There are a few organisations out there claiming to support microbusinesses – I’m interested to know what experiences you have of them. If you’re a member of any organisation, please add a comment to this blog entry to say which one you belong to, what you think of it, and specifically what you feel you get out of it. Please put your comments into context by including information about your business- especially its size and nature.

I’m particularly interested in organisations that require you to pay if you join up but if you want to include the various free-to-join groups out there that’s also fine.

And if you’re not a member of any organisation (like me – hence my interest) I’d like to know why, what you’d look for in any prospective group and how much you’d be prepared to pay. I’m not going to be launching my own organisation, this isn’t a marketing exercise – I’m just interested to find out what fellow businesspeople think.

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I am utterly fed up with the way the current economic climate is being reported by the media. This came to a head yesterday when better than expected GDP growth was reported in the UK. Growth of 0.5% in a quarter is more typical of an economy in normal growth rather than one that’s struggling. Now, I don’t pay much attention to figures from single quarters – just as the tiny growth in the previous quarter didn’t phase me.

However, given the predictions of Armageddon that accompanied the next-to-zero growth in the previous quarter, you might expect somewhat brighter reporting of the latest figures. Not a bit of it. Every single report I heard started with a phrase like “GDP grew by a higher than expected amount in the last quarter but…”. There would then follow a whole host of reasons why, in fact, the figures were NOT good, despite the fact that they actually WERE.

All this doom and gloom is being spread by economists and journalists. The tone changed completely when actual business people were interviewed. Over lunchtime on BBC 5live, after the usual negative reporting, three business people were asked how they were doing. Of the three, one was doing brilliantly thank you very much, one was doing ok and one was complaining that he can’t offer Chinese-level wages to UK workers. In other words, exactly the sort of responses you’d get from a random set of three businesspeople at any time. Later, after qualifying the good figures by saying manufacturing in this country is doomed, the head of an manufacturers’ organisation came on and was asked what he thought of the outlook. His answer was that it was looking very positive in the medium term and that while some aspects of the figures were poor, others were much better.

Don’t get me wrong. I fully accept the difficulty of the current climate. Of the four limited companies I currently own, one has collapsed, one has seen profits dive, one is doing well and one is growing exponentially. Of course, I’d love it if they were all doing as well as the last two but I’m not sure I would ever expect that to be the case. These are challenging times and for some businesses, the current difficulties will prove too much.

However, this constant negativity is driving me round the bend. I am not asking journalists, economists and commentators (who don’t run businesses) to hide uncomfortable truths from us but simply to give balanced reporting. Maybe they feel that the role of  an “expert” is to dampen down enthusiasm. Well, I can reassure you all I wasn’t planning to run down the street naked in celebration of one quarter of modest growth. I just want figures to be reported objectively with a proper mix of caution and hope.

Continually running down our businesses and economy generates false negativity, making people feel less secure about spending and becomes, therefore, a self fulfilling prophecy. It isn’t big or clever to be a prophet of doom and whilst I don’t advocate blind optimism, a little positivity would go a long way.

Let’s face it, the economy today is, according to 5live, 96.5% the size it was before the banking crisis. In other words, very nearly as big. That’s still a whole lot of business to play for. Businesspeople are, by nature, optimists but it’s a shame we tend to be the only voice of hope in a climate of doom.

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I’ve used a number of email marking services over the years – most notably GetResponse.com and AWeber but MailChimp is my favourite.

Just as every business needs a decent website, every business should have an list of people happy to receive their emails. How you go about generating this list is a wider topic but MailChimp is by far the easiest to use in my experience. If you’re on my mailing list, you’ll be experiencing MailChimp first hand. You might have noticed how tightly it’s integrated into my website but, for me, its key advantage is the speed with which I can set up new email campaigns, autoresponders (emails sent in a set sequence) and lists.

Mailchimp has a sophisticated dashboard, and nicely designed too

MailChimp operates in very strict adherence to SPAM regulations which means that your messages are all the more likely to get delivered. This also encourages you to prune your list on a regular basis to remove old or poorly responding subscribers.

They have a very generous free plan which allows you to store 2,000 email address and send 12,000 emails per month – plenty to allow you to get used to the system and make sure it’s right for you. Across my accounts I have well over 4,000 active subscribers and gaining and managing has been (almost) a joy with MailChimp. In fact, the only major criticism I have of them is that it’s impossible to move an email address from one list to another (for example from “prospects” to “customers”) although they do encourage segmenting within a list so it’s not a major problem.

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Picture the scene. You work for a corporate marketing department with, of course, a limited budget. You’re launching a new product and considering how to market it.

Traditionally, you’d buy print advertising space in newspapers and magazines. To run a small colour ad in the Guardian costs around £4,000 per day for a circulation of around 250,000. If 5% read your body copy that’s 12,500 reads at a cost of 32p per read.

