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The (obvious and not-so-obvious ) ways entrepreneurs make money from their inventions

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How entrepreneurs make money

Some entrepreneurs have a firecracker of an idea and seem to instantly make millions from it, whilst others plug away until something great happens. But the one thing they all have in common is strategic planning, focus and hard work… and a bit of luck too.

Here’s how entrepreneurs in the UK grow their idea – and hopefully make some serious cash from it.

 

1. Innovating strategically

Emma Lewis

Racking your brain for a business start-up idea? Most people seem to think the only way they’ll be a successful entrepreneur is to come up with something brand new. A flashing lightbulb moment where they create something no-one has ever seen before.

But actually, that’s not usually what happens. Instead, many entrepreneurs and start-ups simply take a product or service that already exists and improve it. This might be so it appeals to more consumers, or is cheaper or easier to manufacture and use.

An example? The iPhone. Launched back in 2007, mobile phones were nothing new. People were generally happy with what they had; they could send texts, make calls and take the odd photo. But what the iPhone did was take the best bits of the existing technology and make it better. Suddenly people could easily surf the web from the palm of their hand, with screens that were much bigger than anything before. New and exciting apps exploded onto the scene alongside instant messaging and social media – and the telecoms market was changed forever.

It’s tricky, but getting this right could put your business light years ahead of any competitors. Don’t forget too that innovative research and development activities seeking to make an advancement in science or tech may well attract lucrative R&D Tax Credits.

FinTech companies are particularly innovative, but of course, innovation occurs across just about every business in every sector.

 

2. Putting business growth front and centre

An entrepreneur must grow their business to stand any change of surviving. Sustained growth needs to come from the top down, weaving itself into the very fabric of the business.

Employing fresh, innovative talent is an important way of doing this. Onboarding skilled people who are fizzing with new ideas and know how to implement them effectively will keep the business evolving.

“Finding the right people is always a tough task in business”, says Kelly Ruston, Communications & PR Director at Lightbox.

“No idea is a bad one – even if it is a little far out. Ideas can lead to brainstorming new ideas, new ways of working or new campaigns”.

 

3. Franchising

“The Franchise Industry contributes £15 Billion to the UK economy – an increase of 46% over the past 10 years.”Franchise Supermarket

Franchising allows a third-party business to set up using the same branding, products, logos etc as the original business. It’s especially common in retail, leisure and hospitality.

Support is given to the third-party franchisee by the primary company, in return for a fee. This is normally a set percentage of turnover.

It’s essential that all products and services sold by the franchise are completely identical, with no change in quality or appearance. For example, a McDonalds Big Mac is exactly the same no matter which McDonalds restaurant in the country it came from.

Bear in mind however that franchising may not be the best way forward for an entrepreneur if their product only has short-term sales potential or is in a geographically restricted market. But if it does work, it’s a relatively straight-forward way to expand.

 

4. Getting their intellectual property licensed

Too many entrepreneurs have fallen foul of other people ripping off their idea and creating lookalikes. If these lookalikes are cheaply made or poor quality, the original brand will soon be damaged – possibly forever.

By licensing their intellectual property, an entrepreneur can sell the rights to its patented or copyrighted inventions to a specific, named license holder. Royalties (usually a small amount per sale) are then paid by the licensee in return.

Patents are great, but they only last for 20 years (maximum). So licensing intellectual property is often the best way forward, as receiving a small amount per sale is far preferable to no money coming in at all from the patent once 20 years have passed.

We recommend reading our recent piece Protecting your company’s intellectual property.

 

5. Benefitting from Patent Box tax relief

“In the tax year 2018 to 2019, 1,405 companies claimed relief under the Patent Box, and the total value of relief claimed was £1,129 million.” – Gov.uk

UK Patent Box relief is incredibly generous, so missing out is a really wasted opportunity.

Developed to encourage UK companies to innovate new products, as well as retain and commercialise existing patents, Patent Box tax relief was launched in April 2013. It means that any profits that result from an eligible patent will only be taxed at 10% – far below the current 19% Corporation Tax rate.

One particularly notable benefit to the relief is that profit made from products anywhere in the world will qualify. This is still the case even if only a very tiny part of the invention is actually patented.

No matter what course of action an entrepreneur takes, it’s likely to be a bumpy ride. Unfortunately, there are no ‘quick wins’ when it comes to innovative ideas making money.

But by planning your next move in detail you put yourself (and your business) in the best position for success.

Business

The perfect storm: new regulations and an inflationary environment will cause an upswing of M&A and consolidation

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By George Netherton, Partner, Head of Europe Insurance & Asset Management at Oliver Wyman

 

As Q2 results roll in, we’re beginning to see the impact of the perfect storm of challenges facing the UK personal lines insurance market. The effects of significant regulatory changes, heightened inflation, and macroeconomic uncertainty have so far largely been hidden by profits achieved during the pandemic; however, they are gradually being unmasked. The next two years will be tough, and we expect significant market shifts to result.

 

The challenges

The beginning of this year saw major regulatory changes brought in by the FCA. Welcome reforms aimed at creating a level playing field and ensuring good value for money for loyal customers, have nevertheless pushed up premiums for new customers and reduced profits in the back books of many insurers. Those with large retained profits in their back books have reduced flexibility in attracting new customers now, and we are seeing some overdue investment in innovation, particularly around electric cars.

As materials, labour, and energy prices rise, inflation challenges are not only being seen in insurers’ cost base and claims value chain, but are running far ahead of expectations. The motor insurance market, for example, has experienced significant levels of inflation in the first half of 2022, resulting from higher used car prices, higher third-party claims costs, longer repair times and inflation in the cost of car parts. As a result, profitability is dropping sharply.

