The arguments about Brexit have been raging for more than two years. Even now I have no idea if we are hard Brexiting, Brexiting with a deal, postponing again, voting, delaying or cancelling the whole thing.
Out of the stress and the lack of clarity I have been forced like so many other micropreneurs to look at my business, my clients and the effect of all these options on what I need to do to continue to trade and grow. Understandably, some business owners have decided to ignore the whole thing and make a plan when we know what is going on. Others have done their risk analysis and already stocked up produces, arranged new suppliers or customers and are ready for a hard Brexit.
It is extremely hard for micropreneurs to plan for several complex eventualities. We don’t have the resources that large organisations have to have a plan A, plan B and a plan C. And we certainly don’t have the money or lines or credit to stock up ‘in case’. Combined with real concerns about where we can work and live, the Brexit conundrum has hit the virtual working community as hard as any. We have more flexibility, but with that comes more uncertainty.
We had had to ‘dig deep’ strategically and emotionally. But this is what I have learned.
We live in an uncertain world
Brexit is one of many uncertainties we face in business. We also face massive technological change, climate change and possibly economic change as well. As micropreneurs our job is not only to survive all these changes, but to thrive.
It is too easy to say “I won’t plan until I know what is happening” or “It is just overwhelming”. I have had days like myself, but whilst micropreneurs have the advantage of being able to ‘turn on a sixpence’ when the world changes, some elements of business take time to come together and if you don’t already have some simple inexpensive options in hand, you may experience big caps in our cashflow or business as everyone adjusts.
If you can’t plan for everything, plan for what you can.
If we can’t make a ‘masterplan’ that covers every eventuality we can at least make a plan that covers the things we know we can plan for.
Key areas to look at
Your sales and marketing ‘pipeline’ are critical to your business. Have a look and work out what difference various options might make. For example:
Do you sell goods to the EU?
If the World Trade Organisation (WTO) were to be applied to your goods, how much more expensive would they be? 10%, 20%, 30%?
What percentage of your business turnover do sales in the EU represent?
Can you find a way to increase your sales in the UK or in other countries? If you spread your ‘risk’ of countries you can only win.
If we soft Brexit or don’t Brexit the worst that can happen is that you have got new customers in new territories.
For micropreneurs this is often about online sales being posted to new countries, though some will find agents in new countries to act as ‘sales reps’ or wholesalers.
If your products are meeting current EU standards it is most likely they will meet standards elsewhere, but your local chamber of commerce or the Department of Trade and Industry (DTI) will be able to help you there.
If the price of your goods may go up, can you identify a market for your goods at a higher price? Whilst logic often indicates that you will sell more items at a lower price, in some market places, price is an indicator of quality and too low a price can actually inhibit sales. Have you researched what the next price point up from you is and how your competitors market? Could you increase your prices by going up to a more lucrative section or niche?
If you are not used to exporting except to the EU you will need to get the hang of export licenses. For more information see https://www.gov.uk/guidance/exporting-goods-from-the-eu-to-a-third-country-outside-the-eu. This will also come in handy if we hard Brexit since there will no longer by an EU rules.
In certain sectors you will need appropriate safety marks and standards too. If you were meeting the EU standards this should not be problem once the appropriate systems are put in place.
If we soft Brexit or don’t Brexit the worst that can happen is that you find a marketplace where you can put your prices up anyway. That can never be a bad thing for profitability.
What will you do about VAT?
The current EU VAT regime will end the day we hard Brexit. This means if you do export to the EU you will simply no longer need to charge VAT (just as you do for other non EU/EEA countries today). You will need to identify the sales in your VAT return.
What about services across the EU?
Most of the heated debate around Brexit is centred on manufacturing and the effect on jobs and exports and imports. Over 80% of the UK economy is in services. The Brexit options for services are pretty much the same whether we hard Brexit or soft Brexit. No-one is thinking much about this.
If you need to travel to EU countries to deliver your services you will need a work permit from the appropriate country. These are not so easy to come by and will cause delay and extra cost.
