Why small business do not become bigger businesses

H M Government is very keen that Britain's small businesses do not sell out too early to overseas businesses.  The Government is clearly worried that jobs, expertise and IPR maybe lost to cash rich overseas companies before they have achieved their full potential.

The latest big number to appear in the business news was the acquisition of  Skyscanner Ltd an online travel portal that has been sold to a Chinese travel company for £1.3Bn .


Now I don't know about you but if someone wants to pay that amount for my business then why would I not take the money and run?

The fact is that running your own business requires you to be a marketing expert, financial wizard, lawyer, social worker and tax collector and that's before you start dealing with customers who are more familiar with their "rights" than they were 10 years ago.

You have to be tenacious and resilient be prepared to lien everything you own to the risk averse bankers for an overdraft to fund working capital and then be prepared to deal with customers who do not pay on time or at all.  It is not for the feint hearted!

Some of the legislation passed by Government that regulates business activity is clearly conceived and written by people who have never run businesses!

In my own businesses with a turnover of approximately £1.5M I employ 28 staff.  I work in a highly regulated area of business with an aggressive Regulator who believes that all the firms it regulates are in business to rip off their customers it does nothing to promote the sector.  It sometimes feels like you are walking a tightrope balancing between success and a stretch of minimum security.

I have had to employ an external contractor to manage all the HR issues that are caused by hugely complicated employment law I also buy in an employee assistance programme so that staff have someone to talk about their personal issues that may cause them to be off work.  Recruiting staff in our area is difficult despite 20%+ unemployment among young people.  Those that we do recruit seem to come with lots of "baggage" and many need a period of adjusting to actually be in work.

Whilst Government has lowered Corporation Tax it has raised taxes on dividends.  It has imposed the workplace pension and for larger businesses the apprenticeship levy, made employers responsible for paying statutory sick pay and imposed a nightmare called the Equalities Act that replaced the lesser nightmare known as the the Disability Discrimination Act.

Now the good news is that owning your own business is rewarding despite the above challenges.  I make very good money and have the freedom that would be denied to me as an employee. I am free to be a School Governor and to get involved in other community projects.

So returning to the original question why don't small business become big businesses I hope that I have set out some of the reasons why but I am a believer in proposing some solutions: -

Business Taxes

1. No capital gains tax or inheritance tax on the founders of a business if they retain their shares for at least 10 years.
2. Tax on share dividends should allow a full credit for the corporation tax paid on the underlying profits to ensure no double taxation.
3. Abolish business rates and replace with a turnover tax applied to all businesses equally.
4. HMRC to chase all businesses equally regardless or size or industry.  I have a sneaking suspicion that established businesses that pay their taxes are treated differently to those businesses that never pay their tax.  Certain sectors such as fast food  and the building trade may appear to the HMRC not to be worth the effort and tallowed to operate in a kind of tax twilight zone.
5. Government does need to deal with the position that multi-national business are able to pay less tax by using complex transfers.  My own favoured solution would be a turnover tax that replaces Corporation and Business Rates. 

Employing People

1. Change the ridiculous requirements that employees accrue all of their benefits when they are off sick or on maternity leave.  For example someone returning from a year's maternity leave immediately can take off their accrued annual paid leave the same with long term sick leave.
2. The Government needs to either abolish Employers' National Insurance Contributions which is a tax on employing people or abolish the pension levy and reinstate recovery of statutory sick pay
3. The Equalities Act imposes hugely unfair requirements on Employers which are particularly onerous for SME's.  For example employees are under no duty to disclose long term illnesses or chronic conditions that require them to have inordinate amounts of time off work.  The need to make so called reasonable adjustments which may be unfair on other employees and lead to resentment.  It is also very difficult to performance manage employees with disabilities without long, protracted and expensive process.

Getting Paid

1. Enforce existing legislation on getting paid include forcing all businesses to publish stats on paying invoices in their annual accounts.  Government may want to consider having statutory allowable credit terms which stops big businesses bullying smaller businesses.

