Monthly Archives: December 2016
In the latest edition of AIB Agri Matters two young progressive farmers offer advice to aspiring young farmers in setting up a new farm enterprise or starting out in farming:
1. Know exactly why you’re doing what you’re doing – if you don’t it’s hard for anybody else to know. Explore the options and pick the one that suits you best. Seek advice from others to see what worked for them.
2. Establish a good track record when you’re young – in work, in college and with the Bank – it gives others more comfort you have the credentials to deliver on your plans.
3. Put your best foot forward when meeting the bank – prepare well in advance. Don’t sell yourself short – Have your costing’s and have your research done. Show you understand your business and its profitability and most importantly ensure your lender understands it.
4. Treat the farm as a business – if you don’t look after the business, financial management is useless. The opposite is also true. Costs and cash flow must be controlled and monitored to ensure the business remains profitable and bills can be paid, when they fall.
5. Have a simple system – more easily expanded, and helps ensure consistency and accuracy – especially important where additional labour is employed.
In last year’s Budget, the Minister introduced an Earned Income Tax Credit of €550 for small business owners who cannot benefit from the PAYE tax credit of €1,650 available to employees. The Minister announced an increase in this credit to €950 for 2017.
The three lower USC rates have been reduced by 0.5%. Accordingly, all income earners will have a lower tax burden to varying degrees. The ceiling at which the 2.5% USC rate applies is increased to €18,772 – this ensures that a full-time worker on the minimum wage will remain outside the top rates of USC.
2. Minimum Wage
The higher cost to employers arising from the increase in the hourly minimum wage from €9.15 to €9.25 will take effect from 1st January 2017.
3. Entrepreneur relief
The standard rate of capital gains tax remains at 33%. However, the Minister announced a reduction to 10% in the capital gains tax rate that applies to disposals by Entrepreneurs of qualifying assets. Entrepreneur relief offers the reduced rate of capital gains tax on the disposal by an individual of business assets up to a lifetime limit of chargeable gains of €1 million. The Minister is to review this lifetime limit in future budgets.
To qualify for the relief, the business assets which include shares in a company must have been owned by the individual for a continuous period of at least three years in the five years immediately prior to the date of disposal.
4. Share-based remuneration
Following a public consultation and review of share-based remuneration earlier this year, the Minister announced the intention to develop a new, SME, focussed share-based incentive scheme which is to be introduced in next year’s Budget.
5. Retailers and Tourism
The reduced 9% VAT rate for tourism and related activities will continue to apply. The Minister noted that the reduced rate will act as a buffer for the sector against the weakness in sterling which increases the cost of holidaying in Ireland for British tourists.
6. SMEs in the Construction and Property Sector
The Minister introduced a new ‘Help to Buy Scheme’ for first time buyers of new houses that take out a mortgage of at least 80% of the purchase price. This scheme will provide a rebate of income tax paid over the previous four years. The rebate is subject to a maximum of 5% of the purchase price of a new home up to a value of €400,000. New houses with a cost between €400,000 and €600,000 will also qualify for the scheme but the rebate is calculated at the €400,000 limit. No rebate will be paid on new house purchases in excess of €600,000. The rebate does not apply to the purchase of second hand houses.
The Home Renovation Incentive will be extended for a further two years to 31 December 2018. This measure provides income tax relief to home owners who undertake qualifying renovation works which cost a minimum of €4,405 (excluding VAT). The relief is payable over the two years following the year in which the work is carried out and equals 13.5% of the qualifying expenditure.
Landlords are entitled to deduct 75% of interest incurred on qualifying loans when computing the rental income subject to income tax. The Budget provides for an increase in the deduction to 80% of the interest incurred on qualifying loans. The deduction will be increased by 5% each year over the coming years until a 100% deduction for interest is restored.
What makes it so hard for founders to confront what they don’t know? For starters, they grow so accustomed to improvising that they assume they’ll learn whatever they need to know by doing. They assume part of running a growing business is rendering judgments without having all the answers.
