There are two definitions of the term resilience that I like. One comes from an engineering context and describes resilience as the ability of a substance or object to spring back into shape. Another definition, perhaps more relevant to the current context is the capacity to recover quickly from difficulties.  Well, we have all had a few of those!

We are facing challenges on many fronts; home schooling, furlough, social distancing, remote working and endless Zoom calls, which can all nibble away at our resilience. Alan and I wanted to use the Mind Your Business Podcast to provide some hints and tips to help business leaders, owners and entrepreneurs rebuild their resilience.

We discussed two approaches to resilience; a psychological one and a philosophical one. Alan describes the philosophical approach as a state of mind he adopts each morning as he visualises his day ahead. He connects with the emotions he needs to take positive steps forward, regardless of the challenges he may encounter in that day.

In his book, the Miracle Morning, Hal Elrod describes the empowering effect of visualisation. He introduces visualisation as way to generate positive results in your outer world by using your imagination to create mental pictures of specific behaviours needed to lead to desired outcomes occurring in your life.

For him, visualisation is the process of imagining exactly what you want to achieve and then mentally rehearsing what steps you need to take to make it a reality. Elrod suggests that this turbocharges the programming of your subconscious mind for success. All before breakfast!

Alan and I agreed that when you visualise your goals daily, you align your thoughts and feelings with your vision, which makes it easier to maintain the motivation you need to keep taking the necessary actions to achieve those goals. It can also be a powerful tool to overcome any self-limiting habits such as procrastination or self-doubt.

Face the two imposters
I have tried to add my own philosophical viewpoint to this discussion. If resilience is the capacity to recover quickly from difficulties, then a way to achieve resilience is to use every disaster as a learning experience.  In other words, if you can meet with Triumph and Disaster, and treat those two impostors just the same, then you will have resilience my son!

My point is that when we experience even the worst failures, if, when the dust settles, we can make them positive learning opportunities we will become better and stronger for it. As a business owner seeing barriers as challenges can help develop a mindset that allows us to approach life in a far more positive frame of mind. This in itself helps to create inbuilt resilience.

Alan and I discussed the difference between introspection, i.e. looking for the learning opportunities in any given circumstance and rumination, which is in effect just a past version of worrying. We agree that there is a clear negative correlation between worry and resilience. Worrying-about past or present- effectively saps your inner strength and takes your resilience away.

Alan and I have talked much- see previous blogs- about the power of getting clarity over issues as a way of defeating worry. Worry often leads to writing a horror story for our businesses. Viewing what is worrying us in glorious technicolour can often expose it as a lie and upgrading a worry to a challenge allows us to take some more positive action.

Even using language such as ‘here is my challenge and I am looking for ways to solve it’, feels more empowering that ‘here is something I am worried about and it keeps me awake at night’.

Grow your Circle of Influence
In his book ‘The 7 habits of highly effective people’, Stephen Covey refers to two concentric circles. The inner circle is called the ‘Circle of Influence’ and the outer circle is called the ‘Circle of Concern’. What he advocates is focusing on your inner Circle of Influence and what you can control. For example, how you can improve, how you can get better at what you do, how you can make your service better or how you can create client astonishment.

In this way you are expanding your Circle of Influence and as your Circle of Influence expands, by definition, your Circle of Concern diminishes. Growing or expanding your Circle of Influence effectively shrinks your Circle of Concern.

Our final discussion topic was how optimism and pessimism are linked to resilience. I consider myself a born optimist I will always look for solutions, the actions I need to move forward. But there are people out there who are the opposite and consistently let worry become their driving emotion. I’m not a psychologist but I am confident that there are significant benefits of optimism versus pessimism. I suspect optimists are more resilient than pessimists.

Even if we are born as either a pessimist or an optimist and there is a direct genetic link to these traits, I am confident we can we can learn to be more optimistic and therefore more resilient.

For inspiration, I think we should look to our children, specifically pre-teens. They too have coped with many challenges this year but I still see them taking it on the chin and starting each day with optimism and the resilience to make the best of it.

Building Resilience
Like building a muscle, increasing your resilience has many benefits but it requires time and dedication. If you don’t put in the work, it might atrophy. People are conditioned to think of resilience as a personality trait-either you have it or you don’t, but this isn’t necessarily the case. With intention and practice, you can become more resilient, no matter your circumstances.

Top tips for building resilience

• See everything that goes wrong as an opportunity to learn and be better for it
• Focus more on your Circle of Influence and less on your Circle of Concern
• Optimism and pessimism are both learned behaviours and we think there is a direct link between optimism and resilience
• Visualise your day and choose to be resilient through whatever challenges it presents
• Get real clarity in issues that worry you to change them into challenges

On the Mind Your Business Podcast, we like to go a bit deeper than that and look at other possibilities. One of these alternative realities is completing rather than competing.

As an entrepreneur starting out, if we spent too long looking at the existing businesses in our industry, perhaps those that are dominant; already have a decent market share, a range of good products- perhaps there’s an Amazon, a great restaurant or a wonderful accountancy firm already in their space- then they might not even get started and a lot of possibility is killed before it has chance to grow.

To avoid this scenario, rather than looking at the world through a competitive lens, why not try and view it through a completing one. There are 79 million people in the UK, all with different needs, meaning there is enough audience to go around. Instead of competing with all of the other established businesses in your sector, consider how your company can add value to what is already going on, how you can make an existing service better, or create something complimentary to what is already being delivered.

Side by side competition is healthy
As an example, if you were opening an Indian restaurant would you go to the town where there are no Indian restaurants or would you go where there are a few open already? A lot of people would go for the monopoly option, but I think a better decision would be to go where there is already a proven market for your product.  As long as your product is distinctively different; maybe it’s in a modern style, a high end location or a tapas offering then you can demonstrate your place in the market, identify where you compete and standout from other restaurants.

When customers consider competing in close proximity they will always do some quick comparisons. Sites like Amazon make that easy for customers by offering these like-for like comparisons on many product pages. The point is twofold; it may not be a decision of ‘EITHER’, ‘OR’ it could be decision of ‘AND’. If you are put side by side and your product does something slightly different or better, then it immediately stands out and the customer hasn’t had to travel that far to find that out!

