7 out of 10 cats prefer....

It’s one of those blind taste tests – Costa Coffee did it, Pepsi did it. And everyone finds that 7 out of ten prefer the promoting brand...

So why does Coke still outsell Pepsi? Were Pepsi skewing the results? Or is it more about how people make decisions? Do they make them blindly?

Of course not. It’s not just about the product. Pepsi had to find out the hard way that it’s about the image that comes up in the customer’s mind - the idea, the concept – not just the product. Granted, you do need to have a good product, but that’s not everything. People in America were buying Coke because it represented an idea to them – Coke was baseball games and apple pie and a flag waving on the front porch and families sitting down together for a meal and having a laugh with friends and Christmas gifts and leaving out cookies for Santa. When they looked at the two cans at the grocery store, the colours and images and feelings that came when they looked at the Coke can were why they chose that one – not first the flavour when they opened it later.

Completing technically accurate accounts and tax returns is important to me and my clients, but it’s not the image my clients have of me. It should be about how they feel when we meet, or ring up, email, letter – communicate. And it’s the same whatever you do. It’s about the customer journey – how they feel. Do they feel happy, relaxed, at ease, confident in you? Because they should – at every part of the customer journey – from initial contact right through the experience. You can have produced the best, more accurately machined, shiniest widget – you could be so proud (rightly) of your technical ability, so you think your clients should be too – but if they see untidy, late, uncommunicative – they get a different impression. And they won’t buy. The difference between good technician and good business person is a whole new subject!

Here’s another story – Scandinavian Airline Systems were awful at customer service (I’ve flown them) and were losing money hand over fist in the 70s and 80s. The new CEO instigated what is now called a Coffee Stain Survey. They found that if the passengers, when they flipped the tray in the seat back in front of them found a coffee stain, they assumed that the engines hadn’t been serviced properly. They reasoned that if the airline couldn’t even be bothered to clean the trays, they may not look too hard at more important things.

Do your own Coffee Stain Survey. Walk the customer journey. And have a free eBook – Customer Care – Why Bother? It’s on the website – www.hixsons.co.uk. It’s your lifeblood.

Queens Speech - letter to Santa!

So you need a new law to get pupils a good education? Or one to halve the debts the Government has built up?

It's like saying that I will get up at 7 o'clock every morning - just do it man!

No fiscal Golden Rule has remained unbroken, and now we have the news that borrowing is nearly the same level as this country's GDP. Include unfunded public sector pensions, and its twice GDP.

Which means that spending will be cut, and tax WILL rise. Maybe some inflation too - after all VAT goes back up to 17.5% on 1 January (Happy New Year from Team GB). The highest rate of income tax is already set for 50% from April 2010. Maybe it will go higher yet.

And - to depress us more - analysis of all the recessions in the last century shows us that they last between 47 and 55 months. We, by the way, are at about month 19. Nationwide expects house prices to move on down next year as unemployment drives demand down. More good news.

The next 6 months will be characterised by all the political parties spending most of their time and energy on getting elected, and NOT on sorting this out.

Which mean that businesses who are getting by (just) will be further weakened. Many more will fail, especially in the next 3 months. The remainder will see their tax bills rise.

That is, unless they do something about it - to survive (even grow as some of our clients are doing) and minimise their tax. I have lots of cunning plans!

After all, it's not about cheating the taxman - it's about having enough cash to survive. I'm expecting a busy few months. I just don't want to hear people tell me afterwards - "I wish I'd taken your advice". Take it now!

Confidence tricks – has the recession been caused by over confidence?

NatWest has surveyed nine thousand young people about salary expectations. Because of the recession, expectations have dropped. Instead of expecting to earn £70,000 when they are 35, they now only expect to earn £54,000. How’s that for confidence – when an average salary for a 35-year-old is just under £24,000?

In an international study, American students who ranked last in maths abilities ranked first when they asked how they felt about their maths abilities. Their positive thinking had completely deluded them about their actual abilities.

