What Comes First: Business Strategy or Tax Strategy?

Any business advisor will tell you the answer, but what’s happening in the real world?

Here are a few examples:


When Jeanne started her exercise class business, she decided after taking advice that she wouldn’t register for VAT. It makes sense. If you want to compete with everyone else then you can’t charge 20% higher prices to include VAT. But now she’s stuck. She can’t grow the business beyond the VAT threshold because she would have to increase her prices or take a significant reduction in margin. Now she’s contemplating setting up separate businesses to boost her earnings. It’s quickly going to get complicated – she can do without all the distraction of doubling the admin work.

Five years in to running his hair salon, Scott takes a day off a week and shuts early some days just to limit his takings to keep them below the VAT threshold. But he’s living hand-to-mouth.

Which came first in these two cases: tax strategy or business strategy? The payoff of course is that both businesses reduce their tax bill, but at what cost?

I’m sure this isn’t what was intended when a VAT registration threshold was included in the VAT legislation created in 1973.

Income Tax

John runs a sole-tradership and draws money from the business as he needs it and, more importantly, when it’s available during the year. His accountant then finds the most tax efficient way at the year-end to distribute his drawings between salary, expenses and dividends. Cashflow is not managed proactively, so while John knows what’s in the bank he doesn’t keep track of every due payment or receipt so he sometimes draws too much and leaves the business short of cash. This regularly causes him to have sleepless nights.

Norman runs a limited company and runs it the same way. He takes no salary as such and reinvests most of the profits into the business to fund growth. He restricts his drawings to pay as little tax as possible. He’s looking to exit the business in 3-5 years. Unfortunately, because he’s not taking any kind of salary, let alone a market rate salary, he has no idea how profitable the business truly is and is complicating things for himself when he eventually come to sell.

Ken is looking to buy a new vehicle for his business, that he will use personally too, in order to reduce his tax bill. However, his tax savings are less than savings he’ll make obtaining a vehicle this way compared to some of the alternatives.

Which came first in these cases – business strategy or tax strategy? Again, the payoff is a lower tax bill, but at what cost in terms of business growth and equity?

These examples are not rare. Many micro-businesses and SMEs are operated in a way that minimises tax liabilities. Their business strategy is defined by their tax strategy. In the real world, it seems, tax strategy more often takes priority over business strategy.

And in every case described it is stunting the growth potential of the business. That may be OK in some cases, where the owner doesn’t want to grow. However, where they do it is holding them back. In any case, all businesses should be looking to grow at least a little just to overcome the effects of inflation!

So what’s the solution? Some say that the government should change the tax rules to benefit SMEs even more. Others might point out that accountants are well placed to help business owners put business strategy before tax strategy. However, both of these “solutions” abdicate responsibility. Governments will forever tinker with tax rules, shaving a bit here and adding a bit there. The overall result is added complexity, confusion and probably a ligher wallet. Tax advisers will prioritise minimising the tax bill because that’s their job and the tangible, immediate benefits show how good they are at it.

The solution then is for business owners to recognise that a successful business should pay taxes. That a successful person contributes to society by paying taxes. And to be successful means developing and implementing a business strategy that will achieve their goals not minimise tax.

With a business strategy in place, then a tax strategy can be applied to mimimise the tax liability of that strategy without strangling business growth.

So how do you create a business strategy? There are books written on the subject, but here are the essentials:

Define what you want to achieve, or start with the end in mind as they say. I don’t believe anyone really starts out wanting to build a sub-£78,000 turnover business. Many settle for that, but few start with that ambition. Starting with the end in mind allows you to pre-think what the business needs to look like in terms of turnover, profits, headcount, infrastructure, etc.

Look at what’s already available in the market and come up with something different. That might be a different target market, or a different way of delivering what you offer. But to avoid competing on price (like Jeanne) you must have something different to offer your target market, not just a little better, or smaller, or bigger, or faster, or whiter, but completely different.

