Where will you be in 5 years time?

"Where will you be in 5 years time?", is one of the questions I ask prospective clients. Its a popular question in interviews, to assess whether a candidates ambitions match that of his prospective employer.
The reason I ask it is:
If I know where you want to take your business and what your "vision" is, then I can help you to get there, and advise accordingly. You may want to just tick along and view your business as a lifestyle business, which is fine and theres nothing wrong in that. On the other hand you may want to grow the business and maybe replicate it in another location, and therefore you need to work on the business rather than in it. You need to build processes and systems, and put them in place early on, that way you will build a business with growth in mind and therefore will be able to scale your business more readily. Have you thought about this in your business? If you are a start up or thinking of starting up what is your vision for your business?, and ask yourself where you want it to be in 5 years time, or I will!

Q & A - Part 1

Q I am setting up my own business soon and I plan to re-mortgage my current home to raise the start up capital.  Will the interest payable on my mortgage be considered a tax deductible expense against my business profits?

A Whether or not the interest is deductible depends on the purpose of loan. Although the loan will be financed by other means, (and in your case on your personal residence), the interest on the element that will be used wholly and exclusively to fund your new business venture is an allowable deduction when establishing the net profit from your business activity.

However, you can only claim a deduction for the amount of “qualifying interest” which applies to the business. This is the interest paid on the amount of the loan used for your business, and any interest payable on the element relating to your existing residence is not deductible against the profits from your business.

Q I recently registered my hairdressing business for VAT.  I understand that you can claim back VAT from my previous two years of trading. Is this true?

A Unfortunately its not all the VAT you have suffered in the last 2 years, as you can only claim back the VAT on goods that you have acquired in the 4 years prior to registration which are still held in stock (or used to make other goods which are still held in stock) and originally acquired for business purposes.

Equally, it also includes the VAT on any capital assets such as equipment which you have purchased in the previous 4 years, but I am afraid any VAT suffered on goods or items that have been sold on to customers cannot be re-claimed once you have registered. You are also able to recover the VAT incurred on services, which have been supplied within 6 months prior to the date of registration, assuming they were also supplied for the purpose of the business.

Disclaimer – advice shared in this column is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this column, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

What Gets Measured-Gets Done

I can't remember who came up with the above phrase, but it basically means if you measure something over time and crucially make someone responsible for it. Then you can keep that particular issue under control and take corrective action if needed.
So for instance you may have a product X, which comes with a 1 year guarantee. Now some of these products are going to come back under this warrenty- so you want to be able to measure it.
A simple measure might be returns per 1000. It could be further broken down by type of fault/total faults. If this measure is monitored over time, you can see if it is getting better or worse, then investigate the reasons why and take corrective action, to improve the this statistic. Having a budget/target will help to keep this figure in check. Having a person responsible for this should ensure something gets done about it. Hence what gets measured gets done.
Could you apply this to your business?
If you are a one man band you probably have a rough and ready grasp of the numbers important to your business-albeit they are in your head rather then on paper or in a spreadsheet. But once you start to employ people these performance indicators become more important, as they will be what you monitor to control and manage your business and your staff if you are to be successful.