Social Enterprise Growing Business With A Purpose

Pearson Education and Villanova University School of Business have put together an infographic titled “Social Entrepreneurship: Growing Business With A Purpose”. The graphic details the various organization models and ventures of Social Entrepreneurs, how social enterprises are transforming innovation in business, and more.

Social Enterprise Growing Business With A Purpose

Factors to consider when deciding to sell your business

After years of hard work, sacrifices, stress and worry you’ve managed to build a strong and profitable social business. And you now decide that the time is right to sell your business and move onto another chapter in your life.

Although they were not social enterprises I’ve recently sold a web businesses and its great to be able to get 2-3 years cashflow up front when you sell.

But how do you actually go about selling a business? A question that an accountancy firm in West London, which works with a number of charities and social businesses, has been probed with on countless occasions over the past two years.

How can you be sure that you are getting the best price? Will the business itself be badly disrupted by the whole process? How much will it cost in fees and what about tax implications?

These and many other questions come tumbling forward as soon as any serious thought is given to the prospect of selling up. However, it is possible for all those questions to be answered positively if the sale is carefully planned and good housekeeping is performed beforehand.

Realistically you should be looking at a timescale of 3-5 years to get your business in a state ready for a sale. During this time you should consider the following:

Distance yourself from the business

The buyer wants the business, but probably does not want you.  You may be required to assist in the handover or there may be a need for you to stay on for a while after the purchase to ensure stabilisation, but the buyer needs to ensure that the business will function without you.

Monthly financials

It is likely that the purchaser is going to be a bigger business than yours.  They will not want to hear that you keep all the necessary figures in your head.  They will expect to see:

  • Management accounts:
  • Cash flow forecasts
  • Budgets
  • Sales order pipeline
  • Active credit control

To have these records and systems in place and easily accessible will make a big difference to the way your business is perceived.  Improve your corporate governance and you are likely to attract a greater interest from potential buyers.

Financial results

From the buyer’s perspective the value of your business is in its future earnings potential.  Probably the most efficient method of estimating future earnings is by reference to historical figures. Consequently, the more accurate your historical figures, the more credibility given to your projections.

Consider arranging for your end of year accounts to be audited if this is not done already.

Any long term, un-reconciled balances need to be cleared.

Carry out a stock take rather than estimating the value of stock held.

Any weaknesses in your financial records will be uncovered during the period of due diligence prior to the sale. The buyer could then use findings of this sort as a reason to negotiate a reduction in the sale price. By removing any such weaknesses now, the records in the 2 or 3 years leading up to the sale will be in a good state.

Your own expenditure

Have a think about costs that the business currently incurs that, while being legitimate, are largely incurred due to your own choice. For instance, do you drive a particularly high cost company car, do you have a very generous entertainment budget, do you really splash out for the staff at Christmas? These costs impact on the actual profitability of the business and it may be worth cutting back on these in order to demonstrate to potential buyers the true profit to be made from your business.

Clean up the balance sheet

Sell any surplus assets and scrap any obsolete stock.  Make realistic provisions for doubtful debts – buyers will want to not pay for assets that hold no value.

Properties

Do you own the freehold of your property(s) and if so, do you want to retain this? Are you looking to renew a lease?  If so, try to keep short, if possible.

Does the business own an investment property such as a holiday home or a buy-to-let? If so, it may be worth considering removing it from the business.

Tax advice

Include your accountant in the process at the earliest opportunity.  They will be able to provide advice on your tax position and give consideration to the actions necessary to mitigate any tax liability.

 

There are (of course) many other considerations, such as renewing contracts, involving other shareholders etc. but the better your planning, the greater the likelihood that you will achieve your goal.

How to jump on the content marketing bandwagon

The phrase content marketing is everywhere right now, but what is it, why is it relevant to you and how can you get involved? This article, by Martin Harrison of online copywriting supplier Copify delves into the subject in detail and tells you everything you need to know.

First of all – what is content marketing?

Broadly speaking, content marketing refers to the process of creating and promoting content that will raise awareness of your brand, your products and your services. This usually comes in the guise of useful, funny, shareable and interesting articles, videos or interactive pieces such as infographics.

Why do I need to do this?

It is universally accepted that content marketing is becoming increasingly important for several reasons. People are blind to advertising and bored of direct marketing, while SEO is becoming increasingly driven by the kind of links that money just can’t buy.

Content marketing is a way of promoting your business covertly and setting your stall out as an authority in your vertical.