Climate change is also hitting the market, with more extreme weather events, such as storms and heatwaves, becoming more frequent and expected to result in increased claims for flood damage, subsidence and even wildfire. In the first half of 2021, global insurers paid out the largest amount of claims in 10 years to cover the damage caused by natural disasters. Insurers are also facing costs for developing net zero and transition plans, as climate commitments are prioritised and scrutinised.

In addition, the cost of technology and data investment is becoming an increasing burden. Weaker businesses are struggling to justify big investment costs, yet are struggling for competitiveness without them.

 

The impact

Traditionally, insurance has been a stable business with balance sheet reserves reducing volatility and creating room for manoeuvre. This has meant that some in the market have in effect been ‘zombie business models’, not creating economic value for shareholders but still writing some new business, nursing a backbook and hoping for better next year. Insurers can give the impression of health long into their decline and several that were on their way-out pre-pandemic were able to rebuild their reserves to some extent as lockdowns created unexpected profits from motor portfolios. However, the tide is now going out and the recent market changes will make it very difficult for unprofitable outlets to survive. As the market settles into the new ‘rules of the game’, we expect to see some significant changes.

We predict the market will rationalise down to a smaller number of players, consisting of some rejuvenated major players and some low-cost digital attackers. Many Tier 2 and 3 insurers may withdraw from the market entirely, consolidate their exposures or merge to reduce their cost base. Marginal players will be faced with the choice of significant investment to reach market leadership or narrowing to focus on defendable niches.

At the same time, we predict diversity and scale to come back into fashion. The decade of 2010-20 was dominated by the success of largely monoline businesses writing largely one product (motor) through largely one channel (price comparison websites). But this concentration is now proving painful. Diversification brings resilience and breadth of opportunity, and the companies recently announcing successful Q2 results are those that have been able to secure varied portfolios. Personal speciality businesses, such as pet and travel, will benefit from this as they become attractive opportunities for major players seeking diversification in tricky core markets.

Tough market conditions are a natural part of the insurance cycle, but the combination of factors experienced over the last year has been extraordinary. The challenges run deep, and the impacts will continue to be seen for a long time to come. Insurers need to continue to adapt to protect their operations, promote customer retention, and prepare for the future.

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Accounting software: the future is not what it used to be

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By Lyndon Stickley, CEO of iplicit; an award-winning accounting software developer


Escape your discomfort zone

US Navy Seals have a saying: “The only easy day was yesterday.” That sentiment could well be echoed by some of the FDs and CFOs we hear from.

Many are suffering (unnecessarily) in a discomfort zone that looks like this:

  • their old on-premise accounting software is unable to integrate with other true cloud applications, within their organisation
  • they resort to numerous time-consuming spreadsheet workarounds to patch ‘holes’ in their reporting processes
  • their teams have to manually rekey data to make sense of information from multiple sources
  • reports can take days and even weeks to complete – when they could take just hours
  • their desktop technology can’t cope with today’s efficient WFH and hybrid working
  • essential information is trapped on office servers (or even in filing cabinets) – but they need to access it remotely.

It’s not ideal – so why do they put up with it? What’s so bad that they’d rather soldier on with this sub-optimal status quo?

What’s worse than your outdated on-premise accounting software?

The cost, time and stress involved with upgrading to more powerful software – that’s what. Or so some finance professionals believe.

It’s not uncommon for them to worry that the cure could be worse than the ailment. That’s because of all the pain that they experienced the last time they changed their accounting software.

They can recount horror stories of paying tens of thousands of pounds for an annual licence and similar for implementation charges. But the software was so complex that even the experts took months to install it and customise it.

Back then, too many buyers had to endure a string of broken promises and missed deadlines – all of them bad enough to trigger nightmares, flashbacks and the occasional nervous tick:

  • the system cost twice as much as the quoted price
  • installation took twice as long as promised
  • it still didn’t achieve the intended result because it was so difficult to use
  • staff never truly understood the system or liked it.

And we sympathise because their concerns are based on bitter experience. Back then, they were the victims of a cynical software industry that revelled in putting them through the wringer.

The vendors made a fortune from overselling a sledgehammer to crack a nut…and then took forever to install it. All the pain simply meant higher profits for them.

But that was then. This is now…

Don’t get me wrong – there are still vendors out there peddling the old model by charging far too much and taking too long to install the software.

But the difference now is that there are alternatives. Sensible, readily accessible ones.


Don’t let the past define your future

You no longer have to repeat the misery of the past to end the discomfort of the present.

You don’t need the open-heart surgery of a high-priced corporate ERP system that takes a year to install. Now you can opt for the elegant keyhole surgery of mid-market true cloud accounting software – whether you’re an SME or a Nonprofit organisation.

Today’s mid-market cloud accounting software costs a fraction of the price of a big ERP system. And it can be installed in just 15 applied days – over a time period to suit you. The data migration, configuration, implementation and training can all be executed in bite-sized chunks – enabling you to continue with your day job and transition with minimal disruption.

So there’s no reason to continue putting up with the hopelessness of your existing on-premise accounting software. Your fears – though rooted in all-too-real past experience – are based on a future you’ll no longer have to endure.

 

The Devil you know is no longer worth knowing

Inevitably, ‘Better the Devil you know’ will never be a solution to the increasingly pressing problems posed by old and outmoded accounting software. At what point does prudence become inertia? If you choose not to decide, you still have made a choice; deferment is still a decision.  Both the saying and the software have a nasty habit of wasting money as well as time in the long run.

And, with every organisation requiring increasing levels of timely, actionable information, hindsight could show that doing nothing, in this instance, is the wrong decision to make.

The future is not what it used to be. Take a look.

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