Have you fallen into this trap? See if the following statements sound familiar:
- I’ll never have all the information I’d ideally like to have, so I need to do my best with what I know
- I don’t have anyone critiquing my performance every day. There’s no one around telling me, “You don’t know enough about this. Learn more before you plunge in”
- Launching a business is a leap of faith. I’m busy drumming up excitement in our future. Obsessing over what I don’t know isn’t going to help us grow
What’s more, business owners cherish their independence. They may reject unsolicited input from others, especially if outsiders try to tell them what to do or how to do it. Unless entrepreneurs schedule periodic meetings with a mentor or advisory board, they may operate in a vacuum and lose perspective on their own strengths and weaknesses.
Self-confidence is a prerequisite for building a business. But too much confidence can convince you that you know what you’re doing when you really don’t, causing you to stray far from your field of expertise. Another obstacle is the temptation to assume you can muddle through on your own. Telling yourself, “I can get by for now” or “I can figure this out myself,” prompts you to accept your limitations without attempting to patch up knowledge holes. Even if you accept your knowledge gaps, you might not want to dwell on them because it makes you uneasy. Feelings ranging from misguided pride to flaring anxiety can lead you to forge onward rather than taking the time to confront unknowns.
Quiz your employees
To help identify your knowledge gaps, tap into your employees’ expertise to become more familiar with the inner workings of your business. Begin by asking workers, “What do you need to know to do your job?” Sit with them at their desks and ask them about:
- The processes they’ve adopted
- The systems they use
- The knowledge they draw upon
Then compare what they know to your understanding of what they need to know. You may find that employees’ jobs have evolved in new and surprising ways. Expect to come away from this exercise thinking, “I need to find out more about.”
Also ask employees, “When it comes to working at this company, what do you wish you knew more about?” This question encourages them to share their knowledge gaps, which you can help fill. By exchanging insights and information about company operations, you’ll gain a stronger sense of how you can educate yourself and your staff to appreciate both the nuts and bolts of your business and the big-picture issues it faces.
Finally, ask both your peers and employees point blank: “Tell me what I don’t know.” Kick off every staff meeting by going around the room and asking participants to volunteer something they’ve recently learned about the business.
Sitting on a stool in one of the changing rooms – our makeshift interview room for the day – Mairead takes a rare pause, looks around and reflects: “You know, when we viewed the property, we sat in this very changing room. And I said to myself, ‘I could really give this a go.’” Since that decision, she hasn’t looked back.
For Mairead, owning her own boutique was a natural progression from her successful personal styling business. “I’m a personal stylist and shopper, and I decided that maybe I could actually provide the clothes for the people I go personal shopping with instead of having to go elsewhere,” she explains. “That’s how Smock Boutique started.”
Her years working as a personal stylist and shopper have provided Mairead with an invaluable insight into her target customer’s needs. This heavily influences the clothes she chooses for Smock. “I’m in the wardrobe of my target market at least once a week. I feel that I have a certain advantage when I’m going to buy my collections because I feel 100% confident that I know what is needed,” she notes. “We’re not filling the wardrobe with pieces that don’t suit your lifestyle, we’re providing a working wardrobe within budget for that person. That’s absolutely at the forefront of my mind. That’s my USP.”
Building the Boutique
Setting up a business on your own comes with many challenges and there’ll always be a few learning curves. Although Mairead was absolutely certain in her vision for the boutique, she was conscious that the admin side of things also had to be perfect. She heard about MyBusinessToolkit from her local AIB branch and thought it would be useful to help get the business off the ground. The Toolkit offers access to a suite of leading business tools, from Sage Accounting and Payroll to the bOnline website builder. MyBusinessToolkit is free for 3 months when you open a Start-up Business Current Account before the 31st of Dec 2016. She explains how MyBusinessToolkit has helped her get her business off the ground: “You have so much paperwork, and because it’s a seasonal business it all comes at the one time,” she says. “If you don’t keep up to speed with what and when you need to pay, you’ll quickly fall behind and your front of house suffers. I don’t want that to happen.”
The bOnline website builder provided in the toolkit was also a huge help in getting her online presence up and running. She explains: “MyBusinessToolkit has helped me get my business off the ground by allowing me to have an almost free website. That cost would have been a huge undertaking for me at the beginning. It just made it so easy.”