But we want to be confident, and we want our children to be confident as well. We are told regularly that thinking good thoughts will bring good results. Well, we have thought good thoughts over the last decade and look where we are now. We have assumed that the boom would continue. We have closed our eyes to history. And I don’t mean by that the previous centuries, I mean the previous few decades which we have lived through. Why did we assume that the last recession would never be repeated? History does repeat itself.

Yet confidence, and in particular financial confidence, and more particularly the bankers and financiers who broke the system, has at least in part caused the problem that we are now going to be living with for the next umpteen years.

Just because I’m an accountant does not make me a pessimist! It might, I hope make me a realist. That’s that old definition isn’t it – a pessimist is a realist described by an optimist!

Apart from the financial implications of my clients’ actions, I deal with their personal objectives and to some extent their emotions. They are all interrelated. I’ve even done courses and taken qualifications in an attempt to understand why people act the way they do, and to try and find ways to change that when necessary.

As a country we are determined to fill our lives with self belief and good thoughts as a method of driving ourselves towards good outcomes. I think we have caught this disease from over the water. There is a whole industry which started in the United States and is now throughout the Western world which peddles the mantra that if you think bright positive and optimistic thoughts good things will be drawn to you without any further effort on your behalf. It’s not positive thinking, it’s magical thinking.

I do believe that you can influence the way that you act and hence your outcomes by the way you think. And I help people with this. But I do not inculcate them with a belief that they can overcome any obstacle just by wishing it so. I try and give them a realistic outcomes and realistic plans to achieve them. Plans which can be amended and adapted to fit changing circumstances.

As a society, we have not done this in recent years. We have assumed the best, and even worse, assumed we had to do nothing to achieve it.

Individual self-esteem is a good thing based on realism. Perhaps more of this would lead to a community with more chance of achieving realistic goals and with more sense of purpose and values.

Individually, and in businesses, be realistic (not pessimistic!), set realistic goals with some slack in them, and enjoy what you’ve got.

Why banks repackage assets, and what it means for us

It's all about de risking the bank's balance sheet. It's so difficult to decide when bankers really make money because the financial instruments they use are so complex. And look how many dodgy securities they are sitting on at the moment.

So what's a poor banker to do to improve matters? How about selling some of these securities to a brand new offshore company, and lending the company the money to buy them? It gets over the following problem: you have to write down your securities if you don't think you're going to collect on them, and that makes a hit on profits, and worries people. But if you have lent money on a house for example, as long as the repayments are still being made, even if the house is in negative equity, you don't have to write it down on your balance sheet. so if I were a banker, I would be delighted to sell a dodgy asset and get a loan in exchange which I don't have to write down. Is

And this is what has just happened. Barclays had just sold $12 billion worth of securities to a brand new company and lent it just about all the money to buy them. It's bought itself some time. Banks need all the time they can get at the moment.

What does it mean to us? Well, the bank gets a bit safer. That's good. But if the bank has lent its money to this company, it can't lend it to us. So credit has just got a little bit more difficult, and a little bit more expensive all round. and that means that the value of assets you buy with this credit is likely to fall to prop up the price of the assets that Barclays now don't think they will collect on. this deal was done under very, very favourable terms to the lender. Not the actions of a bank that thinks that its assets are worth what it paid for them.

Anyone think that the recession is over?

6 killer facts in micro enterprise learning and support.

A|ll from the UK Sector Skills Body for Enterprise

Fact:

Over 95% of enterprises (4.5 million) in the UK are micro enterprises with fewer than ten employees. A fair share of government skills and support funding to start ups, self employed and micro enterprises will provide the best returns for the economy, employment and society of any UK sector.

Yet 95% of government funding for business skills and support goes to the 5% with 10 or more employees

Fact:

Over three quarters of these businesses have no employees beyond the people running them and only just over a quarter of these businesses are based away fom the owner’s home. They may be hard to reach but SFEDI Advisory Board Members do and can help them. It is vital that we do, for the UK employment rate.

