And when the haggling finishes, the two parties shake on the deal. Frighteningly, there are no end of implied terms around the transaction, from basic ones like the supplier having the goods in question through to the fact that (in Britain anyway) the supposition is that both parties are talking British Pounds and again in most B2B conversations, if the goods attract VAT, then that’s on top of the agreed price.

Even I (an accountant – sorry) nearly came a cropper – I was buying a domain name from a Dutchman. There was much toing and froing on the price – after all every domain by definition is unique and benchmark pricing is not obvious. But it wasn’t until late in the conversation and close to paws touching, that it occurred to me I was bidding him euros and he was expecting the number in question in sterling. It was resolved – at a time when there were more euros to the Pound than today – so could have been disastrously expensive.

But it is worse for accountants. What is the ‘bottom line’ for a business? The phrase ‘bottom line’ in business is an alternative to ‘profit’.

A traditional Profit & Loss Account might look something like:

Sales (aka Turnover, Revenues, Income) £x
Cost of goods sold (£x)
Gross margin (aka Gross Profit, Margin) £x
Expenses (aka Overheads, Costs) (£x)
Net Profit (aka EBITDA, Net Margin, PBIT) £x A
Less: depreciation (aka Amortisation) £x
interest paid £x (£x)
Net profit before tax (EBT, PBT) £x B
Tax (£x)
Profit after tax (aka Retained Earnings, Income) (£x) C

So let me ask you, what’s the bottom line, here? Is it at (A) where you have factored in all your costs , or (B) where you add the cost of using money (Interest) and the cost of using equipment (depreciation), or is (C) after the government – over which you have no control – has taken its 0.454kg of flesh?

I think bragging rights go for the largest number – so if someone says ‘I’m making a million a year’, it is probably somewhere around (A) that they’re doing their sums. But if you are buying the business then you probably need to be a (C) because that’s the only piece that’ll be yours at the end of the day?

The problem is it is not defined. But then nor are many of the terms accountants use. If you look at all the aliases I’ve listed – and even then they are but a sample -you can see confusions abound.

I was once engaged to help a British Millionaire buy a marina in the South of France. My French is poor but it was clear from the first moment I looked at the paperwork that the vendors quoted ‘Income’ for the business was the total sales, but had been heard by the buyer to be the profit (wherever that fell on my P&L above – in his mind) – the deal didn’t happen. Worse, it was apparently my fault!

I don’t want a rigid accounting code in this country as they do for instance in Germany, but I think as an accountant I should remind everyone relying on a ‘bottom line’ to be warned by that useful piece of street law – ‘buyer beware’.

So if you are the Government where do you place the priority for assistance?

‘Not enough data’ I hear you cry.

So what happens if I tell you that – measured in turnover terms – SMEs and large companies in aggregate both have similar turnovers? Does that help? Or would you prefer to know the small end employs 13.8m whilst the bigger brethren are at a slimmer 9.8m workers?

Or, like me, do you think it is totally crazy to lump together as a homogenous whole – companies employing just the proprietor with those having 249 employees on board?

Segmentally:

With thanks to the Financial Times for collecting together this data.

In the old days, banks only lent to those people who could prove they didn’t need it. I think now we are returned to those times except that after you have adduced the final piece of evidence to support you not needing the finance, the bank now assists by refusing.

If my cynical take is only part right, then the only place Government can hope to make a difference is at the bottom of the pile. No, not the bottom of my table – the bottom of the pile, where the poor oppressed sole proprietor or under-resourced start-up team can be found.

We are in a mess. However you now label the current state of the nation, there is a big issue and it’s not going away any time soon. So how about a real cabinet reshuffle? How about creating new ministers for things that matter going forward from here? Surely today, a minister for small business (and I’m thinking 0-10 size) is more useful at the top table than a Defence Minister?  We’ve got minsters too for Scotland, Wales and Northern Ireland – and each of those has its own assemblies – but why not a ‘Backing Britain Minister’ instead of those three – saving cost and flying the flag for things made and grown in Britain.

I could go, but I guess blogs are not books?

Or more collectively for each pro-something, there’s an anti-something?

A while back it was a commonly held belief that fox-hunting wasn’t something we should do any more. The moment however legislation threatened, it seems half the country were marching against the ban as the Countryside Alliance.