We see it in retail, FMCG, and the pharma sector, all the time. Go to any supermarket and there are a range of different colours, flavours, price points across the mix completing the offer to the customer.

Completing the offer.
An optician client of mine had five stores. Two were in relatively low-brow neighbourhoods a couple were out of town and he had a flagship outlet on one of Oxford’s hottest shopping streets. Both of the low-brow stores were next door to Specsavers. You would think he would lose 50% of his customers and his spend per head would be considerably lower than the more famous competition, but in fact the volume of footfall he received and the profit margins available on own-brand glasses versus designer brands meant that he made all of his profit from the two low-rent locations. His business model now is to go where Specsavers is. They spend millions on driving market awareness; he simply piggybacks work and scoops up the market they can’t service.

Know your target market
This story demonstrates that there is obviously a great demand for opticians in this town and despite their size, power and brand awareness, Specsavers can’t service the whole market themselves. Finding out what the competition doesn’t do can create a market for new entrants.

But even with this model, it doesn’t have to be seen as a competition. Cypher, for examples, doesn’t support a lot of private client work. If a customer asks us about detailed inheritance planning, we recommend other firms who we know will offer a great service. Conversely if they receive complex ‘Xero’ requests, they know that is our sweet spot and kick things over the fence to us. While we are competing in some areas there is enough to go around, making it a very lucrative completion model.

A central theme for this successful philosophy is to understand who your target market is as well as who it isn’t and be comfortable with that choice.

Co-opertition
Co-opetition is a bit of a buzzword in business. The portmanteau brings together cooperation and competition. Essentially, businesses decide to interact at some level because they have shared interests of reaching a higher value proposition. Samsung’s decision to sell Apple its new Super Retina edge-to-edge OLED screen for the iPhone X is a good example.

Apple has an extremely loyal customer base so are comfortable selling a product that is half Samsung and however much people find out that the whizz-bang tech screen, which is the selling point, is made by Samsung Apple fans don’t really care. if you’re willing to camp out at the Apple store to get the new I-phone, you won’t move, so Apple are comfortable in their own skin, they realise where their limitations are- and how to benefit from a little co-opertition.

The other benefit for Apple is that the money that Samsung make from Apple goes back into R&D which helps the Samsung products improve. Apply helps keep the supply chain healthy and the cumulative marketing efforts ensure the demand for smart products continues to grow.

Another example is in the car industry. Toyota, Peugeot and Citroen all combined to create what Peugeot call the 107. They shared R&D, shared parts, badge it up and market the product differently but have effectively all saved millions in NPD to get the car to market.

Give the customer what they want
There is a shift in power- consumers and clients are more informed, they know they have choice – Amazon has demonstrated that in spades. Rather than fight it, accept it and use it to your advantage.

Sky now includes Netflix and Prime in its packages. Sky know that consumers don’t just want a Sky TV dish, they have other viable options, so to make it easy for the consumer – and to retain a healthy percentage of the market spend Sky enables you to pay your Netflix subscription through your Sky package. It’s why Microsoft gave TEAMs away to compete with Slack.

Summary
In this blog based on a Mind Your Business Podcast episode, Alan and I tried to introduce the idea of completing rather than competing. It’s an alternative philosophy to the binary ‘us v them’ scenario. It is a way of coming to market despite large competition. We tried to demonstrate that some of the biggest companies in the world in the software, automotive and broadcast sectors have become the best of frenemies to make it easier for the consumer to choose both options. They know consumers can choose to go elsewhere, so facilitate their choices rather than block them.

You know the saying ‘fail to plan, plan to fail’. It’s true. And right now, there isn’t a better time to plan for you the future you want from your business.

Planning is fundamental to the process for knowing where you need to go. Planning helps to clarify your vision, your purpose and highlights whether you have the available skills, time or resources to complete your plan. A lack of a coherent plan often leads to confusion; it makes business owners follow the next shiny thing, which then causes them to deviate from their own plan.

Action Coach David Rivers uses the analogy of a using a Sat Nav to describe the planning process. Business Owners are able to choose their destination, whether that is for this year, next year or in five years, they can press ‘start’ and then Sat Nav plots a route back to their starting point and advises them to turn left, turn right or go straight on, in order to reach the desired destination.

Planning after Covid
Prior to lockdown 1.0 we helped create a number of very robust business plans, then Covid hit and a lot of them were torn up and thrown out!

While the business world has always evolved, Covid-19 has become the accelerator for one of the greatest workplace transformations in generations. How we work, exercise, shop, learn and communicate has changed forever.

Over the last 12 months business owners have seen more rapid change than ever before, which means we are entering another period of uncertainty and 90% of the previous ‘normal’ may now be totally different.

Change is inevitable and the challenge will be to pick a path, create a robust plan and stick to it. A 90-day plan can give you clarity on your goals, what you need to change and highlights what unnecessary distractions you need to filter out to provide a structure for where you want to go.

What’s included in a good plan?
A good plan will help business owners to develop the necessary mindset for setting a clear plan, accepting change where it’s needed and sticking to their original purpose.

A good plan will focus on:

• Having a clear vision for what business owners want to achieve
• Identifying whether they have the skills to achieve it
• Highlight the resource needed for delivering objectives
• Giving them the motivation for what needs to be done
• Creating a plan to execute

If you don’t have all of these in place it can lead to a lot of anxiety and frustration.

Your plan should also answer the Have, Do, Be questions. As a business owner what do you want to HAVE from your business? What do you need to DO to get there? And in order to succeed, what sort of person do you need to BE?

“The importance of planning is the process you go through, not the document you end up with”

The process of making a plan allows you to understand what you can influence and what you can’t.  But it can also be a good Kick Up The Ar$e (KUTA) time.

Reality check, you can measure the life you have left in minutes and days! You have limited time to have an impact so even less time to waste procrastinating.

How will you use you time? Planning for the next 90 days can be the blueprint for the next 1-5 years

Remember, the importance of planning is the process you go through, not the document you end up with.

I spoke to countless business owners throughout the various lockdowns, who all told me they were using their relative downtime to focus on their social media presence. Ahead of the pod, I Googled ‘top tips for social media use’ and then Alan and I discussed the results, critiquing the advice given based on our own experiences.