Not having employees or conventional business premises seems to make them invisible to government enterprise skills and support policy. Yet if they were not in business on their own there would be nearly 3.3 million more unemployed. Our unemployment rate is only at the current level because there are over one million more self employed people than in the last recession.

Fact:

Enterprise owners and the self-employed account for one in seven of the people in work. Self employability and enterprise skills are as important as employability and sector specific skills and lead to most net new jobs growth.

Enterprise owners will account for one in five people in work by 2020 and one in three by 2050. Nearly all the net new jobs growth in the private sector comes out of the growth in self employment and micro enterprises.

Fact:

There are almost half a million new enterprises starting each year. Providing effective start-up support can halve the rate of early business failure. We believe that government should fund a minimum level of start up training and support to everyone at pre-start for their new enterprise. Running your own enterprise requires specific skills and know how – just like any other career.

In England there is no government policy to ensure all those starting up get the skills coaching and business support to ensure they have the best chance of surviving and thriving in their new career. With the right support over 85% will still be trading in 3 years time and 6% of them will become substantial businesses. (Inbiz)

Fact:

Almost two-thirds of people running small businesses have no prior business/ management experience and less than a third of these have any formal business training. 12% have no qualifications and 55% have a highest qualification below Level 3. At least 200,000 adults and their enterprises could benefit each year from achieving an enterprise qualification which would be of value for all their working life.

Assisting prospective micro enterprise owners with the skills coaching and business support they need would mean a minimum of 100,000 new level 2 business enterprise qualifications, 30,000 new level 3 qualifications and 5,000 new level 4 qualifications per annum.

Fact:

Almost all these people say they develop their business abilities by learning from their own experiences and half learn from other enterprise owners. Enterprise learning and support needs to be experiential, active and integrated into the everyday practicalities and problems to be solved in starting or running your own enterprise.

We have researched, defined and proven the skills and know how needed to start up, survive and thrive. We know how to engage with prospective and existing micro enterprise owners. We know how to quality assure and recognise the appropriate enterprise learning and support. We have private and social enterprise sector backing and we’d like government to meet us half way.

The Missing Madoff Millions! How to avoid fraud in your business

Many will have been shocked by the news from the US of the missing Madoff millions - or rather billions. One of the features of this scandal was that a high proportion of his investors knew Mr Madoff personally and trusted him with their money. It perhaps underlines the dangers of thinking you know someone and, in consequence, perhaps not being as careful as one might otherwise be.

Some form of fraud or theft could be happening in your business right under your nose. Are your internal controls strong enough to catch it?

Often small business owners only find out about fraud and theft when it’s too late. And very few businesses are able to fully recover, if at all, from an internal theft. Having good internal controls means you can focus on doing what you do best, building your business.

We’ve seen it in our clients – it’s happened to them, so I’m keen it doesn’t happen to you. It’s generally perpetrated by someone you know well and trust, and in these times of economic pressure, people will do things which are out of character, so you need to be extra careful.

Here is a useful checklist to help you think about the risk of fraud in your business.

Fraud Checklist

Fraud is a potential threat to every company, including small and medium entities. The risk of fraud can be managed. The following is a checklist of simple and affordable measures on managing the risk of employee fraud, including some technology-based measures that can be adopted when the threat of fraud is higher.

Accept the idea that fraud is commonplace and can happen at any business.

Set an appropriate ethical example for employees to follow, and treat them with respect and fairness, including fair play.

Ask your employees to identify ways in which someone could commit fraud at your company and the ways to avoid it.

Develop a code of conduct that explicitly prohibits employees from committing fraud, conflict of interest and other illegal acts. Ensure all employees, vendors and customers get copies of it. Consider having key employees provide annual confirmations of their compliance and have a clear company policy on time and expense reporting.

Adopt a “trust, but verify code”. If you need only one bookkeeper, conduct a careful background check before hiring. Take note of employees who appear to live substantially beyond their means.

Verify the credentials of all new vendors before they are authorised to supply the company. Periodically review vendors to identify possible improprieties.