Dealing with Customers

1. Regulation and legislation has titled so far in the favour of the consumer that businesses are floundering in dealing with customer dissatisfaction.  In my own business customer who are dissatisfied immediately invoke their rights whether they are right or wrong.  Our own regulator imposes a £500 case fee for each case referred to it and we have to pay it regardless of whether we win or lose. 
2. The rise of personalities that champion consumer rights also promotes the point that the consumer has no responsibilities such as reading the terms and conditions before buying.
3. I would like to see new consumer protection act that sets out clearly what a buyer of goods and services can expect from the supplier and also the buyer's responsibilities.  A statutory mediator dealing with disputes would also enhance the legislation. 

Donald Trump is President Elect - lets get on with it.

Donald Trump defied the worldwide political establishment and beat Hilary Clinton to the most coveted post that of US President.  The sneering classes that is the Liberal Left are having to eat a huge amount of humble pie and whilst thy cry into their peppermint teas the rest of us will need to face the fact that Trump has won.

Globalisation has lead to a highly dysfunctional world where the rich, democratic first world economies have switch production of consumer goods to second/third world economies.  This has caused a massive imbalance in world trade not helped by Asian economies refusing to opening up their markets in services, technology and high value goods and significant state manipulation of the currency most notably by China.

We are now in the most ridiculous state that China owns the majority of the world's debt funded by the aforementioned imbalance of trade and even worse the situation that China is not necessarily seen as a friend.  The situation has been facilitated by weak Governments and global corporations who have shifted production searching for ever higher returns for their shareholders and it's workers in these corporation's home country that have paid the highest price.

Now, lame duck Governments paint these global corporations as the villains of the piece but the reality is that these companies have simply followed their noses for the biggest returns for their shareholders most acting within the law.  The question for me, without an answer, is have they acted morally?

The biggest threat to the world economy comes from Trump's anti-trade rhetoric aimed at blue collar workers in the rust belt states of the USA implying that he will force repatriate jobs back to the US at the expense of the low wage nations of Asia and central America by tearing up trade agreements. The problem here is that consumers both sides of the Atlantic have got used to the low cost throw away consumerism built on cheap poorly made goods the fact is that the majority of consumers are not going to pay thirty to forty percent more fore these goods just because they are made locally.

There will be a price to pay as the affected Asian economies simply close their markets to goods made in the USA which will in eventually lead to job losses and a slowing world economy as trade ware breakout across the world.

Trump does offer carrots by offering to significantly lower corporate taxes for US corporations and giving them a one off incentive to repatriate their huge slush funds housed offshore.  One wonders if you currently pay no tax why would you want to pay any tax even under a Trump Presidency.

Western Governments will need to work with Trump in order to influence his policy direction standing on the sidelines snipping will have no impact.

NHS needs more money - no surprise there then

On today's @BBCr4today Chris Hobson Chief executive at NHS Providers made the simple case that the #NHS needs more money.  Now I have been saying for sometime in my Twitter posts that the #NHS will consume every penny that its given and then still come back for more.

Hobson, in justifying the needs for more money admitted that the #NHS had underestimated the demand on it, the predictions having been made less than 2 years ago.  The implied threat being that services will be cut if the Government does not provide more cash.

Already spending £1,900 for every man, woman and child in England the burden falling on the already hard pressed taxpayer is likely to become ever greater as Government refuses to face the fact that we are going to be unable to meet the rising demand of the free-to-use service without fundamental reform.

I would congratulate the Government in facing down Junior Doctors, it now needs to do the same with Consultants whose own contracts are being negotiated on and ensure that those contract are written with patients in mind.

I would urge the Government to engage in a public debate to examine: -

• Future of GP services
• How services are organised - is the #NHS just too big
• Funding
• Charging for use
• Cost of drugs that are used to prolong life for very short period
• Democratic accountability

Whilst there is much to be proud of the concern must be that the service will be allowed to deteriorate rather than be reformed.