Unless you are paying for targeted advertising, access to Social Media is free. It enables the smallest business to compete with global brands. It can reach a large audience and create a direct connection.  Simple, organic content can build a brand and drive sales traffic. In short why wouldn’t you use it?

Here’s what the advice says you should do to make the most of Social Media.

#1 Start with a plan.
Too many businesses have a scatter gun approach to social media. They post sporadically, there’s no topic or theme to what they post and so it becomes a random exercise of effectively shouting in the dark. If you want to break into one of your prospect’s feeds, or show up on their timeline, then your content needs to be relevant, easily understood and demonstrate the positive impact you can have on their business or sector.

A plan brings clarity on what you are trying to do and the effect you are trying to achieve. The great thing about Social Media is that you can access a whole range of metrics to see what is working and what people are engaging with so you can set some SMART goals and objectives.  I would also suggest that before you set future goals you should first review your current position; the number of followers, the level of engagement, the amount of times you post and on what platforms. And understand what your competitors are doing, especially if they are doing it better than you.

In addition, Alan asks clients to measure their motivation to actually do the work. It takes effort to remain consistent and keep posting.

#2 Select a platform that’s right for your business
Not every business will get bang for buck out of every platform.  The basic rule of marketing is ‘be where your customers are. Currently, Cypher does really well across LinkedIn because that’s where the majority of our audience is. If you’re a funeral director or a trade business then maybe Facebook is better. If you are a florist, an artist, or a niche craft business, then Instagram or Pinterest might suit. If you create a lot of video content then TikTok is growing massively. The point is don’t try and be all things to all people. Don’t overstretch or pour too much energy into creating the wrong sort of content or attempt to conqueror a platform that isn’t right for you or importantly your audience.

#3 Build relationships
The clue to mastering Social Media is in the name. If all you do is focus on yourself, post about your business and your achievements, but don’t engage with anyone else’s content, then all you are doing is broadcasting yourself and it can be seen as a very selfish view of the world. Instead, show you’re listening; show you are interested in other people’s thoughts.

The post that has brought me the most direct success was one I made at the start of the first lockdown.  I ranted about the fact that I felt that accountants were letting their clients down by not being available when the business world needed them most. I picked out some direct competitors that I felt were going above and beyond and I tagged them. Obviously, they all thanked me, their client base saw the post too and the likes and shares drove massive engagement.

I wanted to vent but it was genuine and being authentic is important for a Social Media plan too. I was standing up for what I believed, I was happy to play nicely with the competition and although it wasn’t intended as a sales piece it created the right engagements at the time. Now whenever I get a chance to big up someone in my industry, I do it because I feel it always comes back to me.

#4 Focus on quality over quality
The Google top tips state that one strong post a week is better than five mediocre posts. I disagree.

You never know what your audience is thinking at the time they read your posts and you can’t always know what a good post is until after you post it. For your Social Media efforts to work you need to be regularly seen and heard. People need to know what they are going to get if they engage with you. So as long as you’re consistent in your messaging, you can spend time scheduling enough content, of sufficient quality, to be posting throughout the week.

Not long after my rant post, HMRC posted one of my clients possibly the worst letter I have ever seen. I posted that up and got 125,000 views. People liked it, shared it, I got interaction from HMRC and from accountants around the world! I have never seen anything like it. Did we get any work on the back of it- not a jot!  My rant post brought in three clients, my calling out HMRC- nada! So in my view quantity definitely beats quality, but you do need to adhere to a base level of quality and authenticity.

#5 Engage with people
I often annoy myself by just doing the bare minimum to engage. Even if your view is different, you should try and post something. Often the time you get most out of the author or content creator is when you have a different opinion. As long as you can articulate your point in a way that isn’t rude or offensive, then constructive conversations on other people’s profiles can be a great way of stimulating engagement. You can position yourself as an articulate thought leader without hijacking other people’s posts or being aggressive.

This wasn’t a Social Media masterclass; rather this was a real-life critique of suggested social media best practice. In summary, here are mine and Alan’s top tips;

• Have a plan, start with where you are now, and set clear goals so you know you have achieved them.
• Pick a platform, and be social, it’s called a social network, use it to build relationships.
• My personal opinion is that quantity is better than quality but whatever you choose make it consistent with your voice.
• Think of engagement as a way of demonstrating thought leadership
• To remain authentic, pick three words you would like everyone to use to describe what you post.
• Connect with your motivation to do it.

As a result of this podcast, Alan was inspired to commit to posting three times a week.

As we are still in the middle of Lockdown 3.0, it was interesting to debate the best strategy for businesses considering their own pivot as many may still make this decision over the next 12 months.

My co-podder Alan Clark introduced two useful strategies; one of ‘best of breed’ and the other of ‘integration bundles’ to use when considering the route to take.

As a best of breed example, Alan cited the recent acquisition of Slack by Salesforce. At $27.7 Billion, the deal is the Martech world’s most valuable integration ever and was seen as a good enough investment to meet the current work-from-home scenario and growing demand for 100% secured Cloud-based apps for the digital economy.

As the global leader in CRM Salesforce specialises in improving external relationships with clients and prospect leads, so its decision to buy Slack, a workplace productivity tool represents a pivot strategy that brought together two game-changing organisations and now provides Salesforce a platform to improve communication and productivity internally as well.

In 2015, just 18 months after it launched, Slack reported having more than 1 million daily users — a figure then unheard of in enterprise software. When it was sold that figure had reached some 12 million. In response, Microsoft, using a design similar to Slack’s own, added Teams to its 365 portfolio without increasing the price and used an integrated bundle approach to take Teams from zero to more than 115 million users.

That disparity and ongoing demand for the Microsoft product perhaps helps to explain why Slack sold itself to Salesforce in the end. At Cypher, we still use Slack mainly as a replacement for email. We let clients have their own channels and it means they can contact us very quickly whenever they need to.

For transparency, I feel that Cypher operates a largely integrated bundle model, insofar as we do lots of different things and our clients get a bundle of services that they pay a monthly retainer for. But I also want to be best of breed and we pride ourselves on client astonishment, that’s just how we roll!