The other day, someone thought all dangerous dogs should be banned. Did I hear the RSPCA come out against that idea?

And so it goes on, right into Government. Somewhere is written in stone that the opposition’s task is to oppose the government.

But we’ve abolished slavery. Surely with two centrist parties (or three if we give Liberals proportional representation in this statement) with the country in a mess – it is time for some parliamentary co-operation, agree what is right for the country and do a few things consensually – therefore giving more time and air space to issues that do matter.

But then, do I agree with myself?

Going into business for oneself can be the most rewarding step you could ever take. However there are a few things I think you really should consider:

1. It’s going to take twice as long and cost twice as much

It’s a frequently used maxim but only because it’s true. It is easy to underestimate how much needs to be done before revenues come rolling in and one’s plans rarely allow for any contingency or indeed living oneself until the business kicks in.

2. Test your proposition first

If it’s a product you are going to sell have some advance orders, or test selling it at a car boot. If it’s a service, go be someone’s apprentice or stand in for a week or two first, and see if you are cut out for going it alone.

3. Strongly consider becoming a limited company

A limited company is a separate legal entity to you and so if things go wrong it can go bust without you having to. Also, with a limited company you can sell shares to others at different prices and quantities and so raise money whilst retaining 51%+.

4. It’s all about the team

If you are going to raise money from Venture Capitalists or Business Angels, they’ll want to see a team in place with all the key roles covered. Six rocket scientists might build a great rocket but will still need a sales person , someone in finance etc.

5. Be a little selfish or greedy

If this is your plan, or simply you seem to be doing most of the work, you don’t have to settle for equal participations all round. If the chances are you’re going to lead this, then take the biggest share – kindness at the beginning can cause problems later.

6. What’s your ‘Ronseal’ pitch?

Forget elevator pitches – life’s too short even for a quick explanation of what you will do. Ronseal ‘does what it says on the can’. Can you summarise your business proposition to anybody in a single sentence?

7. What need does your offering satisfy?

Very little in this world is completely new, so most times there is already a need. If there’s a need, does your proposition deal with it? If there’s no existing need, because it is as revolutionary as the Sony Walkman or Apple’s iPad, then you’re going to have to create the market too.

8. How will the competition react?

Be careful if a market opportunity appears to exist because of competitors’ inefficiencies. If by starting, you show them wanting, they’ll surely move to shut the door on you. And remember too, existing loyalties might make their customers slow to switch to you.

9. Don’t rely on professionals – do some yourself

Lawyers and Accountants etc make their money by charging for their time. Often at hourly rates you’d happily take as daily salary. So  ensure you know what you are asking for in terms of outcomes and always ask for a quote first.

10. Look for a mentor

Starting up is full of tricky situations you might never have encountered but invariably someone else has. Consider approaching an ex-boss or industry legend to see if they might agree to help you in your early stages. Surprisingly such help is often willingly given for free.

Michael Carter is the author of ‘Take the plunge – 101 things you need to know before starting in business’. This easy-to-read, colourfully illustrated book covers everything from business plans to VAT, selling to find premises, hiring people to limited companies and is available at a special price of just £5 (post paid) from www.efactorybooks.bigcartel.com

The traditional SWOT or TOWS (I prefer the latter) analysis is generally represented in a Boston box; you know the 4 x 4 matrix variety:

ABC Enterprises TOWS

We can find this representation in text books, most business cases and plans, adorning strategy presentations and so on, but what does it mean? Is it really an analysis? And that’s the point; unless you have written it you may not really know what it means. And even if you do, where is the analysis? I think there is a simple way to improve it.

I use “SWOT? So What?”, where the “So What?” forces the consideration of “So, what does this mean for the business?” i.e. analysis. It does exactly what it says on the tin.

A slight change to the layout reveals all.

ABC Enterprises TOWS

My “SWOT? So What?” approach encourages us to go beyond just the headline and really explore what it means for the business. Not only does this give better and more beneficial information, but it tends improve presentations too, forming the basis for discussion rather than just being the cue for an explanation.

Next time you are in need of a TOWS/SWOT analysis…why not give it a try.

