Exit-planning can never be given too much emphasis according to Oliver Woolley, who discuses investor attitudes to exits in this TV show.

 Investors and exit-planning

Most of our investors, we say they walk into the room backwards. In other words the moment they go in they’re looking for how they’re going to get their money out. And one of the biggest challenges for our investors is the fact they’ve got a lot of money tied up in illiquid stock, ie private, unquoted companies. And so what we focus on is exit-planning for companies, almost from you know, within the first six months of putting the investment in. And under EIS the investment has to be in there for a minimum of three years, so we’re typically looking for businesses to exit within the three to five year period.

Inside Finance will continue to follow ideas around exit-planning and related subjects.

Financial objectives need to be met for success as an entrepreneur. Those with a good idea will still need to prove it works in order to secure further funding, as David Spencer-Percival explains in this video.

Financial Objectives: Funding

You need to have a track record of what you have been doing, I think to get investment. I think it is awfully hard to get investment for something that is a completely new idea. The thing about investment is getting the money is only half the trick. The other bit is actually using that money to create value. So I think you can go and get investment for something, but you have to deliver on it. It's two halves to one piece, so there's no magic trick, but if you are good at something I am sure you can convince somebody to give you money to do it again. It's just what you do with that money.

Continue browsing Inside Finance to find out more about how businesses are achieving their financial objectives.

Business risk can hit at any time and companies can survive small unexpected losses. But constant problems may be a sign that failure is imminent, as Henry Shinners discusses in this TV show.

Business risk: Early signs of impending doom

There are some early warning sighs. Typically business will operating with an overdraft facility, or some other kind of working capital facility. If they find that they are constantly at the limit of that, and there’s no fluctuation, they can return into credit for example from time to time, then that’s a good sign that working capital is a problem and they need to address that. Other signs would be if they have competitors in the same sector that are failing. That can be a positive thing for some businesses because they pick up business that their competitors aren’t doing, but it may also be a sign that the sector is in difficulty and they need to take care.

If you enjoyed this video about business risk, then why not watch more TV shows on Inside Finance?

 

The hospitality industry would benefit from investment in technology and infrastructure. In this TV show Sir David Michels explains that government successfully invests in failed industries.

Technology, infrastructure and investment

I don’t think the hospitality industry generally needs any subsidisation. It will always ask to pay less tax, to be more equal to our European partners, but I don’t think that’s the main thing that the hospitality industry would ask for. It would ask for investment in infrastructure, investment in technology where it is appropriate, investment in an industry where they have never invested before. Government has been wonderful at investing in failed industries; Coal, steel, I won’t give the whole list. But it always seems to put its money on industries that are no longer relevant. Maybe not always but very often. What it doesn’t do is find industries that are growing and invest in them because from their view they don’t need help. History tells us that if you invest more in the successful, and less in the unsuccessful, you’ll get a higher return. Now it’s our fault if we haven’t been able to convey that message, but it’s one message we are desperately trying to convey.

If you enjoyed this video about technology, infrastructure, and investment, please explore more TV shows on Inside Finance TV

The person centred planning that is done in the HR department should include issues like absence. In this video Matthew Haswell discusses how employee illness drains employers’ pockets.

HR management does person centred planning

Employee sickness is something that ultimately impacts on employers and it impacts on employers pockets ultimately. There’s the financial impact and also the loss of productivity impact as well, which ultimately can be financial as well. Sickness management can be done in several ways, you either mitigate sickness absence or you insure against the cost of sickness absence, but either way solutions to sickness absence are very relevant to business directors and HR directors and business owners alike.

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A business benefits from having insurance when it helps them cover the cost of sick pay. In this TV show Matthew Haswell discusses insuring against employer liability.

A business benefits from preparing for the unknown

On the other side if you do have particular sickness absence, you can insure against the liability for the employer to pay the costs. Now you can insure individual salaries so that if an individual is off sick the employer is able to maintain a percentage of their salary by way of insurance, an insurance product will actually pay the employer the employee’s salary and then the employer can pass that onto the employee. So the employee remains as an employee, remains able to participate in other benefits, but the employer is protected against the cost of maintaining that salary. And really that goes back to the old reason of why do we have insurance and the reason for that is because you’re paying a known or a premium that you can keep a handle on against the unknown cost of the liability. So it’s really a known cost of insurance versus an unknown cost of liability and that’s something that’s picked up by finance directors and having a known cost for several years in the future of insurance compared to the unknown cost of absence is a comforting thing. And quite often some of these insurance products will have associated benefits. For example income replacement insurance quite often comes with a product called an employee assistance plan, which essentially is a telephone based and an online based resource that employees can access relating to questions regarding health, stress, anxiety, medical issues and quite often that includes face to face counselling as well and the insurance companies tend to provide that because any, I think whilst it may be seen as a freebie obviously the insurance company like to think that those associated products will have a positive impact on absence, therefore they won’t have to pay out too much in claims.

If you are interested in issues like insurance and it's business benefits, why not browse more videos on Inside Finance TV?

The business advantages of a public company are compared to those of being a private company by Philip Quigley in this TV show.

Business advantages comparison

The flipside is that if you’ve got a private equity investor, you’ve got one investor sitting on your board and you really have to take notice of them. If you’re a public company with a broader base of shareholders then you haven’t quite got the concentration of power in one set of hands that you would have with PE. The great thing, you know, about being, is you’ve then got shares you can use for acquisitions. They’re a liquid form of currency other than cash. So you can use your shares to make acquisitions. And if, you know, that should be your plan, it’s a growth market on AIM, it’s not for companies who are going to steadily grow, it’s for companies who are going to look to expand quickly.