It was interesting to debate with Alan whether there was room for a middle ground; a ‘best of breed bundle’ if you will. A model where you do operate an integrated bundle strategy but within that bundle each product is market-leading. That would make a very strong business offering. But is it sustainable?

One of the reasons I am so fascinated by this subject is that we have a lot of conversations with clients around the fact that the business they have now, will not be the same in 5-years’ time. It might do a lot of the same sort of thing, but there will inevitably be change along the way. Having a polar opposite perspective on the route your business might take on this journey can lead to the establishment of a whole new set of income streams.

A recent example was the creation of the Oxford Fire Door Company by our client Rowood Kitchens and Joinery. Business was good, but Nick Rowland the MD spotted a gap in the market and wanted to fill it – literally, with bespoke, handmade fire doors.

When this growth happens, and it does more often that you would think, we discuss with the business owners whether the new companies will sit within the current business or whether they will completely stand-alone. For me, the way to answer that question is to understand the risks your new venture presents to your current business. Two separate downsides are that the new business could blow up instantly and make you loads of money, side tracking you from the one that has paid the mortgage for all those years, or there is a risk that you go off, set up company B and it’s awful, it damages the current brand and basically comes back to bite you.

Take innocent smoothies.  They built their brand on being ethical, fresh and innovative. They were bought by Coca-Cola and whatever your thoughts are on the ‘real thing’ the acquisition absolutely tanked the Innocent brand. On a small business level, if you set up a new business but don’t stick to the principles that made the first business so strong, maybe you don’t treat companies right, don’t treat customers right, don’t do a good job, perhaps because you are stretched too thin, then it can only do damage to the existing business.

It is still too early to know for certain what plans Saleforce has for Slack, or how successful the integration of two very different cultures with be, but based on this pivot strategy, as a small business owner who is used to being best-of-breed, it does sound hard to integrate with another business as a bundle or as a new company without diminishing the value of one of them. It feels a bit like chasing unicorns.

Ever the optimist, however, Alan points out that the mere possibility of being a business owner who is able to be across four or five businesses and can keep them all at a very high service level for a period of time should be exciting for anyone and reason enough to try.

The decision for business owners to pivot may not have been so much a choice as a final throw of the dice as Covid has forced many to consider new routes for diversification. For those still considering their next business step, I think my main advice is to not make that next step too big.

Pivoting can be risky in a normal world; doing so in lockdown presents a whole new set of challenges. To pivot successfully, using the Ansoff Matrix model, for me ideally you would take a relatively small step and sell something new to your existing customer base.  Leverage the trust and competency that your customers associate with your current portfolio to offer them a slightly different, or better still, complementary product. I would certainly not advocate creating one that affects your ability to grow your current business in the future.

My second piece of advice comes from the recent ‘Everyone Competes with Amazon podcast’. We also wrote a blog on that. Look at your new pivot business through the ‘Amazon lens’; what can you do better and more efficiently to delight your customers even more?

And finally, from a podcast on looking for Clarity, not Certainty, if you are considering a pivot for your business anytime soon, it doesn’t matter whether you want to pursue a best-of-breed or integrated bundle strategy. Whether you run one business or five, as a business owner, you can own the position they enter the market, you own the decision on the products and services you will offer and you own their quality, how well they are delivered and the level of customer service you want to offer.

Whatever your model, control what you can and knowing these two possibilities hopefully it will help you create a pathway for a successful pivot.

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This pivot to a physical store location represents a complete 180 from Jeff Bezo’s early dreams of opening an on-line book store to disrupt the established bricks and mortar brands, but it is yet another example of the constant innovation we have seen from Amazon since its inception in the mid 1990’s.

It will be interesting to see how this till-less offer develops and the reaction is elicits from other supermarket brands as Amazon starts to compete with their traditional retail offering. It also sparked a discussion that Alan Clark and I had on a recent Mind Your Business Podcast episode, that now every business, whatever their product, service or sector now competes with Amazon.

As most of you reading this will know, I run an accountancy business, so you might ask what right do I have competing with Amazon? I don’t sell products, I am not a distributer of goods, I certainly don’t package my advisory service up in a cardboard box with an A-to-Z swoosh on it and leave it in your greenhouse!

So let me explain what I mean by this statement.

The way I see it is that, today, if you want to buy literally anything, at some point you will go to Amazon. In that Amazon world you will have a huge choice and instant access to a range of products in your search stage. Let’s say you want to buy some Bluetooth headphones. You use the search function, which returns hundreds of options-the algorithms are very clever, they make sure you see what you want – or what Amazon and its thousands of Bluetooth headphone sellers’ want- and when you make your choice, you can proceed to the checkout, pay instantly and have them delivered literally later that day.

Amazon has built a business that delivers instant gratification. It has built a proposition that whatever you want, you will be able to find and buy it, or get the answer to a question you need resolved within the working day. This proposition is now integral to everyone’s life. So, even though my business is in the professional services sector and it can take months to deliver a product or service, we now have to treat our customer experience like we are Amazon.

For example, when we talk to a prospect client, they can get a proposal from us instantly. It can be digitally signed, while we are in the meeting with them discussing it. When they become a client, our on-boarding process is digital and seamless. And since the start of lockdown we have also made the conscious effort to always be available. Clients can contact us whenever or however they want. Whether their preferred channel is WhatsApp or Slack or email or a telephone call, we will be accessible.

For too long, particularly in the professional services sector, a potential client will choose a firm, they all agree terms in principle and then nothing happens for a week. The client chases, and in return receives a tatty email which says, ‘yes we can put together your shareholder’s agreement, it will be £1,500 plus VAT’. In the meantime the Amazon generation has spoken to a competitor, who didn’t keep them waiting, has got a price, signed a deal and moved on. Boom.

That is the new ground we are all competing on; instant gratification, or at least a much quicker acknowledgement and follow up process.

To compete with Amazon we have to turn things around in real time. It’s not necessarily because we are flashy, it’s because our client base are young entrepreneurs. Millennials or Gen Z are used to being able to sign on the dotted line and immediately start receiving the service they have asked for.

If it takes more than an hour from meeting a prospect to give them a proposal and sign them up as a customer, then someone in your industry will get there quicker and you will be haemorrhaging potential sales.

And I think this is now true for hundreds of businesses.