Make sure all disbursements are properly approved.

Protect yourself against cheque alterations by adopting electronic transfers for large payments, using direct deposit for payroll, placing a financial limit on cheques and implementing up-to-date cheque security measures.

Review original bank statements before your bookkeeper does. Keep an eye out for unexpected overdrafts or declines in cash balance.

Make sure bank statements are reconciled each month and that an expert adviser, such as your accountant reviews the bookkeeper’s work periodically.

If something seems odd, whether it is a disbursement to an unfamiliar vendor or unexpected costs, consider the possibility of fraud.

Growth and Profits! Or Cash and Choices?

You don’t want those!

You want CASH and CHOICES! Growth and profits help the business to fulfil your personal objectives. You didn’t start the business so that you could have thousands of employees, and earn millions of pounds. You started is that you could have the freedom to do that kind of work you like, be your own boss, take holidays or pursue outside interests when you like, and have the cash available to do so, and even into your retirement.

But it’s not always how you end up, is it? Overworked, stressed, needing help but not knowing what, and struggling to get a week in Majorca let alone anything more exotic.

Most business advisory tools are used to drive growth in profits. But without a clear understanding of what YOU want, that only does half the job. You need to be clear about your goals, and by that I mean personal goals.

Driving growth and profits up is a means to an end, not an end in itself. It still needs to be done, and that’s what we do best here. But we are know why.

Because other key thing that we try and build in is choice. You can choose to take four weeks off or you can choose to work. Sometimes – most of the time these days – you can’t choose. You have to work. But if we can build in the choices then the work becomes easier, stress levels drop, and who knows – you make it for your four weeks off.

It’s essential to plan personal goals as well as business ones. Just doing the business ones is just doing half the job.

Do the maths!

People have some number blindness particularly when they’re trying to be positive. I come across this all the time, and in particular, in this recession, people are keen to feel good about their jobs and their houses. So they forget what the numbers really mean – particularly percentages.

If your house has dropped by 50% in value, and then goes up by 50%, it doesn’t go up to the same level it was at the start. Let’s do the sums.

Price year one £100,000
50% price fall -£50,000
Price at the beginning of year two £50,000
50% price rise £25,000
Price at the end of year two £75,000

Do you see how percentages can mislead us? And oh how we are being misled at the moment!

The government told us that the economy’s performance in the first quarter of this year showed a 1.9% drop. Now that has been revised to 2.4% drop. I wonder if more revisions are coming. That’s 4.9% in the 12 months by the way. The largest deficit since official records began just after the war. They didn’t offer us this fact – you had to go look yourself.

Let’s look at the USA for a moment. Employment numbers last month showed a better than expected drop. This wasn’t though a genuine improvement, but new and improved techniques for recording the numbers. More adjustments for seasonal adjustments and birth and death models were built in. The discouraged workers – those who have given up looking – were not included in the jobless figures at all, for the first time. Without all these shenanigans, the figures would have shown unemployment getting worse at the same pace as last year. If the authorities were measuring on the same basis as in the 1930s, then they will be showing similar levels as those in the Great Depression – about 20% of the workforce. But we can’t tell people that can we?
My message is simple – check the numbers and question the basis.

Now here’s the entertainment – Warren Buffett’s response to an enquiry about when the positive effects of the US government stimulus package will be seen “ We’ll see the benefits eventually but not yet. You can’t make a baby in a month by getting nine women pregnant”.

But the one I really like comes from Ryanair CEO Michael O’Leary “ the UK needs a new government because they are a group of witless, hopeless Scots whose solution to the recession is to tax your way out of it. If that was the answer, Ted Heath would have an elected to six successive terms.”

Question – assuming that the government is going to lose the next election, are they setting up the next administration to fail so they get back in five years time? Of course, that implies that we are paying for this.

Boom & bust?

Where is the economy going on? And equally important, in what timescale? I wish I knew!

