, it is definitely time to prep your business from what has happened and what is about to come.”
Jim Truscott, partner at Beyond Corporate, said despite the uncertainty M&A activity is still strong and the drivers for decision making for business owners has remained the same. “There are a lot of owner managers who largely run incredibly good businesses without having an exit plan. The question I always ask is ‘where do you want to get to?’ And then work back from that as there’s a lot of planning that you can put in place to get your house in order. A lot of owner managers operate very good businesses, but without having a particular strategy or endgame in mind they get to the point where they want to get out and planning for that is relatively rare.”
He said in general he has acted on more disposals and acquisitions recently as more people have had time to think about succession planning and what they want to do next. “One interesting development that we’ve noticed is an interest in other ways to execute businesses. In the last few months we’ve had a lot of interest in employee ownership trusts and other ways to transition your business into a new chapter.”
Alex Savage, independent financial advisor at Pareto Financial Planning, has also seen businesses shift their focus onto strategy and structure. “Entrepreneurs are still entrepreneurs, they’re adapting to change, and despite it being a difficult year, we’ve seen some amazing success stories of how people have switched their business. Making sure a strategy and structure is in place, looking at succession plans, making sure that your articles are up to date, making sure you’ve got shareholder agreements, making sure that you’re valuing your people is key to having a successful business. People are also looking at their exit strategy whether that’s a sale, an MBO, or taking private equity, whether it happens now or 10 years down the line, owner managers need to think about it and get back to basics.”
Rob Davenport is CEO of mechanical engineers and suppliers of commercial fire sprinklers and dry and wet risers, Shawston Holdings. The employee-owned business said despite a ‘roller-coaster’ year, the company is confident of growing beyond 2021.
“We’ve done three deals in four months with John and Jim. That’s unheard of,” he said. “It was part of the aspiration before Covid but the conversations we’ve had recently seem to have taken off quicker. People are talking more; you can pick up the phone to a rival and ask for a virtual brew and they’re up for it and that’s been refreshing. That confidence to do business is still there.”
McCaffery said: “Covid has focused people on what’s more important to them and it has led to activity as a result of that.”
Asked about how businesses are planning for Corporation Tax, McCaffery said: “If you don’t make any money, you’re not paying the tax. That’s a bigger problem. Are people preparing for it? No, it’s a bit too early.”
In terms of managing cash flow in a crisis, Davenport said it was important to face any issues immediately. “There may be some very unpalatable decisions to be made but if you’ve sorted your cash flow, you can protect your staff who are hopefully going to be here for the next 15 to 30 years. But with no cash flow, you can’t do that, you have to start letting a few people go. That’s where the trouble is.”
For Savage, one area of business that has seen a huge increase has been employee benefits and was a huge revenue driver for Pareto last year. “The reason for that was because people were looking for cost savings. We had one company saving nearly £100,000 on their employment benefits scheme.” She added: “In general expenses have gone down massively. Some companies are even considering whether they need an office in the location that they have got or the size of their office because next year it could look quite different with working from home. There’s huge savings waiting to be made going forward and businesses will start to review where they are at and what costs they’ve got.”
Looking ahead, McCaffery said many businesses have done ‘extremely’ well and there are support packages still available such as stamp duty holiday for residential landlords.
“If you’ve done well in your business, then the opportunity is now to springboard off that and take it forward,” he said. “As we come out of lockdown and businesses start to fly up again, the support packages are still available for post covid-recovery, and with the right planning in place businesses can get the right measures in place for future growth. They’re not sitting still and want to grow and expand.”
Davenport said there’s an opportunity to engage better with employees. “There’s even an opportunity that in a good company, and culture there is a job for life,” he said. “It’ll be fascinating to see whether there is an employee ownership boom because of capital gains tax rumours. I also think there’s an opportunity to rebalance the people’s brand of capitalism and how they treat people and how people treat their employer as well.”
Jim added: “If you’ve got a sound idea and where you want to get to – have a plan and take your people with you. I agree with what Rob said, that there’s a bit of a mindset change. The last 12 months has made a lot of people think carefully about what is important to them, not only in terms of what they want out of their business or their life, but what is important to them in how they get there.”
First published on The Business Desk