Amazon has conditioned us to expect to be able to pick apart a product and put it back together the way we want it, at a price point that suits us. So your operations and sales processes have to evolve to match this expectation. If you have a business model where customers can buy various different versions of the same product or service, meaning they can select from a basic budget model right the way up to platinum, with 100 different options in between, then from their experience of Amazon, your customer is going to want to instantly understand all of those options, the costs, where the differences are, and pick a solution that best suits them.

The concept of telling customers that they can have any colour they want, as long as it’s black and that the car will be ready ‘when it’s ready’ is obsolete. With its first foray into a book of the week spotlight, Amazon first brought us standardisation, then customisation and now personalisation. That is what we are competing with.

There’s also the consideration of how you deal with something if it goes wrong. We purchased a monitor from Amazon- that we had delivered not to the office but to the home of a new starter, because we were working remotely which had a fault with the power pack. We contacted Amazon and requested a new one. They said they couldn’t break up a monitor and power pack set so they would just send out a complete unit. Importantly, the whole process took less than two days and came with no stress and no quibble. A problem was fixed and we are still loyal customers.

Every small business I work with has a built-in guarantee like this. One of our clients specialises in beautiful handmade kitchens and joinery. They don’t talk about their guarantee at all and the reality is very few people experience it because they make sure they get it right first time. But if someone spent £40,000 on a new kitchen that wasn’t quite right, they fact is that Rowood wouldn’t hesitate to fix it and wouldn’t leave the site until it was put right. That’s their guarantee but they don’t shout about it. Amazon has ensured that its vast customer base expects that when something goes wrong it will be put right, no hassle, no arguments. If your customer service doesn’t match this level, someone else’s will.

Amazon is also a great entrepreneurial story. When he started, Jeff Bezos was absolutely not an expert in distribution chains but rather a guy in his garage trying to create an online book store. In another blog we talked about skyscrapers and how easy it is to only see the final product and ignore the years of hard work it took to get there. If you look at the first iterations of the Amazon home page and its book of the week section you will see how far the platform has come. Amazon probably sells more books than anyone else in the world but the lesson here for every business owner is that the business you have today will not be the business you have in five years. Allow yourself to grow and evolve.

Amazon is also binary; you either buy the product or you don’t. There’s no hard sell. A lot of business owners, certainly in the first few months of trading, fall into the trap of needing to sell to everybody, all the time. As the saying goes, everyone with a chequebook and a pulse is a potential customer. We have a restaurateur as a client; he runs a top-quality restaurant and is very clear on his menu, his price and who his customers are. A lot of people think it’s too expensive, but he’s ok with that because the price reflects the time it takes to prepare the dishes and the quality of ingredients he uses, it is a destination restaurant.

We talked in a previous pod about looking for clarity, not certainty in a business. This is an example of that clarity. This restaurateur has never had certainty that people would flock to eat at his restaurant, but by getting clarity on what he can control he has built a core fan base and has developed a thriving business. Like Amazon, he presents you with what he thinks you will like.

We started off with quite a bold statement about how every business now competes with Amazon. It’s not necessarily their products or service, but rather in the way their customers have been trained, by Amazon, to expect certain standards from every other supplier they deal with.

Whether you are a barber shop, an accountancy, a funeral directors, a restaurant, or a professional services business, your customers have been indoctrinated by Amazon to expect that they can pull apart your product and put it back together exactly how they want it. They can get instant gratification in terms of receiving whatever they order, and can enjoy a really well-rounded guarantee of customer service, if something ever goes wrong.

Whatever business you are in, you need to focus on your customer touch points. Whether it’s your initial engagement and proposal process, how you on-board a client or how you package your product or service, take a look at your operation and then Amazon it, because as customers that is now the model we expect.

I had created this vision for something that might happen in the future, which was a complete horror story for my business and my life. Enter Alan, who provided another perspective, grounded in fact and logic. I chose his route and I am pleased to say that my personal horror story didn’t end the way it could have in my head.

As a business owner, whether you are running a new start up or a business that has been around for generations, sadly you can, quite easily, become the director, producer, scriptwriter and actor of our own horror story.

Talking to Alan, Scary movie land is a land of perception, a self-created perception that has a massive impact on how we feel, how we act, what decisions we make and ultimately how we perform. Part of this self-creation stems from the context we create and the language and words we use to describe a situation we find ourselves in. I was describing my situation as one where I wasn’t going to have enough money to pay back what I owed. It was catastrophic; it was the end of the world. In that context I was seeing myself as a failure, it was muddying my emotions, it was slowing me down and I was becoming limited.

To break the funk I was in, Alan encouraged me to talk about the service I wanted to give, my purpose for creating Cypher, the offer I was making to the world and how I wanted to inspire people through what I thought was possible from an accountant. It was a powerful moment. It helped me to reconnect with my passion and reminded me why I created Cypher in the first place. Of course, I had to keep a level of clarity on what needed to happen to pay the money back, but logic and the business financials showed me the likely end of the movie. Spoiler alert…we are still going strong.

One way to explain my self-perception is that the mind is a powerful thing that is designed to protect you. It is hard wired to make you pull back every time you get too close to the edge. It throws up all the possible negative outcomes to ultimately keep you safe in the status quo. But once you see passed that, see what’s likely, what’s possible even, then the weight off your shoulders is significant.

To help get a different perspective, Alan describes four domains through which one can view any situation. They are Logical, Emotional, Spiritual and Structural. Needless to say the more balance we can achieve, the more developed we are in each of these domains, the better our decision-making and the better our performance as we let go of the baggage that is dragging us down.

I was stuck in the emotional domain, which was draining my energy and limiting my performance, Alan, urged logic – and financials – to frame my context in a better way. A more accurate way in fact. He also reconnected me with my purpose through the spiritual domain and because of the structures we had already put in place at Cypher, we had created the ability to thrive.

To prevent your business’s movie from having a horrible ending and add a different perspective to your context, both Alan and I recommend creating partnerships with other professionals. To keep the movie metaphor going, they can become your supporting cast and crew. This could be a business coach, a marketing consultant or an accountant who can each give you access to new expertise, a new perspective that can help guide you.