Unemployment is up a whole 10% in the last quarter to 2.26 million. Yet there has been a bounce in the stock market, and our oh so short term memory is leading us towards the end of the recession. After the stock market collapse last year, people expected a bear market rally and that is what we have had. There has been a bounce in economic activity as businesses were forced to restock after cutting back so sharply last year. But the rally continued, and people have started to question whether this is a bear market after all. They wonder if the recovery is actually genuine. Surely this is what bear market rallies do – they suck in investors, stocks rise, until eventually there aren’t any buyers left, and stocks plummet again.

It’s always wise to consider the fundamentals. Any recovery in corporate earnings is probably short lived, because it has been made by cost-cutting, and by government spending money that we don’t have. At some point the economy must generate growth without the benefit of extra government money fuelling it, and cost-cutting in corporations can only go so far. What cost-cutting does is make life harder for businesses in the future. By all means cut out waste now, but remember on a countrywide scale that firing people leads to higher unemployment, which leads to less spending power, which leads to fewer sales for your company.

The general public is desperately paying off debts as fast as it can, and so are companies. I make no complaint – it’s what people should be doing, but people also need to be aware of the long term implications of this policy. Companies are doing everything they can at the moment to reduce their indebtedness, usually by selling more shares to their shareholders to repay debt. They’re not raising money on the market to invest in future growth. They’re even repaying debt when interest rates are low.
And it can clearly be seen that interest rates are likely to rise – look at the standard variable rate mortgages now, and what a building society will offer you as a fixed rate of two to five years in the future. There is about 1½ percent difference – higher of course. They expect interest rates to rise. So does everybody else.
Which in the long term tends to leads to inflation. The government will be pleased, because then it will be repaying at the enormous amounts of debt that it incurred in bailing out banks etc with cheaper money. We, as taxpayers, should be pleased as well because it will reduce the amount of time that we have to pay interest to the people who have bought this debt. But we as consumers will be paying out through an inflationary period in the longer term.

In the near term, we are still in a recession and there may be some deflation. In short, we’re back to boom and bust.

Holes and avoiding them

Denis Healey’s First Law of Holes – “ When you’re in one, stop digging!”

A very good thing to keep in mind when you are Chancellor of the Exchequer. And also a very good thing to keep in mind when you’re in business.

Because, I have discovered, people have a habit of repeating themselves, especially when they are in some difficulty. The businessman thinks that if he works harder, the problem will get better. But often it is the method of working that is causing the problem. So working harder makes it worse quicker. So he works even harder, because he sees the problem getting worse, but he does not stop to think why. He is too busy doing when he should be thinking.

In this recession we are seeing the rate of personal bankruptcies and insolvencies rising. It’s no surprise – so many businesses were started in the boom years, and the owners have never experienced a recession so do not know what defensive steps to take. It’s such a waste when the business goes bust. The headline news is the personal bankruptcy and the redundancies. But that’s really just the tip of the iceberg. In the last recession a large housebuilder went bust in the south east of England, and 120 of its subcontractor firms went bust because of it. The same thing is happening now.

Apart from the personal tragedies, there is a collective pool of knowledge in any business which is now dissipated. So starting again is much more difficult for everybody concerned.

There is another, very common, issue when the business is failing, which is generally evidenced by business men rather than business women. The male of the species does not want his wife and family to worry, so does not talk in as much detail about the problems he is facing as perhaps he should. Then, when the business does fail, it is a shock to the family. His wife feels there has been a lack of trust in the relationship, and it puts it under even more strain than the business failure alone. So a failure in the business can lead to a failure in the relationship and the family as well. Such a waste.

So I think there are two points to note. Firstly, businessmen would benefit by being more open with their family. And secondly, they need to stop digging holes. To do that, they need to change the thinking. Or, at the least, stop and think. And if they cannot think of a better way of doing it, then they need to find someone who can.

The great house price debate!

In English it is called a complex equivalence. It’s when two statements are joined in your mind but not in reality – it’s as though someone has said ” which means that” in between the two sentences. Salesmen use it all the time when trying to sell the benefits will feature of some new car or the like. The rest of us just use it continually without noticing. “ You’re not smiling.” (which means that) “You’re not enjoying yourself”. No – I’m simply not smiling!