Hang on, I don’t have any budget for this…

Don’t panic, just because you don’t have any cash, doesn’t mean you can’t take part. Most companies will already have some form of content that they can promote.

First of all, do an audit of all of the existing content you have produced, either on your own site, or for other sites. You may be surprised at the amount of content you have amassed over the years.

There are 2 free tools for doing this – Screaming Frog will help you find all of the pages on your site Open Site Explorer for sites that link back to yours.

Once you have all of these assets, set up an automated social media tool like Hootsuite to share this content with your followers. There is more information on how to set all of this up in an article I wrote.

Moving forward, you can create new content by encouraging staff members to contribute pieces that discuss their daily work activity and you will find that colleagues/friends/family will often be happy to contribute in exchange for an SEO-friendly link.

How to win at content marketing

1) Think about genuinely interesting, useful or funny content ideas.

2) Spend time on your copy/design to make sure it is perfect – don’t be too overt with your branding, subtly is the name of the game and more people will be inclined to share content that is not blatantly promotional.

3) Regularly promote your content on social media to get maximum exposure – mentioning key influencers in your posts and including them in tweets is a great way to increase the chances of them sharing on your behalf.

Profit changes for social enterprise partnership models

Limited liability partnerships (LLP) – salaried partners

Currently, if an LLP carries on a trade or profession with a view to profit, then its members are treated as partners. However, finance bill 2014 will ensure that a salaried member of an LLP will be treated as an employee where the following conditions are met:

  • There are arrangements in place, where the member performs services for the LLP and it is reasonable to expect the amounts paid to the member are either fixed, or if variable are unaffected by the overall profit or loss of the LLP (“the disguised salary”).
  • That member does not have significant influence over the affairs of the LLP
  • That member’s contribution is less than 25% of the disguised salary which is reasonably expected to be paid in respect of the services.

These rules will also apply if the individual is not a member of the LLP but performs services for the LLP under arrangements involving a non-individual and the main purpose of this arrangement is to avoid the salaried member rules.

This could have a big impact on both the partnership and individual. If caught under the new rules, the partnership will be liable to pay class 1 (secondary) national insurance in respect of the disguised salary. The individual partner will then be subject to class 1 (primary) national insurance instead of the previous class 2 and class 4 national insurance.

Mixed membership partnerships

Mixed membership partnerships involve both an individual partner and a non-individual partner such as a limited company. Previously it has been possible to minimise/defer any income tax liability on the individual partner through the use of such a structure.

If the partnership has a high level of profits during an accounting period, the partnership share ratio can be changed to allocate a higher portion of the profits to the corporate member. Therefore the profits will be taxable at the lower corporation tax rates, rather than at the higher or additional rate on the individual. Then, provided the individual partner is also a shareholder in the company, the profit can be distributed by the company via a dividend during a period of lower profit. Depending on the individual’s other income, this could be taxed at an effective rate of 0%.

Anti-avoidance legislation is to be introduced by finance bill 2014, to reallocate excess profits allocated to a non-individual to an individual partner where the following conditions are met:

  • A non-individual partner has a share of the firm’s profit;
  • The non-individual’s share is ’excessive’
  • An individual partner has the power to enjoy the non-individual’s share or there are deferred profit arrangements in place; and
  • It is reasonable to suppose that the whole or part of the non-individual’s share is attributable to that power or arrangement.

The legislation will also include a provision so that excess profits can be allocated to an individual who is not a partner where it is reasonable to assume that they would be a partner if not for the new rules and at least part of the non-individual’s profit share is attributable to the individual’s power to enjoy the non-individual’s share or to deferred profit arrangements.

In the case of a partnership making a loss, the new legislation also contains restrictions on the use of a loss allocated to an individual partner. This applies where the individual is party to arrangements, where the one of the main purposes of which is to secure that at least some of the loss is allocated to the individual instead of a non-individual, with a view to the individual obtaining relief.

These changes will affect both standard partnerships and limited liability partnerships.

When will this take place?

The changes in relation to the profit allocation will take effect from 5 December 2013. All other changes will take effect from 6 April 2014, for further information about these upcoming changes, blogs like that on Perry’s can keep people abreast on some of the changes that will coming into place.

Those affected by the above legislation may wish to consider changing the business structure. Alternatively, firms with a corporate partner should consider gathering evidence to confirm that their profit allocations are made on a commercial basis.

Next page