Secondly, try to connect with your emotion, be clear what is it you are feeling, own it and be prepared for an honest answer. You might be too scared to look in the metaphorical basement because there may be a scary monster in there and you don’t want to confront it. Stay true to the intent you had at the start of getting better at whatever you do and suddenly you will access more useful insight and do less ruminating. Alan always recommends using your emotion to help you.

A trick Alan shares on the podcast is that if you use language like ‘I worry that’…for example; ‘I worry that I won’t sell enough’ or ‘I worry that my clients aren’t happy’, guess what, you are rewarded with a lot of worry. Instead, change your language to ‘I wonder how….’ So, for example; ‘I wonder how I can deliver a better service’, ‘I wonder how I can compete with bigger businesses and win more profitable clients’, then you will be rewarded with a more creative mindset, you will feed your purpose, which is liberating.

Another example of this change in mindset is giving bad news. Sometimes you have to have difficult conversations or give a client bad news. It is unavoidable. In my experience those conversations are never ever as bad as you think they will be. You build them up to be another brutal scene from your horror movie, when in reality they aren’t. As business owners, we have to be comfortable with the fact that not every interaction will go perfectly, not everything will be optimal every time. The important thing is recognising that generally it isn’t as bad as we think it will be and then doing something about it. Don’t fixate on the ‘what ifs’, think, ‘what else’.

Alan says we have around 6000 conscious thoughts a day (Google it). Not all of them are spent in the present. A percentage of these will reminisce in the past, while others will transport us to the future we have created- good or bad. If we accept this and come up with an accurate way to explain the situation, past, present or future while remaining true to our intent then it will change our context, change our perception of ourselves. it will change you into more joyous passionate emotions your axe bolder and your create better things for both yourself your business and your clients. Remember we create our own experience.

So much anxiety for business owners stems from a desire to make everything perfect; every client interaction, every piece of work. In reality that will never happen and often you don’t have to be the best in the world at what you do, but you need to be good enough. We have around 200 clients in our business and if three had an issue, this would have kept me up at night. In reality if I speak to them directly two may not see their issues as that big, the other may have a genuine concern, but the important thing is that by addressing it, understanding it, we will do something about it thus preventing the catastrophe we have predicted.

In summary, we called the podcast ‘Don’t create your own business horror story’. This title was based on the premise that perception and context are all self-created. How we describe a situation to ourselves is often how it will turn out. Identify the emotions you are experiencing about a context and try to view it through a new lens, ideally with the help of someone else. Getting clarity about the context and the situation can move you away from negative thoughts and lead to higher performance. Open the basement door, take a torch with you and confront the monster. It is unlikely to be as big or as scary as you think.

There is a large waiver that accompanies this blog. If you do find yourself in a rickety old house, isolated on the moors and you hear a banging under the floorboards, don’t go down there. In this context horror movie rules do still apply!

Before today’s announcement he was clear that he would focus on three areas in particular; protecting jobs, protecting businesses and protecting the housing market. Our initial thoughts are that it feels like it’s a budget that is good for business and particularly small business which is the majority of our client base.

Along with the extension to the furlough scheme until the autumn and a freeze on personal tax allowances, three things stood out for us in the details of the speech, the widely anticipated Corporation Tax increase isn’t as bad as predicted, the super deduction and increases in capital allowances will represent massive savings for businesses that invest in plant material or electric car fleets and with the potential for an even bigger impact is the news that the loss carry back period for businesses has now been extended.

Let’s start with the Corporate Tax Rate rise to 25%

To balance the need to raise revenue with the objective of having an internationally competitive tax system, the rate of corporation tax will increase from April 2023 to 25% on profits over £250,000. The rate for small profits under £50,000 will remain at 19% and there will be tapered relief for businesses with profits under £250,000 so that they pay less than the main rate.

Firstly, the rate isn’t going up until 2023, so that does offer businesses the chance to bounce back somewhat after Covid, and realistically, I think 90% of small businesses will not be paying the new headline 25%. A huge amount will remain on the 19% rate they are paying now while under the new tapered system, the rest will be somewhere between 20 and 23%. Interestingly, under the previous budget, pre-Covid, the corporation tax rate was due to be going up past19% anyway. The flat rate was going up to 20, 21 and 22% over the next few years. So actually a number of small business with profit below 50K could look at this like a tax cut!

Linked into this is the super deductions capital allowances scheme.

From 1 April 2021 until 31 March 2023, companies investing in qualifying new plant and machinery assets will benefit from a 130% first-year capital allowance. This upfront super-deduction will allow companies to cut their tax bill by up to 25p for every £1 they invest, ensuring the UK capital allowances regime is amongst the most competitive in the world.

For businesses that buy plant machinery, electric vehicles or anything that capital allowances would normally apply to, or anything you would have got annual investment allowance for this is huge.

The chancellor has also removed the annual investment allowance limit. It was £1m which sounds like a lot but we have agricultural clients that can easily spend that in a year. It now appears the £1m limit has been abolished, and there is another 30% added to the tax relief you can claim.

The final and possibly biggest news of the day is the extended loss carry back for businesses.

To help otherwise-viable UK businesses which have been pushed into a loss-making position, the trading loss carry-back rule will be temporarily extended from the existing one year to three years. This will be available for both incorporated and unincorporated businesses.

In addition:

• Unincorporated businesses and companies that are not members of a corporate group will be able to obtain relief for up to £2 million of losses in each of 2020-21 and 2021-22
• Companies that are members of a corporate group will be able to obtain relief for up to £200,000 of losses in each of 2020-21 and 2021-22 without any group limitations
• Companies that are members of a corporate group will be able to obtain relief for up to £2 million of losses in each of 2020-21 and 2021-22, but subject to a £2 million cap across the group as a whole

At present if you make a loss in any given year, you can carry back that loss against profits you made the previous year. So let’s say you made £100,000 profit and paid £19,000 in tax last year, but this year you lost £50,000. Under the old rules you could carry that £50,000 loss back and get half of your £19,000 of tax back.

The new rules mean that we can go back two years.