We are all familiar with the marketing mix 4Ps: Product, Place, Promotion & Price, with Physical Evidence,   often added as an optional extra (some will add a couple more Ps).  I’ll happily discuss the marketing mix and how we can use these headings to shape our approach to the market and I’m not suggesting we should abandon them entirely.  But, and here’s the swipe, these are approaches from the supplier side.  What about the customer perspective?

Yep, radical as it may seem we need to view these elements from the customer perspective.  I suggest that for each P also consider what I call “the buying mix”.  Let’s apply some letters (this is not original, but can’t recall where I got it from during my studies all those years ago) and “A” will do nicely:

Product: Acceptability – how acceptable to your target customer(s) are the products or services: do they do meet the buyers’ requirement(s).
Place: Availability - where and how readily can your customer(s) get their hands on your products or services.
Promotion: Awareness - how and how easily can your customers find out about  your products and how to get them.
Price: Affordability – you may think it is a good and fair price but can your target customers actually afford it.

Just to make sure we haven’t missed any, let’s also take Physical Evidence…how about Aesthetics or Appearance…which offer a differentiation from whether a product does the job by adding the very important elements of fashion, smell or  cleanliness (quite important for a restaurant don’t you think!).

So, for a really customer focussed approach, think buying mix 4As and marketing mix 4Ps.

But with start-ups it’s different.

Certainly the starter-upper is probably well versed in what they are about to do: dog-grooming, house-building, architecture, wood-turning etc, but their knowledge of basic business isn’t there at all.

I greatly enjoyed Richard Branson’s ‘Losing my virginity’ but you can’t really advocate starting a business on a tax fraud, can you? Similarly, I was incensed by ‘Anyone can do it’ by Sahar Hashemi – cofounder of the Coffee Republic. Reading her book gave me no confidence at all that a potential start-up would learn any of the basic business steps to support their chosen activity.

My own first book: ‘It’s all cobblers!’ was, I found at my 45^th reading,  in a similar vein to the two above  – more autobiographical and less helpful to a start-up to whom I thought I had addressed it. In fact, reviewing the market I couldn’t find a book for start-ups that explained in bite sized chunks, why you need to do things in start-up mode at all.

So I wrote it. ‘Take the plunge – 101 things you need to know before starting your own business’.  Available from Amazon in paper or as an eBook – with all Amazon’s ‘look inside’ features.

If one stands back, I think the Annual Report should now be divided into three:

1. The financial reporting for the historic period. This is the basic reporting stuff and the piece subject to audit. The more than can be taken out (by law and convention) the more useful it will be as a record of what has occurred.
2. A prospective report. Investors, potential suppliers and customers all really want to understand how the company sees its future and how it envisages assembling and using its resources to get there. This I see as an unaudited document but not unlike a prospectus though with rather more detail, and one that can be updated as news events occur in the company and not doggedly tied to the company’s reporting date. It will almost certainly reside on the company’s website
3. The compliance report. Another unaudited, updated , web-site dwelling living document, where the company maintains its approach to compliance and regulation, its green and other credentials, its ownership statement (in terms of subsidiaries and interests in other companies), it’s public risk statements etc. Again, given the content is dynamic, it should not have a reporting timeline, though obviously for transparency a preparation date on each piece would help interpretation

Okay – so all a bit financial, but what do you think?

Well, I’ll try this analogy. I like to cook, and pulling together a good meal is more than just chucking a few ingredients in a pan.  The perfect meal needs the careful combinations of ingredients, flavours, pots and pans, cooker, timing and, of course, a cook to blend everything together for the optimum results: in short a carefully designed recipe, perhaps tweaked as you follow it, that brings all of these things together to give you the resulting foodie pleasures.

In the same way, a successful business is created and sustained by bringing together every aspect of your business.  I call this the business mix and find this to be a good representation:

By combining the operational and marketing mixes, we can begin to map the interactions between the various ingredients for our successful recipe.  Using this format as a starting point, and populating the business mix to fit your business, you can to collate all of the aspects of your business that impact its results: and that really will be all aspects of your business.

As product managers, or indeed general managers and executives, we need to work across the whole business mix to achieve the sustainable advantage we all want.

So, what should we then do with all of this newly tabulated insight? Well, I find that applying a ranking system to identify those most important, versus those less so, along with competence/capability rating helps.  And mapping a SWOT to the results really can focus the mind, and help you to focus the right resources, on the most important elements of the business mix for your business’ success.