Figure out which people would want to buy that difference and why they would buy it – why should they care enough to part with their hard-earned cash?

Figure out how to tell people about it and how they can get hold of it most easily.

Then create a plan to help you understand how the cashflow will be generated to achieve your goal. Too few business plans are written to aid understanding of the specific steps involved in achieving a goal and the risks associated with those steps. Write yours with those two things in mind.

Follow the plan step by step and adapt it regularly as you gather real world data to support or otherwise your business idea.

Discuss with your tax advisor/accountant how to minimise the tax liability of the plan and impress upon them that changing the plan is not an option.

If you’re already in business, it’s not too late to figure out a more effective strategy to achieve your goals. The best time to start is today.

Real Estate Agent Goals

When you first enter into the real estate business, it is easy to be intimidated by more experienced practitioners who seem to be able to sell a house at the drop of a hat, often earning hefty commissions as a result. By contrast, you are slaving away with a couple of clients and seem to be getting nowhere fast.

However, it is important to remember that even the best agents had to start somewhere and, as a beginner, you will often be working with properties that those with more experience don’t want to work on. As such, it is important to not only absorb all of the information that you can during these formative years, but to also set yourself goals so that you have a target to aim for and something tangible that will determine whether or not you’re successful.

Overall Sales Numbers

The amount of properties that you are able to sell in a month or a year is related to a number of issues, which include the time and effort that you put into the job and the quality of the properties that you are working with.

Consider all of these aspects and what effect they have on your overall sales goals and then set yourself difficult, yet realistic targets based on that information. This will make you work just that extra little bit harder to hit your goals, allowing you to gain valuable experience along the way.

Sale Prices

The odds are pretty good that your first few sales are going to pull in a little less than the average for the property that you have sold. That’s OK, as this is all part of the learning process and it at least allows you to rack up some numbers and put yourself in line for some better opportunities.

However, it also allows you to set yourself another goal. Consider the types of properties you work with and use the available information to figure out average sale prices. As soon as you can start hitting or exceeding that price, you are on your way to success.

Your Salary

When you entered the industry, did you have a five or ten-year plan for where you wanted you base salary to be after you have gained some experience? If not then it is important that you make such a plan, with milestones along the way, so that you can track your personal progress.

Understand how much real estate agents in your area make after 1, 3, 5 and 10 years in the business and use these figures to determine your own plan. If you are failing to reach the salary that you anticipate, this is a good sign that you need to change something about your approach.

Grow Your Reputation

To start working with some of the best properties, you need to make sure you do things that get you noticed. In the real estate industry, this usually means selling properties. Never underestimate the amount of work you will be doing and always be prepared to rise to any new challenges.

In fact, one of your goals should be to place yourself in a position where you can take on new challenges in the first place, but that will only come as long as you keep networking and building on your reputation.

Different Genders, Different Choices

A few years after I left a major accounting firm to start my financial planning business, a female friend of mine called to say she wanted to do the same thing.

In some respects, this woman was even better qualified than I was. She had been a partner at her accounting firm, while I only stayed six years and rose to the level of senior manager at mine. I went directly into my own practice from there, whereas my friend had gained further experience and connections by working for a time as a financial adviser with a large trust company. We knew each other quite well through various professional groups, and while we did not socialize away from work, she felt comfortable calling me for advice on starting her own business, and I was comfortable giving it.

In fact, I invited her to my offices and had her meet and talk with several of my staff. We were still quite small then, just a few people in a single office in New York. My friend and I were both in our early 40s at the time. Yet even then, I was positioning my business to develop a generation of advisers and managers who could eventually replace me. I told my friend that I thought this was important, since clients establish long-term relationships with our type of firm and they want to know we will stick around. Also, if you want to attract top employees who are younger than you, they need to know that you are building a career path for them that can extend beyond your own.