There’s plenty of this about in the discussions on the economy that you can hear about at the moment. Particularly where house prices are concerned, because they seemed to be the key barometer of how we feel about our personal wealth in this country.

Today’s announcement that the housing market has seen a bit of a pickup is a case in point. The Royal Institution of Chartered Surveyors has reported that buyer enquiries have risen for the seventh month in a row. Apparently, this means that house prices have at worst bottomed out, and may even be rising! Whereas I simply think that people think that the market is coming to a bottom and are looking for a bargain.

But if we look at historical measures of affordability, even this looks bizarrely optimistic. Historically, average earnings and house prices have a correlation – 3 ½ times average earnings equals average house prices. Currently, even after the last 18 months of price drops, it is nearer for a half times average earnings. So on that basis, a further drop is necessary just to make houses affordable again. Given that the UK economy is in recession, and that unemployment is still rising and will do so for the foreseeable future – at the least the rest of this year – I cannot see that the bottom has been reached yet.
There is another measure as well – apparently charts are available going back to before the 1800 is showing that house price cycles go in 18 year patterns. 14 years of growth and four years of falling prices. You work it out – how many years of falling prices have we had so far?

I also don’t follow the logic of people who want to buy before they are certain that the bottom has been reached. They argue that if they haven’t quite reached the bottom then at least they’ve bought the property they want at a reasonable price. However they can only judge that in hindsight once the bottom has been reached. They don’t know when they buy where the bottom is yet. They could be buying still quite expensively. Surely it is better to wait until a continual upturn has been observed, and buy then, knowing that they are away from the bottom? It makes much more sense to me.

But what are your views – there’s a survey on this page, so please take it and let me know your thoughts. Do you think house prices are going to go up, stabilise or go down in the near future?

Govt funded help

The Government are funding training and consultancy on a wide range of business issues allied to the recession. It can be for planning, strategic issues on finding new customers, keeping the ones you have, improving profits - in fact, pretty much anything that can demonstrate a business benefit for the owners and senior managment.

The scheme has been extended for another year, and is aimed at small businesses with 5 to 250 people, although smaller entities can benefit too, in the right circumstances. The paperwork is simple, and funding of £1000 is available for businesses that spend £1500 on this process.

As a firm, we've had a lot of success with this scheme. We've found extra profits for every business we've run it for, by using our specialist software package which facilitates a discussion on the areas for improvement, and produces an easily actioned list of changes.

It's good, produces quick results, and costs next to nothing. And might make your business survive!

The sizzle and the sausage

In selling, there is an adage that you sell the sizzle, not the sausage. This means that you sell benefits rather than the product itself. This is how it goes.

“Hello Madam. Would you like to buy some of these tubular cardboard coloured things with flecks of green and brown in them? You can eat them you know! They are called sausages. Would you like me to slip you a sausage Madam? You're going to report me to who? I'm sure there's no need for that……”

Or maybe it should go like this.

“ Hello Madam. Here is a quick tasty and nutritious meal for all the family. You can cook them really easily, and they go with all sorts of things. Everybody likes them. They are full of meat herbs and spices so they're really tasty. Can't you just hear them sizzling in the pan ready to be eaten, with that lovely smell wafting out? You'd like me to slip you one Madam? Well, really!”

Do you see what I mean?

However, there is often a difficulty both in sales and in other areas of life. Some people get the idea of selling the benefits very easily. But after they have sold the benefits, and got the sale, they stop. They miss out the last vital point. You may sell the sizzle, but you still have to deliver a sausage.

In other words, they over promise and under deliver. But if you deliver on your promises, whilst you will be in the minority, you will be trusted, and people will know that they can rely upon you. So make sure that before you make a promise, you think about the delivery, and negotiate if needs be time and space so that you know you can deliver. It's worth it. It saves an awful lot of hassle. And people will always be happy to see your sausage!