If you enjoyed this video about business advantages, why not watch more TV shows on Inside Finance?

 

Financial objectives can be achieved with clear goals and perhaps some outsider help. In this TV show Mike Fosberry of Smith & Williamson gives his perspective.

The importance of clear financial objectives

I think the first thing to understand from a family perspective is what are your objectives? What are you trying to achieve with your money?  Is it to look after the current generation? Is it to look after the next generation? So our job and my job is really to ensure that people are helped through that process, in helping them to understand what their objectives are because I think many people almost run their finances in a higgledy piggledy sort of fashion without any true reflection on what their ultimate targets are. And I think that's part of my job, is to discuss that with them and help them appreciate what it is they're looking for. Inside Finance has more videos from Mike Fosberry, and will continue give you food thought regarding your own financial objectives.  

Government legislation has changed in recent years and has affected savers, as Paul Garwood discusses in this TV show.

Government legislation changes

Most of the legislation changes that we’ve seen over the past five or six years have been disadvantageous to savers, apart from some exceptions, particularly pension savers. I think I just mentioned that the lifetime allowance is falling. So the amount that you can accumulate in tax efficient savings vehicles is falling. The amount that you can put into these vehicles is falling. And the reason for this is the government is trying to save tax. I mean it’s trying not to over-give the relief. And the only relief that we have actually seen going up are ISA allowances which now increase by the increase in the retail prices index each year. So we have seen increases in that. But other forms of tax efficient savings tend to have been limited over the past few years. I think we’re hoping that the restrictions will not become worse than they are. But again it probably depends on how the restrictions that we’ve got work and whether the government think that they’re saving sufficient tax by making the adjustments that they’ve made to date. _______________________________________________________________________________________ Inside Finance TV  have more expert insight on the ways that individuals and businesses have been affected by government legislation.

Henry Shinners, Partner - Restructuring & Recovery Services, Smith & Williamson on how companies get into financial trouble

Often they don't spot it early enough and it's often dangerous for directors to ignore some of the warning signs.

They get into difficulties for many different reasons, they may be in a recession hit sector, they may not control their working capital facilities very well, they may have inadequate or inappropriate working capital facilities.

They may be a poor management team.  There are lots and lots of different reasons why businesses can find themselves in financial difficulties.

Sometimes it's the fault of the management team and sometimes it's outside of their control.

Ultimately what causes businesses to reach the point of failure is that they run out of cash, that is the case in the vast majority of the circumstances we see.

Other causes may be, for example in the current environment where leading up to 2007, for example, we saw banks lending quite aggressively, now they may be... they have lending assets which have decreased I value. And so companies may, for example, have failed their banking covenants and that's a potential risk for failure as well.

But often it's the cash, cash running out, not being able to pay the VAT bill or the rent or the wages.

Mark Webb: "There are a number of companies that I’ve worked with where they haven’t looked at things that don’t look particularly transformative when they think about them.  So for instance, capital allowances – capital allowances are a relief that unlocks over a long period of time.  And a lot of people will think that’s not that much value in them actually looking at that allowance.  But if I were to say to you that they’ve just raised the annual investment allowance to 250,000 per annum, which means that you can take a write-off of capital expenditure day one for a much larger amount than previously.  So you get tax relief immediately for, up to around about a quarter of a million.  Then that is worth looking at for a lot of small medium sized enterprises.  It can generate a lot of cash flow by saving you a lot of tax."

Laurence Bard: "You normally get a straightforward tax deduction for a business expense.  You spend a pound you get a tax deduction of one pound.  If you are, what can be actually almost quite a large company, instead of getting a one pound tax deduction you get a two pounds 25 pence tax deduction.  So you’re getting an extra 125% deduction coming off your tax bill.  So you know you might make profits before your extra R&D tax credit, with that uplift you start to breakeven or make losses.  And if you make losses and a lot of start-up companies do make losses here because they’re spending so much money on R&D, they can actually get a refund.  They can get a 25% refund.  Let’s say they spend £100 on R&D, and they lose at least £100 over the year, they’ll get a £25 refund for tax they’ve never even paid, they’ll get a subsidy of £25 from the revenue.  So that is a very ... again, for the innovative loss making developer that is a wonderful shot in the arm.  What they’re often very short of is cash funding.  They’re big on ideas and they’re big on how to spend the money, they’re not quite so good at getting it in, 25% subsidy is very useful."

Laurence Bard: "One of the aspects that Smith & Williamson focuses on is corporate tax.  I’m primarily a corporation tax adviser.  But I have a significant specialism which is about research and development, about companies that do research and development for which there are wonderful tax breaks in the UK.  And my job is largely to identify and help companies claim their proper research and development tax credits, which is wonderful for some smaller innovative loss making type of companies.  It’s one of the focuses that the government wishes to encourage, they’d love to have more.  I see a great deal in all sorts of areas.  There is probably no industry that I’ve ever looked at that doesn’t have some form of significant R&D.  However basic and traditional it might be they’re always doing something innovative, often with the internet and with software. For example an old industry will be automating.  There is a lot of R&D about.  And the government wants there to be more of it.  The UK is a relatively high cost economy of the world.  And it’s got to have a competitive advantage.  It sees this advantage in a well educated workforce that can provide competitive advantage to the world.  R&D is a natural industry that it can measure on with a significantly educated workforce."