Churchill Knight Blog

Many contractors are brought in to either organise or manage a team, or to be part of a team working towards achieving a goal within a defined budget and timeframe.

Whether you are running things or are collaborating as a team member it is vital that the project is managed well.

Project management is down to great organisation, people management and risk/problem management. Here are some tips to help run a successful project:

1) The entire project must be fully visualised and understood by everyone involved. Instructions and descriptions of the project parts should be clear and specific and all participants should have a good idea of what is happening with the other team members.

2) Project managers have to balance 3 opposing dimensions of success. The project has to be delivered on time and on budget to a satisfactory level of quality as judged by the key stakeholders. It is important to spot potential delays before they happen and to take care of them. This can come through team members who are not fully on board with their role in the project or just through problems that crop up along the way.

3) Priorities need to be agreed and managed throughout an organisation. If team members are on multiple projects and the CEO is telling them to do one thing and their Head of department another then things can become stressful and messy.

4) It is always worth using project management software to keep things clear and focused. Basecamp, Goalkeeper or Huddle are all examples of project management tools.

5) Project Managers need to be great at organising project timings. As I mentioned above, potential hurdles need to be spotted and dealt with quickly. Progress and changes need to be communicated in a timely manner through careful use of email, meetings and project management software. All of the above need to be carefully planned to make best use of everyone’s time.

6) The Manager/s of a project need to be given the authority to carry out their responsibilities. They should have the authority to give instructions and set expectations, set priorities and they should also be able to fully manage the resources that are necessary to getting the project done.

7) Great people skills – a good project manager needs to be respected and trusted by the team. This means that one has to be a good listener and fair in order to bring out the best in people. Give compliments when they are due and seek to help others to excel in their work. You need to genuinely empathise with others feelings and have the ability to persuade others to your point of view when necessary.

A good Project Manager will understand the specific strengths and weaknesses of all participants in a project so that the tasks can be divided up effectively. Build effective teams that can bond well together and that can operate effectively with the other teams with which they share dependencies.

The fifth IR35 meeting prior to the launch of the new system in April 2012 was planned for January 18^th. However, due to the large workload involved the meeting was put off.

An HMRC spokesperson told Shout99 that:

“The IR35 Forum meeting was not cancelled, but postponed until February 21, 2012. This was because, following working groups with the external stakeholders, we felt that there was more work to do prior to holding another full Forum meeting.”

 

So where are we with the new revisions to IR35?

 

Prior to the 4^th meeting of the IR35 forum two sub-forum meetings chaired by the PCG for the non-HMRC members of the forum took place to discuss the fact that there is still a lack of a singular and clear interpretation of some aspects of the rules. The aim of the meetings would be to identify these areas of disagreement and to come up with a proposal for HMRC on how this should be tackled.

Following recommendations from these meetings, HMRC stated at the 4^th meeting of the IR35 forum that they intended to start looking at a contractors business in totality rather than simply on a contract-by-contract basis in order to determine candidates for investigation.

Of course the law still remains unchanged and contractors must be compliant on all contracts. HMRC are stating that in order to effectively focus their resources they will consider the bigger picture when identifying whom to investigate before engaging in an investigation.

HMRC also suggested that they might withdraw from investigations into contractors who are classified as low risk to enable them to focus their time on the high-risk cases with a greater probability of success.

However, it is yet to be agreed exactly who is/isn’t low risk.

From everything that we have read on the IR35 forum process, it sounds as though it has been quite thorough and well conducted. The PCG have ensured that contractors’ voices are heard and time has been taken to consider and investigate all opinions.

They will have a busy time until the April update but hopefully following that contractors will be a lot clearer on where they stand and the process of the investigations should be a lot fairer and smoother.

The first year as a contractor is crucial in terms of ones confidence levels, financial situation as well as getting established in the market.

There are a number of things that are critical to ensuring ones survival over the first year that should be considered and planned for:

1. Consider the reasons for starting the business, is it driven by a desire for a change of lifestyle or a real passionate for the work? Freelancing or working as a consultant is tough but rewarding. However, one must love what they do to succeed, as there is no team to hide behind.

2. Avoid distractions – If one is passionate about what they do then this is relatively easy. Effective and efficient time management is a pre-requisite, however, contracting also allows a great deal of flexibility, which can be used to spend more time with family.

3. Be careful with money – a good financial safety net to cover illness, holidays and time between contracts is needed. Most importantly try to ensure that you do not go into debt.

4. Do not try to do too much at once; ensure that everything that you do is done incredibly well and that your clients see that you have gone above and beyond for them. Recommendations are by far the cheapest and easiest way to grow a business.