Alternatively, you could spend your £4,000 on creating a Facebook game. A good game will get at least 100,000 plays at a cost of 4p each. Not only is the cost a fraction of a single day’s print advertising in a single newspaper but the quality of the interaction is massively higher. A user might spend, say, 10 minutes playing a game related to your product. Imagine that, 10 minutes fully engaged with your product for 4p – including a direct link for ordering that product.

As far as I am concerned, this is a complete no-brainer. And if you’re wondering where I got my Facebook figures from, they’re actual figures from a real game.

So why don’t corporate marketing departments commission more of these games? Two reasons. Firstly, ignorance of online media. This is, of course, unforgivable in so-called “professionals”. The second is even more unforgivable and can be summed up in the sentence “no-one ever got sacked for running a print advert”. In other words, keep doing what you’ve always done and no-one can criticise you. And that, my friends, is why working in a corporate department is a mug’s game. I know, I’ve been there.

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Any marketer worth their salt will tell you that “the money’s in the list”. What they mean is that, over a period, you can convert many more visitors to buyers by having a mailing list. Sometimes this means broadcasting to all subscribers when you have news or information to relate but usually these lists also use an autoresponder that sends out emails in a set sequence.

I recently set up a membership site which offers free membership with paid upgrades. At the end of the process, the member was automatically added to my Mailchimp mailing list – they would then, of course, have to confirm that they wanted to be on the list because “double opt-in” is a requirement of all respectable lists. The problem is that even with a freebie thrown in as an incentive to complete the process, only 1 in 4 of the people who became free members signed up to the list.

Now, you might ask why I did it this way around and the truth is that it was simply because this was the way Wishlist Member (the WordPress membership plugin I use) did it.

Why was it important to get people on the list? Because I know that I will get a much higher conversion rate for the paid memberships if I remind and prompt people to upgrade over the following days. It’s also worth building up a list because a targeted mailing list has a value.

So, on Monday, I reversed the process. I set things up so that when the user visited the site they were invited (using the Popup Domination plugin) to sign up for a free membership via the mailing list. They then get the double optin confirmation at which point they are directed to the page containing the registration box for getting their free membership of the site. This way, I guarantee that they’ve signed up to the list before they get access to the site. Sure, they could easily unsubscribe but then those sorts of people would be unlikely to buy in any case.

The results so far has been impressive. A slight drop in the number of free members but the percentage of daily mailing list signups has quadrupled. Next week, I should see this improvement in mailing list conversion translate into paid upgrades.

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Presentation is everything in business and if you offer your customers CDs or DVDs either as products in their own right or as part of your marketing, there’s little point unless they are produced professionally.

I’ve produced CDs for two of my businesses. For one, I was acting as a mini duplication company for a client and for another the CD was part of the product. Our options were either to have an external company produce the CDs on CDR and using inkjet printing on the surface for the label or to buy in the equipment to do the same ourselves. We opted for the latter and it was profitable enough.

But next time, I’ll do it differently. Kunaki.com is an online CD/DVD duplication “machine” that allows you to produce small quantities of completely professional CDs and DVDs at a tiny cost. For example, as a test, I had 5 copies of an audio CD produced. They came shrink-wrapped in a jewel case with full colour printed insert and rear insert. The CD face was beautifully printed and the CD itself looked as though it had been stamped rather than burned (can’t believe it was, however). All in all, a lovely result – the cost was around £1.25 per CD. It was only that much because of the shipping.

To use the system you download a piece of software which walks you through the process. You can use your own artwork (this is one area you should NOT scrimp) or provided templates. You get to see how the end result will look from all angles. Then, you put the original CD/DVD into your PC’s disk drive and the software reads it off the disk, compiles it all up with the artwork and uploads it. Once this is done, you can order as many copies as you like. You can even have Kunaki drop ship to Amazon or take payment from your customers on your behalf and ship for you. This works best if you’re based in the US as the shipping costs are lower and I’m not sure whether the integration with Amazon applies to the UK site but still, it’s a fantastically cheap way to get excellent results- especially if you get them to take payment or if you charge a good price for your product.

The biggest problem is that it doesn’t offer quantity discounts – it really is no cheaper (and sometimes it’s actually more expensive) to buy 100 than 10 or even 5. But if you’re selling a CD product for £20, for example, then buying 5 at a time will cost you (including shipping) $3 each (around £1.80 at present) for a completely professional result.

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My accountant is trying to drum up business for their “Tax Investigation Insurance Scheme” which is fine. What isn’t fine is that they’re mixing it up with the proposed Business Records Checks which are another thing entirely. It’s nothing short of scaremongering to link the two together but that’s a matter between me and my accountant. For now, let’s look at BRCs and what they might mean for us.