I pointed out to her that most financial planners, lawyers and accountants who start their own firms don’t do that. They basically just create a job for themselves, one that gives them the income and personal flexibility they desire. If they hire employees, they do not necessarily groom them as successors. Eventually these business owners typically sell or merge their practice with another firm, often sticking around for a few years to ease the transition.

There is nothing wrong with that approach, if it is what you choose, I told my friend. But it is the difference between creating a job and creating an enterprise. You have to decide what you want to do. I chose to create an enterprise.

My friend, ultimately, chose to create a job.

She started her own firm and did well at it. She hired a few employees but did not turn them into successors. As I expanded into other cities across the country, she stayed local. And eventually she merged her firm into another, larger enterprise (not mine). She has taken a position there, which will help smooth the transition of her clients to the new firm. I expect that she will retire within a few years, while I have no plans to quit anytime soon.

My friend did not do better or worse than I did; she just did something different, because it was what she wanted to do. It doesn’t make her less of a skilled planner or a skilled businessperson than me. When I compare our paths, I note that her husband, who has his own professional career, will probably retire soon and she no doubt wants to spend most of her time with him. My wife works in my business, has played a major role in building it and can adjust her work schedule as she chooses without affecting mine.

Women frequently prioritize aspects of their careers differently than men do. Not all women, of course, and those that don’t appear to have pretty much the same opportunities as men nowadays, notwithstanding the identity-politics myths that women are victims of substantial and widespread discrimination.

A study conducted by LeanIn.Org and McKinsey & Co. recently rekindled discussion as to why women are underrepresented in positions of corporate leadership. The study’s findings suggest that fewer women than men say they want a top executive position. Both women and men who did not want upper-management roles cited stress and increased pressure as major reasons for not pursuing such positions.

Similarly, a paper from the Harvard Business School incorporates the results of several studies and draws the conclusion that women felt they could attain the same level of success as men, but that a high-level position in their company would be as likely to be a source of stress and conflict as a reward for excellent performance. The paper also suggested that, in general, women have a greater number of goals than men, spread over a wider array of categories. This may be another reason why some women don’t prioritize executive-level positions.

What about those starting their own businesses? The world of entrepreneurship still skews male, and studies have found that female entrepreneurs face unconscious biases when seeking support and funding. But there is no reason women cannot still be successful entrepreneurs if they choose to pursue that path; in fact, a study from 2010 by the Kauffman Foundation found that while the tech founders surveyed did skew male, the women they included had similar motivations, backgrounds and experiences. And for those who stay in corporate environments and do make it to leadership roles, women meet or exceed the performance of male peers.

Sexism has not disappeared, of course, but for the most part it does not determine our outcomes. Our own choices do that. My friend could have had a similar outcome to mine, if it was what she had wanted. She didn’t want it. It is as wrong to blame that on discrimination as it would be to judge her as less successful than me. I doubt she feels less successful, and I know she has no reason to believe she is. I think we both got what we wanted from our choices.

The young people my friend met at my office many years ago are, for the most part, still with me. Another generation or two have joined us behind them. Many have already started their own families. When someone tells me they are having a baby, I always congratulate them, and I tell them it is up to them to decide how much time they will take off and what their work schedules will be after they return. I adjust compensation and job duties to accommodate whatever they choose. Most of the women who have had children have taken several months off, followed by a reduced in-office schedule and, often, some flexible work from home. No man has ever asked for more than a week or two off, and the only schedule flexibility they need is a sporadic adjustment to meet family needs such as doctors’ appointments and school pickups and drop-offs. I am happy to treat the genders the same if that is what they want. So far, it isn’t.

Equal opportunity in the workplace does not guarantee equal outcomes. In fact, as long as the genders tend to make different choices, it guarantees the opposite. But if it gets people what they need and want from their work, different outcomes can only be a good thing.