5. Plan to spend some time giving help and advice for free to build relationships and trust. This needs to be used with care but helping out an individual with some free advice or a small task can bring plenty of rewards down the line. Of course, the focus needs to be on earning a living in the short term too but it is also worth sowing a few seeds.

6. One needs the ability to be flexible, contractors will work with a very varied bunch of people and there will always be different professional demands. Be aware of this and adapt to each situation as needed.

7. Be proactive in looking for work; there may be opportunities that you can spot on jobs that you are on which the business owners have not yet identified.

8. Build up a list of contacts in a small database and touch base with them either via email or social networks on a regular basis.

9. Have fun in your work and relationships; you will be more effective if you take the work seriously but make it fun too. All this really involves is being friendly and having a chat with the people around you.

A new freedom of information response from HMRC has shown the true scale of IR35 successes since it’s inception.

The legislation, which aims to capture “disguised employment”, has now been around for the past 11 years.

IR35 was put in place in order to deter individuals and companies from trying to avoid tax and National Insurance through paying their workers as contractors when in actual fact they are for all intents and purposes their employees.

You can see from the data below that the number of IR35 investigations (No. of enquiries) has dramatically fallen over the period. This is more than likely due to the costs of investigation and the success rate of HMRC.

Tax Year	No. of Enquiries	Total Yield
2000 – 2001	16	Nil
2001 – 2002	261	Nil
2002 – 2003	1,016	£946,275
2003 – 2004	1,166	£1.9m
2004 – 2005	771	£1.4m
2005 – 2006	656	£2.3m
2006 – 2007	158	£1.9m
2007 – 2008	104	£1.7m
2008 – 2009	25	£1.4m
2009 – 2010	12	£155,502
2010 – 2011	23	£220,000

Source: HMRC

Also notable is the yield per successful enquiry which has risen considerably from £931 in 2002 – 2003 to a level of £9,565 in 2010 -2011 (an increase of 1000%).

Over the last 10 years HMRC has improved it’s targeting of investigations, mainly focusing on suspicious people. This streamlined targeting exercise may also be the result of cost cutting targets.  

It is surprising that these figures are so low. There is massive public concern regarding IR35; last month alone on Google’s search engine there were over 11,000 searches for terms related to the IR35 legislation. So assuming that many people will run multiple searches that means there were about 8,000 individuals looking for information on the legislation and only approximately 2 people found to be inside IR35 when they claimed that they were not employed. This suggests that there is a widespread fear over the legislation but actually only a very few people being investigated.

From the above figures we can see that there has been a large decline in the number of cases investigated. Is this because the legislation has worked as an effective deterrent and the numbers of people trying to avoid taxes has fallen?

Paul Spindler (http://www.kingstonsmith.co.uk/kingston-smith/people/city/spindler_paul), partner in the technology group at Kingston Smith explained: “Over a 10-year period, approximately £13million has been recovered at an average of about £3,500 per enquiry.

Paul then went on to say:

“I expect that many of these enquires [under IR35] have resulted in no recovery [of employment taxes whatsoever].”

IR35 expert Kate Cottrell, seconded by the government for the OTS Review of IR35, has noted that it is an indisputable fact that HMRC ‘clearly got better at IR35.’

“It collected an average of approximately £1,720 per IR35 case up to April 2006 and an average of approximately £16,900 per IR35 case between 2006 and April 2011,” she said.

“[In addition] HMRC deployed a lot less effort, as they worked only 322 cases [during the past five tax years of IR35] as opposed to 3,886 [during its initial six tax years].”

Whether the legislation is effective in itself is quite unlikely due to the level of confusion. However, it seems that it is achieving its central aim of being an effective deterrent to tax avoidance as the figures show that the number of individual enquiries each year is falling, so in a round about way, does the confusion actually make it more effective in achieving it’s goal, or have HMRC just taken their foot off the pedal?

Once the new changes to IR35 come into effect next year there may be additional confusion as contractors grapple to understand the changes and where they stand with the legislation.

The demise of the local Business Link service and what this means for contractors and small business’ was mentioned on our blog last month.

This month Business Link have opened up a new microsite (http://www.improve.businesslink.gov.uk/), which aims to support businesses in growing from the start-up phase to being an established medium sized business.

Here is a short review of the website that should help you to find your way around on your first visit.

What is the Growth and Improvement Website for?

Business Link have content covering a number of areas that have been identified as being major hurdles to overcome in establishing and growing a new business.

The content ranges from videos, case studies and tools to articles on key business topics, like:

• Getting access to finance.
• Increasing your market share and winning new customers.
• Winning government contracts.
• Improving your cash-flow.
• Taking on staff – and getting the best out of them.
• Doing business overseas.