I’m not, at this point, going to get deeply into the government justification for BRCs (indeed, they claim it’ll help us make more money, a-ha-ha-ha) because it can be summed up as this: money. They claim that they’re missing out on billions of pounds of tax revenue because poor record keeping amongst small businesses almost always results in lower tax bills. Or at least, so they say. It seems to me that if the problem is simply poor record keeping, it would be just as likely that this would result in paying too much as too little but reading between the lines they believe small businesses are deliberately keeping poor records to reduce their tax bills.

The plan is for HMRC officers (don’t you just love ‘em?) to investigate “up to” 50,000 small businesses annually. Given that there are 5 million SMEs in the UK, that means one in 100 can expect to be investigated although that will be biased towards certain industries (especially those that deal with cash, I imagine).

I’ve dug around the consultation document and other supporting information to summarise things here:

• The stated point is to improve business records
• It’s due to roll out in the second half of 2011
• It’s claimed intention is to look at record keeping as it is happening, not to look back at past years. It is not a tax investigation. In other words, HMRC might ask you how you keep your records and what records you keep. They will then decide whether you’re complying with the law and use their “professional judgement” as to whether you’re committing a breach serious enough to be fined. Given that this is an exercise in increasing revenue for HMRC I rather suspect their “professional judgement” might err on the side of fining you. Nothing new there then.
• The level of fines hasn’t been determined but it’s likely to be pretty punitive – a ceiling of £3,000 is proposed
• Each investigation is supposed to take up to 1 day but that must depend on the business. So you will lose time and you’ll probably have to pay your accountant too
• You face two fines: one for poor record keeping and one for inaccurate returns
• Separate fines for VAT and Corporation Tax
• Cases are to be selected based on a Risk Assessment of the industry the company works in, along with a few random ones for good measure.
• You should get 7 days notice of any visit.

Here’s the critical section:

It is not intended to begin a programme of Business Records Checks with penalties for significant record keeping failures without first providing for a period of adjustment; that is, allowing a reasonable period for all to bring their record keeping up to standard,with penalties being imposed only for significant record keeping failures occurring after the end of that period.

In other words, small businesses will be given time to get their house in order before the regime begins. At least that’s the plan.

What records do I need to keep?

That depends on your business. There’s the “Keeping records for business –what you need to know” factsheet produced the HMRC but perhaps more useful is BusinessLink’s interactive tool: Find out what records you should be keeping.

I recommend that you get a good quality book-keeping system such as FreeAgent and have as many transactions sent and received electronically as you possibly can.

My Thoughts

My gut reaction is that this is yet another imposition on micro businesses. The government talks a good game when it comes to supporting small businesses but the facts are somewhat different. The smaller your business, the bigger, proportionately, the burden of red tape and HMRC has become noticeably more intrusive in the past 18 months.

If this is just about encouraging better record keeping then perhaps there’s a place for it but there are ways of achieving this that don’t involve jack-booted HMRC clones knocking on your door.

What’s worse is that this is clearly a money-grabbing exercise and is likely to descend into fining as many firms as possible for inconsequential errors in their record keeping when what the government apparently wants us to do is actually run our bloody businesses so we can reinvigorate the economy. Talk about wanting your cake and, simultaneously, eating it.

My message to government is to get off our backs and show some genuine support. They should be cutting down the administrative burdens of doing business not increasing them.

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This coalition government (which I broadly support) has again disappointed today. George Osborne trumpeted the importance of small business to the economy and, as evidence of this, the drop in corporation tax rate. What a pity, then, that the 2% drop in the main rate does NOT apply to small businesses with profits of less than £300,000 per year. For us living in the real world, the rate drop is only 1% (or half as much).

George, if you really want Britain to be the best place to “start, run and grow a business” then you must reward small businesses first. Companies of all sizes generally start out small so getting low tax rates on their profits at the beginning is vital. What a missed opportunity.

So, the focus for all responsible small business people is to minimise their net profits (yes, really) and, in that way, minimise their tax. The simplest way to do this is to employ yourself (and your partner if possible) in the normal way at a rate equivalent to the personal allowance (just over £7k from April). By doing this, that part of your income is tax and NI free. Your profits are also reduced by that amount and you therefore pay less corporation tax.

If possible, you should also see if you can benefit from the new tax allowance for research and development. The best option is to talk to your accountant but, essentially, you could get a big allowance for innovation. Worth a look.

Otherwise, it’s back to normal – grinding away trying to make money on a day to day basis whilst trying to handle the idiots at HMRC (I recently had a demand for £0.00 threatening the bailiffs if I didn’t pay). Good marketing and cost cutting can more than offset the effect of the monkeys in the government.

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BusinessInsider.com produces a series of “charts of the day” based around different topics. This morning’s chart shows the Most Successful Facebook Ads and it makes for very interesting reading.

