Category: Uncategorized

Many years ago, when I was a freshly minted coach, I was asked to run a course about coaching and leadership.

Actually the word ‘course’ is misleading because it was a one-day workshop. However, in the way that sardines are cleverly compressed into cans, this was a 3-day course compressed into an 8-hour tin of goodness. 

Well, that’s what the training manager wanted me to deliver. She had a tick list of items and expected me to touch on at least 15 different subjects during the day. I said no.

I said that she was hiring me to educate people and that 3 days into 8 hours doesn’t work. Machine-gunning a group of delegates is a total waste of time and clients need to remember that you wouldn’t treat school children like that, so why do it with adults?

It’s the ‘less is more’ paradox. Takes a bit of assertiveness and trust to deliver on, but is much better than opting for ‘more is more’ which can lead to a lack of learning.

A good tip is to have an exercise for delegates after each 20 minute teach and to follow this up with a plenary discussion. 

This allows people with different learning styles to digest the new learning and makes for a much more evenly paced day.

In the end I compromised with the training manager, delivered a useful 1-day workshop in 8-hours and gave the delegates some extra handouts, for them to ignore at their leisure.

What reminded me of this experience was seeing advertised a 1-day leadership course that promised to deliver everything but a trip to the moon and back. I think that approach is perhaps more of a light skim than actual education and for some people that is fine. 

Personally, my experience is that people make longer lasting behavioural changes when they have the space to really absorb new tools and techniques. 

Less is more! Except when we are talking about eating cake, in which case more is more!

Next week: Going WiFi Commando

Life is full of surprises, like the fact hipster beards and top-knots remain stubbornly en vogue, despite making some men look ridiculous. 

Obviously I shall declare that my tiny 80s pigtail was absolutely correct and manly and of course was fully approved by my thoughtful parents (they hated it). It was also on the banned list at school, along with white socks and pop star badges. 

However, us fashionistas simply tucked our New Romantic pigtails into our shirt collars, hid white socks under black ones and pinned our badges to the inside of our lapels and fought the fashion fight guerrilla style.

So, perhaps life really isn’t surprising after all, when we think about it. It’s just life, with its many little wrinkles, designed to make us stop and think sometimes.

Business is the same. Fashions have changed; my paisley ties are no longer required and the briefcase has been usurped by the backpack. 

What hasn’t changed is the need to think carefully about tax planning and herein lies a thoughtful story for us to ponder on.

Running a limited company means paying ourselves in basic pay and dividends. We can balance the two to be tax efficient and of course we need to leave funds in the business for a rainy day. We are not allowed to pay ourselves more in accumulated profits than we have earned, even if we have a strong future order book.

This is all very sensible, right up to the point when we apply for a new mortgage. Then we can happily switch off reality and journey down into madness.

I will keep the following numbers simple, to make the point in a general way.

If we have a PAYE salary of £30k a lender will happily loan us up to 4x earnings, equal to a handsome £120k. However, if our business pay and dividends equal £20k they will still loan us 4x earnings, generating a paltry £80k. 

Although this business pay is equal to a £30k salary the lenders don’t treat them as the same risk and in effect penalise small business owners. I discovered this recently and was shocked that despite running my own business profitably for 14 years that timescale also counted for nothing.

Had I folded the business and found myself a £30k job they would have been happy to lend more. 

Madness? I think so, but I don’t get to make the rules here.

The dividend trap is that in running my business efficiently I can borrow less than a PAYE person, even though we both take home the same amount of cash.

To add further insult here, retained profits are not mine either …they belong to the business. Even though I own the business and hence the cash in it, lenders are often unwilling to recognise this.

The catch for small business people is that they need to take less money out of the business when wanting to be tax efficient and take more money out of the business when needing a mortgage. 

Lenders need at least two years of accounts too, so if we want a higher mortgage loan we need to plan for it two years ahead. 

Even if we have the cash to pay a higher loan, the lenders will tend to go by our tax returns, which can put small business owners at a disadvantage.

If this all sounds unfair, well …it is.

So, it you want to avoid the dividend trap think about where your life could be in two years time and plan ahead.

Taking a minimum dividend now might be tax efficient, but in the future it could turn out to be highly mortgage-inefficient.

If you run a limited company then maybe it’s time to talk to a tax advisor and a mortgage broker and find out what you need to do for a happy future.

As for me, I’m going to find some white socks and smash the system quietly. I think it’s too late hair-wise for another pigtail though!

Next week: Learning vs Content