 

Social Media Tie-in

Business Link have a tie-in with LinkedIn so that you can find useful groups that can help you to achieve all of the above and more. This can be found in the “Discussions” section under the “Resources” tab. Links to various established industry blogs and websites can be found on the site providing relevant supportive articles and videos.

Additionally, a twitter feed can be found on the homepage. A weekly competition for the best tweet is held, participants have to submit a tweet with the hashtag (#BLbizideas) and the winning tweet is published on the homepage.

Finding Events

 

There is an events section (http://www.events.businesslink.gov.uk/) where users can search for local events to attend for business support and networking. Although there are some free events, some will range in price from nominal fees to pricey.

Business Tool Finder

The business tool finder (http://www.improve.businesslink.gov.uk/resources/business-tool-finder) is a searchable database with links to articles from a range of websites that have been vetted by Business Link as being authoritative in their niche area. There are some excellent resources for information. In addition there is none of the spam and dodgy content that is often found through Google or other general search engines.

Business Support Finder

This tool allows users to search the Business Link database of publicly funded sources of financial and informational support for business such as loans, grants and bursaries as well as free advice and mentoring services. There are also a limited number of paid services included too.

Resources

There is an abundance of articles, both internally and externally produced, that have good solid advice that users can be confident has been vetted by the government for accuracy so can be trusted.

At the time of writing there were 170 videos in 15 different categories.

There is a contracts finder and an option to subscribe to various different RSS feeds depending on your specific interests.

There are also links to the Events, Tools and Business support sections mentioned previously in this article.

People and Assets

 

Information, tools and advice on the hiring process as well as general people management. There are videos and articles covering this as well as business assets and how you should effectively manage them.

Plan for Growth and Options for Growth

These two sections help users to go through the necessary thought processes and then plan effectively for growth.

Options for Growth takes you through the different ways you could go about growing your business and how it can be done effectively based on your circumstances. Again there are videos and articles as well as external links to support.

Finance

Whether one is looking to improve cash flow management, gain an investment or reduce costs the finance section (http://www.improve.businesslink.gov.uk/finance) has some good videos and helpful articles.

Finally, here is a short video that Business Link have created to summarise the new service:

<iframe width=”560″ height=”315″ src=”http://www.youtube.com/embed/IN-UFy13y0o” frameborder=”0″ allowfullscreen></iframe>

Overall the website is quite impressive; it does not have everything that you could possibly need but it at least gets you a part of the way there and then points you in the direction of more specific expert help when you need it.

Of course, it does not replace a personalised one to one service with a human advisor and perhaps the only other thing that is not prominent enough on the site is advice on how to find similar services to the one that they withdrew – both paid and free.

Recent research by Kingston University and PCG for National Freelancers Day shows that the number of freelancers in the UK now totals 1.56 million, which is 5% of the total UK workforce. The University’s initial study in 2008 found that there were 1.4 million contractors in the UK, so over the 3-year period there has been an increase of 12%.

When looking at the reasons for this it is impossible to ignore the fact that the country has been in hobbled economic health over this period and has undergone mass unemployment. Unemployment has increased by almost 50% to 2.49 million since 2008 and employment has declined by 400,000 (dataset analysis of April to June statistics by Kingston University). Since this data was taken, unemployment has now risen further to 2.62 million. Therefore, perhaps about a third of the 400,000 that left employment decided that they would make a go of it themselves rather than battle it out in a stagnant and opportunity poor jobs market.

As this is written it is National Freelancers Day 2011. This week freelancers received a supportive message by the Prime Minister, David Cameron, who said:

“I have a huge respect for all those who make the brave decision to branch out on their own and take control over the way they work. This Government recognises the valuable contribution that freelancers make to the economy and, as more and more people choose to join your ranks, you have all our support.”

Of course, there have been promises over the past 3 years that the government is committed to supporting small businesses and freelancers but there is still no visible solution to the lack of funding coming from banks; only initiatives to squeeze current agreements (such as mortgages and overdrafts) for more cash.

The Chancellor George Osborne will be making his autumn statement on Tuesday 29^th November when he has promised to unveil some big plans to support UK businesses in getting the finance that they need.

Within the freelance sector the Kingston University survey revealed that the highest proportion of freelancers work in arts literary and media occupations (265,000), followed by management (161,000), then teaching/education (110,000), with IT/Telecommunications (93,000) also extremely well populated.