Take a look at the bottom of the chart for the best performing ads. Clickthrough rate is in red and cost per click on the right. There’s a typo in “tabloids and blogs” because I think it should read 0.165%. So, the best performing Facebook ads have a clickthrough rate of around 0.15% and a cost per click of around 20c. Of course, we don’t have conversion rate information so we don’t know how many of those clicks resulted in sales – my experience has been that, at best, Facebook ads perform somewhat below the conversion rate of Google’s Display Network (Adsense).

A clickthrough rate of 0.15% for the BEST performing ads is woeful. This means (if my maths is correct) that over 600 people see the ad before a single one clicks. For the worst performing ads, this is nearer to one in every 9,000 views. Even though Facebook is a huge network, you’re going to struggle to get any meaningful traffic with those numbers.

How does this compare with other forms of advertising? Well, the closest Google analogy is the Display Network (formerly the Content Network) which, like Facebook Ads, is interruption marketing. If I were to run a Display Network campaign with 0.15% CTR, I’d shut it down – it would simply not be worth the time. I’m looking for CTRs of at least 10x that figure to make a campaign worth running.

Google Adwords is a different kettle of fish. Because the ad is only displayed when the searcher types specific keywords in, then as long as you choose the right keywords you should get much higher CTR. I look for a minimum of 5%. In other words, I can expect roughly 450 times more effective marketing using Adwords than Facebook- where do you think I concentrate my efforts?

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I’ve spent the past couple of months creating a new version of Passyourtheory.co.uk, my driving theory test website. PYT has been running successfully since 2005 but with the government’s decision to stop companies licensing the official questions coming into force soon, we’ve bitten the bullet and are changing things.

The original PYT was created from scratch and, I reckon, cost around £15,000 to build 5 years ago. It’s repaid that investment many, many times over since then but I was keen to find a cheaper method of development this time around (albeit that I can reuse many of the existing elements). One of the big changes in the web “landscape” since 2005 has been the widespread popularity of “frameworks” – software that allows you to create sites quickly by providing the underlying structure.

The most popular of these is WordPress. Whilst originally created for blogging (and still used for that purpose, including the blog you’re reading right now), WordPress is also completely capable of creating fully-functional websites. Indeed, I’ve created a new business called FixedPriceWebsite.co.uk which uses WordPress to enable me to create fully custom websites at a low, fixed price.

One of the great benefits of WordPress is that it’s extensible through plugins. For a membership site, the Wishlist Member plugin is the best of the bunch. This allows you to take payment, handle memberships and restrict access to certain pages/posts all through an easy(ish) to use control panel. In the case of Passyourtheory, a lot of extra code was needed to enable the theory test engine from the old site to move across and for various other purposes but, even including this, the cost of the new site will probably work out to be around 25% of the original. The new version of PassYourTheory launches in February 2011 – news will be posted here.

But the bigger question is whether it is possible, in the current climate, to make money out of membership sites. There’s an assumption that information on the internet is free so how do you get people to pay? Firstly, you need to have clearly valuable information. Secondly, you must stuff your content full of value so that there is no sensible argument about whether it’s value for money. Finally, you need to “grease the slide”.

Greasing the slide

You must make it as easy as possible for your potential customers to buy from you. One way to do this is by offering a free version of your product. Removing the barrier of payment makes it much more likely that customers will sign up. Once signed up, you can persuade a percentage of them to upgrade to paid membership by offering additional features. In “Free: The Future of a Radical Price” Chris Anderson talks about this model and how some companies are attempting to make money from it. Basically, it only works if you can make a profit based on perhaps 5% of free customers upgrading.

With PYT, I’m experimenting with an alternative model. Rather than making the membership free, I am charging one penny. Whilst this is almost free, charging a penny has two potential advantages:

1. The customer has to demonstrate a tiny bit of commitment to the service by going to the effort of using PayPal to make the payment
2. All 1p customers, by definition, have PayPal accounts and could therefore upgrade.

What this does is to help prevent the system becoming swamped with time wasters and casual observers who are never going to pay but still consume bandwidth and, crucially, technical support. Far fewer people will sign up but those people have made a commitment (however small) to their own learning and are much more likely to purchase upgrades.

In the case of PYT, we’ve also decided to deliberately reduce the focus on profit making and increase the focus on road safety. PassYourTheory Ltd will work towards becoming a Community Interest Company with an aim to have an impact on road safety in younger drivers. This is obviously a bigger story than can be covered here (I’ll write more later) but it means that as long as the site can generate enough money to cover costs and ongoing development and provide a small surplus to be invested in road safety campaigns then that’s fine. It’s the perfect testbed for a micropayment structure.

This is all set up on PYT now and the new service will be turned on in February – it’ll be an interesting experiment. I have no idea how it’ll turn out- it might be that the Penny Membership idea results in a high enough conversion rate to make the site sustainable, it might be that I decide to try free membership for comparison or we may give up altogether. We’ll see.

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