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How to Successfully Set SMART Goals

The first step in successfully executing a goal is to state it properly. A well-stated goal clearly explains what you are trying to achieve and in what time frame. A well-stated goal is the foundation of an effective business action plan. An acronym that is commonly used to define a properly stated goal is SMART:




Realistically High



While these criteria seem simple, they can be difficult to perfect. It takes times to have it come together and can take a while to perfect. Once you achieve the perfect criteria it helps you set realistic goals, that are achievable. Allow me to summarize briefly what each of these criteria means:

Specific. Fuzzy goals are destined for failure. For example, “We are going to establish a new training program for our supervisors by 10/1/XX.” You are not defining what you want your supervisors to learn. Lack of information does not allow this goal to be achievable.

Measurable. How do you know when the goal has been achieved? State the goal in a way where this is clearly described. For example, “We are going to increase the frequency of meetings with our hourly staff.” How often will you meet and what will be discussed? This will be easy to track.

Realistically High. Goals must be lofty enough so you challenge yourself but still realistically attainable. In other words, you don’t want to trip over them. If the goal is too low/easy it will not motivate extra effort, but if it is too high no one will take it seriously because it seems out of reach. Make realistic goals so you are able to achieve them and your team will be motivated to reach them.

Time-Based. What is the time frame for completing this goal? Set a deadline so the goals aren’t just floating out there for years. Deadlines are key to this success.

Here is an example of a SMART goal:

Get 10 appointments with decision-makers in the hospitality industry that employ more than 250 people and are located within 50 miles of Miami area by the end of the quarter. This goal is specific, with a deadline, attainable, realistic and you are able to measure it.

Take a few minutes and write a SMART goal for yourself-personal or professional. Work to refine it until it encompasses all the above criteria. Then focus on implementing it.

4 Tips to Help You Reach Business Success

My oldest son is a sophomore in college and recently joined the TRIO program. This program is designed to help him get through college successfully. It’s a federally funded program that helps students in four areas which include academic, financial, career, and personal/social. They sent him an article related to study tips, so he sent it to me to read. I read it and was amazed at the tips and how they not only are geared toward studying, but also to life in general.

Here is what I learned from that article.

In everyday life we can become overwhelmed when we have too many things on our plate. What we don’t think is that it’s possible to get everything done on time and in an efficient way. Of course, the only way that will happen is if we learn how to manage our time and organize our day. Here are several tips that will help you to manage and organize your day.

1. Plan

You may plan every day, but if you don’t give yourself enough time to get everything done, you’re setting yourself up to fail. If you’re not sure how long it will take to complete a task, then the best thing to do is give yourself more than what you think it will take. That way if you complete it in less time, you’ll have more time for other things.

2. Time

Working your business at the same time every day will help you to develop a habit. Daily routines help in developing a habit, but you won’t develop it if you don’t work your business the same way every day. It typically takes 1-2 weeks to develop a habit, so if you force yourself to work your business at the same time every day the habit will be formed.

3. Free Time

While working your business really hard is the only way you’ll reach success, free time is also important. Depending on how much free time you have and how you want your business to go, you may be able to do “me time” daily. It’s important to utilize your free time to your business advantage as well. If you find you have multiple hours a day where you have nothing to do, try spending a quarter of that time marketing your business or learning something new to help you grow. You’ll find your free time may go away, but the success you’ll have will be priceless.

4. Breaks

While you may think the only way you’ll reach business success is to work every waking minute of the day, but if you do you may become burnt out if you don’t take breaks. When you work a job for someone else, you are entitled to breaks during the day; you need to do the same for your business. Take a 15 minute break after a couple hours and don’t do any work during that time. Take a lunch or dinner break and don’t work during that time. This will give you a chance to not think about your business and you’ll find you will be less stressed.

While these four tips are important and should be done daily, it’s also important to know it is OK to deviate from your plan on occasion. It happens and there is nothing wrong with it. Sometimes it’s needed in order to deal with a personal situation or to get away from everything and clear your head. You may find when this happens you go back to your business with better intensions than you had before