The study was commissioned by PCG, the founders of National Freelancers Day. PCG’s Managing Director, John Brazier, commented on these figures:

“The figures underline the steady growth in the sector in turbulent times, and confirm a widely held belief that more and more skilled and talented individuals are opting for freelancing as a work/lifestyle choice, or because of economic circumstances. Freelancers are offering industry and commerce a flexible talent stream when and where it is needed.”

It would be interesting to see how many of the new freelancers have found success or at least survival in their new roles. As we all know it is not an easy route to take but if you are good at what you do and know how to be creative in finding work then freelancing can provide for a very fulfilling and enjoyable career.

Setting fees is a complex balancing act, which if done well can help ensure a steady flow of contracts.

But how should you set fees? Should it be based on an hourly fee, a daily fee or even on a bespoke quote on each project based on the specific requirements?

Generally speaking for IT contractors, the more senior the role is, the more likely it is that the role will be paid on a daily rate. For other sectors, this is not necessarily true as there may be far less established practices and jobs may vary in nature to a much greater extent.

The benefits of working to an hourly fee:

• In the event that a project over-runs, an hourly fee guarantees that any additional time spent working on the project will be invoiced.
• Typically a weekly invoice is produced when an hourly rate is charged, which increases cash flow.

 

The benefits of a daily rate

 

• This generally appeals more to clients as it allows them to forecast and control their costs more accurately.
• However, some contractors prefer the daily rate due to the reduced administration involved as clients are invoiced monthly as opposed to weekly if a daily fee is used.

 

Researching fee structures for similar roles is a good starting point. If one is working through an agency, advice on the best fee structure for different roles can be obtained. It is also possible to research what other contractors are charging. If you are with an agency then you will find that they can advise you on the best charging structure for each role that you put yourself forward for.

Covering for the unexpected

 

Contractors should ensure that rates being charged will cover eventualities such as but not limited to:

• Time spent not working between contracts.
• Time off for holidays (we all need them).
• Time off when unwell.
• Time needed for invoicing and admin.

 

In a full time role you will probably work 40 hours per week for 47 or 48 weeks of the year. That calculates to approximately 1900 hours per year. Whereas working as a contractor you can expect to only bill for about 1000 hours because of the above noted considerations.

Therefore, one way that you could decide your hourly rate is to look at a fair annual salary for your kind of work and then divide it by 1000. You could do the same with a daily rate by assuming about 130 days per year are worked.

It may be worth beginning the process through doing some research on industry jobs boards to see what rates are being offered in your local market. Do not make the mistake of comparing to international freelancer recruitment sites such as Elancer or Fiverr as you will not get a fair judgement of the local going rate.

The news is currently awash with doom and gloom stories of the economic situation unfolding in Europe, as there will undoubtedly be consequences for the already struggling UK economy.

In fact, Contractor UK is reporting a 27% drop in contract roles in the financial services sector in the UK.

When feeling under pressure from the economic climate there may be a solution in specialisation. Specialising is one way to ensure that one has a sustained steady flow of work.

It is also worth noting that in difficult times it is necessary to step outside our comfort zones to survive. When struggling to find work it is necessary to start marketing properly. This has long-term benefits in that it can securely embed a reputation and status in an industry.

Why specialise?

 

Have rates of pay declined in your industry over the past few years? Declining pay rates may be a result of clients finding people willing to do the work for less. In areas of specialism, however, there are less people available to do the job. This results in specialist contractors being in a better position to charge a higher rate, it also increases the chances of securing the job due to the decreased level of competition in highly specialist markets.

It is possible to cut marketing or business development costs significantly through specialising as similar clients congregate in the same places; read the same trade magazines, go to the same conferences, and visit the same blogs and websites.

Word of mouth will become more powerful; if a recommendation is received through a similar business then it will be an instant given that you have the necessary skills to fulfil the task.

A specialist can provide a better solution than a generalist and will potentially have a deeper effect on a clients business. This will in turn bring future work and recommendations.

It is possible to charge higher fees where there is significant past experience e.g. having developed 25 similar websites in the past rather than 25 unrelated websites suggests an understanding of the specific issues and needs of the area of specialism.

Greater job satisfaction occurs through having happy clients.

A specialist may be chosen before jobs are put out to tender, and may become an obvious choice for the work.

 

How to choose a target market

 

It is necessary to choose a target market that is large enough to ensure that acquiring a small share of that market will be profitable. For example, becoming a database consultant for retailers allows for a large enough market to make a successful business out of only taking a very small percentage of the market.

Make sure that there are not too many other specialists in the niche already. Determine this by searching on Google in the local country using the name of the specific niche that is being considered as well as the job title e.g. “Retail Database Developer”.

It is ideal to choose an area where experience and an understanding already exist. This can then be leveraged and built upon.