So, if you made £50,000 of profit last year, but due to Covid you made a substantial loss of £100,000 this year, under the old scheme you would be unable to go back and recover the £50,000 loss over and above last year’s profits.(instead you would have to carry the rest of the loss forward against future profits). Now you can carry all of the losses back against profits last year, and if necessary go back to the before that and use any of the profits there. And if there are still losses that haven’t been relieved, at that point you can go back to the year before. Any regained funds will come in as a tax refund, which could represent a massive cash flow injection for a number of businesses.

There was also good news for a number of the sectors we support. The chancellor announced the up-to-£500,000 “nil-rate band” for stamp duty will finish at the end of June, rather than the end of March, as planned, which will continue to drive activity in the housing market.

The government will also provide ‘Restart Grants’of up to £6,000 per premises for non-essential retail businesses and up to £18,000 per premises for hospitality, accommodation, leisure, personal care and gym businesses, giving them a level of cash certainty to plan ahead and safely relaunch trading over the coming months. The government is also providing all local authorities in England with an additional £425 million of discretionary business grant funding, on top of the £1.6 billion already allocated. We will work with clients in these sectors to access these funds as they need them.

What is it?
Domestic reverse charge (DRC) is a new way of accounting for VAT, it will apply to all VAT registered construction businesses in the UK. The new legislation is being introduced as an anti-fraud measure, it intends to cut down on the ‘missing trader’ fraud, where companies receive high net amounts for VAT from their customers but have no intention of paying the VAT to HMRC.

From Monday 1 March 2021 the domestic VAT reverse charge must be used for most supplies of building and construction services.

The charge applies to standard and reduced-rate VAT services:

• for individuals or businesses who are registered for VAT in the UK
• reported within the Construction Industry Scheme

What does it mean for you?
Firstly, please do not panic, put simply, the new legislation moves the VAT liability from the supplier (subcontractor) to the customer (contractor) but also not always, only if certain criteria is met, so please read on and we hope this document helps. There is a lot of information included here, so please do not hesitate to contact us if a call would be useful.

If you are a CIS subcontractor you will no longer charge VAT to your CIS customers. Instead, on your invoices you need to state your customer is responsible for the VAT and show what VAT rate should be applied.

If you are a CIS contractor when you receive a bill from your CIS subcontractor you are responsible for reporting both the input and output VAT on that bill.

This change may impact your cash flow. If you are a subcontractor then it’s likely your short term cash flow will be adversely impacted as you will no longer be receiving the VAT element from your customer. If you are the contractor, you will likely have a short term cash flow benefit.

Good News
If you are on Xero, they are ready and the movement to DRC will be pretty straight forward. Once we get our heads around when we charge who for what, Xero will handle the VAT return calculations with the introduction of the new tax codes. We will make these live for you and you will see these available for use from Monday. By using these new tax codes your sales invoices will be prepopulated with the required note that no VAT is charged under the domestic reverse charge. It also applies the correct treatment itself on the return, where the amount basically goes in quite a few boxes and would otherwise give us all a headache, so thanks Xero for making this step easier!

For most, this is another scheme that you will not need to know much about. VAT loves schemes and there are quite a few around, but it is something we need to bear in mind so we are hoping this fact sheet will just make life a little easier.

Finally, we are obviously on hand if you would like to talk through any of this information or if you would like us to go through your first invoice under the scheme together please do not hesitate to contact us and we are more than happy to talk.

HMRC understands that implementing the reverse charge may cause some difficulties and will apply a light touch in dealing with any errors made in the first 6 months of the new legislation, as long as you are trying to comply with the new legislation and have acted in good faith.

If you would like to talk to HMRC their contact details are:

CIS Helpline on 0300 200 3210 (or +44 161 930 8706 if outside the UK).

VAT Helpline on 0300 200 3700 (or +44 2920 501 261 if outside the UK) for any uncertainty or clarity on whether the reverse charge applies.

Let’s understand if the work you are carrying out is subject to DRC?

When you must use the reverse charge
You must use the reverse charge for the following services:

• constructing, altering, repairing, extending, demolishing or dismantling buildings or structures (whether permanent or not), including offshore installation services
• constructing, altering, repairing, extending, demolishing of any works forming, or planned to form, part of the land, including (in particular) walls, roadworks, power lines, electronic communications equipment, aircraft runways, railways, inland waterways, docks and harbours, pipelines, reservoirs, water mains, wells, sewers, industrial plant and installations for purposes of land drainage, coast protection or defence
• installing heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply or fire protection systems in any building or structure
• internal cleaning of buildings and structures, so far as carried out in the course of their construction, alteration, repair, extension or restoration
• painting or decorating the inside or the external surfaces of any building or structure
• services which form an integral part of, or are part of the preparation or completion of the services described above – including site clearance, earth-moving, excavation, tunnelling and boring, laying of foundations, erection of scaffolding, site restoration, landscaping and the provision of roadways and other access works

When you must not use the reverse charge
Do not use the charge for the following services, when supplied on their own:

• drilling for, or extracting, oil or natural gas
• extracting minerals (using underground or surface working) and tunnelling, boring, or construction of underground works, for this purpose
• manufacturing building or engineering components or equipment, materials, plant or machinery, or delivering any of these to site
• manufacturing components for heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply or fire protection systems, or delivering any of these to site
• the professional work of architects or surveyors, or of building, engineering, interior or exterior decoration and landscape consultants
• making, installing and repairing art works such as sculptures, murals and other items that are purely artistic signwriting and erecting, installing and repairing signboards and advertisements
• installing seating, blinds and shutters
• installing security systems, including burglar alarms, closed circuit television and public address systems

Subcontractors – what do you need to do?
Life just got a little simpler for you! If applicable you do not need to charge VAT, you just need to state on your invoices that your customer is now liable for the VAT and you just state if this is at 20% or 5%. Do this in Xero by using the appropriate tax rate when creating a sales invoice and they does the rest! Now let’s look at who this will apply to:

The reverse charge will need to be used if you sell building and construction services when:

• your customer is registered for VAT in the UK
• payment for the supply is reported within the Construction Industry Scheme (CIS)
• the services you supply are standard or reduced rated
• you’re not an employment business supplying either staff, workers or both
• your customer has not given written confirmation that they’re an end user or intermediary supplier

If the criteria above is met – What you now need to do:

1. Check if your customer has a valid VAT number.
2. Check your customer’s CIS registration.
3. Review your contracts to decide if the reverse charge will apply and tell your customers.
4. Ask your customer to confirm whether they are an end user or intermediary supplier with a written notification, as discussed below
5. Record the invoice in your accounts with the correct VAT treatment.

As a subcontractor you should also be aware that your customers will no longer be paying you VAT, which will reduce the gross value of payments coming into your business, as no VAT will be due on payments from customers where the supply is covered by the reverse charge. So you’ll need to consider and plan for the impact of this on your day-to-day cashflow. On the bright-side though, you aren’t having to worry about a large VAT bill when the VAT you have been collecting for HMRC is due!

What if the criteria is not met – Who does the reverse charge NOT apply to?
The reverse charge does not apply to any of the following customers:

• A non-VAT registered customer
• ‘End users’ i.e. a VAT registered customer who is not intending to make further on-going supplies of construction
  • For reverse charge purposes consumers and final customers are called end users. They’re businesses, or groups of businesses, that are VAT and Construction Industry Scheme registered but do not make onward supplies of the building and construction services supplied to them.
  • The reverse charge does not apply to supplies to end users where the end user tells their supplier or building contractor in writing that they’re an end user.
• ‘Intermediary suppliers’ who are connected e.g. a landlord and his tenant or two companies in the same group
• Overseas customers – it only applies to UK companies providing building and construction services in the UK

If you supply services that are not subject to the reverse charge, for example to private individuals or end users, you must account for VAT as you did previously, either standard 20% or reduced rate 5%.

In order to confirm if a customer falls under end user or intermediary suppliers HMRC request that you receive written notification in the form:

• on paper and sent by post
• electronically in an email
• in a contract

The notification should be kept as part of normal business records and show clearly what supplies are covered. Contracts can be either for specific supplies or it can be a Heads of Agreement or call-off type contract for supplies that are to be made at some time in the future.

If a written notification is not made correctly the customer will be liable for accounting for the VAT that should have been charged under the reverse charge. It’s important that the person making the notification knows and understands that it’s correct.

An example of the wording to obtain for the written notification is:

‘We are an end user for the purposes of section 55A VAT Act 1994 reverse charge for building and construction services. Please issue us with a normal VAT invoice, with VAT charged at the appropriate rate. We will not account for the reverse charge.’

The below flowchart has been provided by HMRC to help determine whether the supply is DRC or normal VAT rules applies:  

Contractors – what do you need to do?
Life just got a little better for you, you should notice the difference of the scheme with a short term cashflow boost. If applicable, subcontractors will not be charging you VAT so you will not be paying it over to them when settling their invoice (everyone likes to hold on to their cash a little bit longer)!

The reverse charge will need to be used if you buy building and construction services when:

• payment for the supply is reported within the Construction Industry Scheme (CIS)
• the supply is standard or reduced rated
• are not hiring either staff or workers, or both
• you’re not using the end user or intermediary exclusions

If you receive a service subject to the reverse charge from subcontractors you’ll have to account for the VAT in your VAT Return and recover it simultaneously on the same VAT Return, subject to the normal rules on VAT input tax deduction.

If the criteria above is met – What you now need to do

1. Check if your supplier has a valid VAT number.
2. Tell your supplier if you’re an end user or intermediary supplier, as the reverse charge will not apply.
3. Find out how to account for the charge.

Once you’ve confirmed your accounting systems and software can account for the reverse charge, you’ll need to:

• make sure the invoice you receive is correct
• check the list of services that must use the reverse charge
• record the reverse charge on your VAT return and reclaim it in the usual way

The Reverse charge does not apply to any of the following supplies:

• Supplies of VAT exempt building and construction services
• Supplies that are not covered by the CIS, unless linked to such a supply
• Supplies of staff or workers

The Reverse charge does not apply to any of the following customers, you as a contractor to a subcontractor:

• A non-VAT registered customer
• ‘End users’ i.e. a VAT registered customer who is not intending to make further on-going supplies of construction
  • For reverse charge purposes consumers and final customers are called end users. They’re businesses, or groups of businesses, that are VAT and Construction Industry Scheme registered but do not make onward supplies of the building and construction services supplied to them.
  • The reverse charge does not apply to supplies to end users where the end user tells their supplier or building contractor in writing that they’re an end user.
• ‘Intermediary suppliers’ who are connected e.g. a landlord and his tenant or two companies in the same group
• Overseas customers – it only applies to UK companies providing building and construction services in the UK

Telling your supplier (subcontractor) that you are an end user or intermediary supplier:
In order to confirm if you as a customer fall under end user or intermediary suppliers, HMRC request that you provide written notification in the form:

• on paper and sent by post
• electronically in an email
• in a contract

The notification should be kept as part of normal business records and show clearly what supplies are covered. Contracts can be either for specific supplies or it can be a Heads of Agreement or call-off type contract for supplies that are to be made at some time in the future.

If a written notification is not made correctly the customer (you) will be liable for accounting for the VAT that should have been charged under the reverse charge. It’s important that the person making the notification knows and understands that it’s correct.

An example of the wording to use for the written notification is:

‘We are an end user for the purposes of section 55A VAT Act 1994 reverse charge for building and construction services. Please issue us with a normal VAT invoice, with VAT charged at the appropriate rate. We will not account for the reverse charge.’

The subcontractor should report on their invoice to you what rate the reverse charge is applicable, please be aware this can be standard 20% or reduced rate 5% depending on the service and supply.

The below flowchart has been provided by HMRC to help determine whether the supply is DRC or normal VAT rules applies:

Are you using the Cash Accounting Scheme or Flat Rate Scheme?
You cannot use the VAT Cash Accounting Scheme for supplies of services that are subject to the reverse charge – VAT is due when a VAT invoice is issued (tax point) or the payment is received, whichever is earlier.

Reverse charge supplies are not to be accounted for under the Flat Rate Scheme. Flat Rate Scheme users who receive reverse charge supplies will have to account for the VAT due to HMRC and recover it simultaneously on the same VAT Return. Users of the Flat Rate Scheme will have to consider if it’s still beneficial to them bearing in mind that under the scheme they cannot recover VAT incurred on purchases of materials, overheads and so on.