It should be an area where it is possible to get in front of the right people who can make a decision i.e. that there are email lists available, trade shows that can be attended, conferences and local chambers of commerce meetings etc.

How to be successful in the target niche

Firstly, identify where the market is going next in the chosen industry and understand how a unique skill set can be applied to these needs.

For example, an IT consultant may need to position herself from a customer’s viewpoint. An IT consultant who understands my unique problems, needs and language rather than just another IT consultant.   

Create a website/Blog that meets the needs of the specific industry.

Speak at industry trade shows and events.

Create white papers, articles and press releases and distribute them out or offer them for download on a website.

Build a database of contacts, clients and potential clients and aim to keep in contact with them regularly by being helpful and informative about the things that have been learned or changes that relate to their businesses. Not on the hard sell.

Form strategic partnerships with related but non-competitive businesses in order to help each other out through referrals.

Collect and use testimonials from existing clients and also recognised industry experts.

Hopefully this has given you some ideas on things that can be done to turn around a bad situation. It may not be necessary to go all out in this way; things could be taken more gradually. The main thing is that action is taken and that there is no procrastination and worrying in a state of paralysis. There is no need to fail but it is necessary to be proactive in order to be successful and to effect a change in circumstances.

When working as a consultant it can be relatively easy to slip into a false sense of security due to the relative simplicity of the business.

Contractors can often move seamlessly from job to job for a while and as long as the money coming in is enough to get by on then planning and business growth can easily be put aside. Or can they?

Many contractors have received stark reality checks over the past few years so here are a few ideas and guidelines to maintain a healthy business.

Make a business plan

 

It may sound obvious but there are many contractors that do not have a plan at all and are just winging it. It is important to have a clear plan of what the business should achieve over the next 2-3 years with specific and measureable goals that are SMART (specific, measurable, achievable, realistic and time-led).

Once a clear plan exists then performance can be measured against that plan. This may sound like overkill for a contractor but if there are clients knocking down the door for business then there is much less stress and worry as well as the opportunity to demand higher fees.

 

Setting Key Performance Indicators

 

Key Performance Indicators (KPI’s) are the specific measurements that are applied to measure success.

As well as financial targets contractors can use a number of measurements for their KPI’s

• Customer satisfaction; this may not be an exact science but it could be graded 1-10 based on the dialogue during the contract term, comments at the end of the contract from the client, renewal of contracts, number of contracts from the same client.
• Personal recommendations received – what percentage of the contracts over the past year came through personal recommendations?
• How many leads are coming through the website?
• Percentage of jobs finished on time and within budget.

 

Financial measurements should include revenue per month, details of costs as well as cash flow and timeliness of payments received. Money borrowed and working capital levels as well as how these fluctuate over time should also be considered.

Having a Clear Direction

The point of a plan is to know what the aims of the business are and how they are going to be achieved, preferably broken down into small simple steps.

Here are some questions that it should be possible to answer:

• What is the direction of the business, where will it be in 2 years time and how will we get there?
• What are the threats to the business over the next year? What is changing in the market and what needs to be actioned as a result?
• How can a competitive advantage be gained? What can be learned that will give the business a significant benefit over the competitors?
• How is success being measured? Are the KPI’s working and if not then how should they be changed?

If these questions can all be answered then the business is probably in a good place. However, if there is no clear direction and answers to these questions are a little hazy then it may be time to get planning.

1.5million people have been hit with fines for filing their tax returns late-raking in an estimated £150million by HMRC.

Figures were revealed following a Freedom of Information request lodged by Jason Collins, a tax partner at McGrigors law firm. The figures showed that more than one in four of the 6.9million people who filed a self-assessment tax return online missed the January 31 deadline.

These late filers were hit with a £100 fine and so although HMRC are refusing to reveal the total; it is estimated to be £150million.

The level of fines represents an 8% rise on last year and an enormous 56% increase from 2006, when there were 962,000 fines.

A new penalty regime this year means fines could be issued up to £1,500 if people submit their returns late.

Collins has expressed worriment over this, saying: “This wouldn’t be such a concern if HMRC had not developed a reputation for unfairly issuing fines and stubbornly refusing to cancel them, even when the taxpayer complains.”

HMRC guidance states that late filers will not have to pay a penalty if they have a “reasonable excuse”. However, it has not outlined what constitutes a reasonable excuse.

McGrigors warns that HMRC is adopting a “draconian” approach. However, an HMRC spokesman has countered: “We want tax returns back, not penalties, so nobody will receive a penalty where they file a tax return by the deadline or have a reasonable excuse for failing to do so.”

The next deadline for those submitting paper returns is October 31. People who choose to file online have until January 31 next year.