Look at whether you can convert all or some of what you deliver ‘in the room’ to , virtual or online services. These tend to be relatively boundary free. Where you sit to talk to someone on Skype, is a lot less problematic than where you fly to in order to have a conversation. It’s more eco-friendly too.
This is a great opportunity to look at whether you can generate some non-time based revenue in your business. This is something all micropreneurs benefit from anyway.
If we don’t Brexit you won’t have wasted your time, since this can add to your product and service mix anyway.
Outsourcing in the EU?
GDPR has made us all aware that we need to share data in a secure way. That involves not just technology but also appropriate contractual terms.
If our team crosses international boundaries we have to make sure we make appropriate arrangements to protect the data we are sharing. GDPR is going to continue in the UK for the foreseeable future. Leaving the EU won’t change the fact.
What about online sales?
If you sell digital downloads without a significant time element accompanying the product you may find you should be charging Digital VAT now. After a long and drawn out negotiation we got the UK threshold for digital sales in line with the UK VAT threshold. However if we Brexit, this threshold will be lost. If you rely on this threshold currently you should plan with your accountant what you are going to do.
Having a tiny level of EU sales will be disproportionately expensive in this instance. You may want to consider either creating a big enough volume of sales to make it worthwhile or diversifying your marketplace into countries with different Digital VAT approaches.
Generally speaking the world is moving towards trying to enforce a form of sales tax on digital sales – everyone wants Amazon and Facebook to pay more tax in the countries where they have sales. We micropreneurs tend to get caught in the net since government thinking is very much focused on the big boys. The law makers have not caught up with the idea that we can go global from our back bedroom on a tiny sales volume.
While we may feel we are too small for anyone to bother with, if you are planning to go large, planning to go legal has got to be part of your plan. Make sure you know where your sales are coming from and decide whether you want to push more deeply into the EU market place, the global market place or focus on the UK.
As an online entrepreneur you don’t have to face the uncertainty of when you are getting paid. This can be a fabulous way to put a toe in an export market – provided you get your marketing right.
What about imports?
If your business relies on goods imported from the EU or through the EU a hard Brexit will mean tariffs and possible customs delays (and more form filling by someone!). Prices may rise as a result.
Have you got plans in place to find a cheaper supplier at the same quality? Always a good idea if you can. Or to find customers who are prepared to pay more for your products than they currently do?
Boom or bust?
Some say Brexit will trigger a recession. If they are right, then you need to know what percentage of your business is traded on credit, and how much of that relies on one or two big customers to pay you.
Diversifying your customer base so that no one customer is the biggest source or your revenue (or profit) can mean that slow payers, or even non-payers do not jeopardise your business.
What can you do to create a more diverse customer base? This is always a good plan.
Can you create a way for customers to prepay you? Can you change what you do or how you do it to rely less on credit?
These are always goods things to consider as a resilient business is never reliant on one or two key customers.
What if Brexit triggers a boom? Sudden booms can be as dangerous for micropreneurs as a bust. Why? Because booms mean price rises. Micropreneurs are traditionally slow to raise prices. We see many who contract to annual price rises only.
This means your profit margins will suffer as you buy in at higher prices but continue to sell at the original ones.
Review your terms of business and make sure you are not committed to a fixed cycle of price increases.
Do some preliminary calculations on what you need to do if prices for what you buy and who you buy go up.
Prepare a price rise plan. Will you apply price rises across the board or will you get in early with new customers and increase the older repeat ones once you know people are happy with the prices?
These things are always useful. Having a proper profit margin in your business will cushion you against the world we don’t yet know.
Stress or excitement?
Some people seem to thrive on change and for them this is just another series of opportunities. Others find it hard – particularly if they have not initiated the change and don’t even want it.
As entrepreneurs we know that ‘change is us’. Our ability to adapt and survive is critical to our success. Getting the hang of how to handle uncertainty and change is a useful skill.
It is possible to turn your lemons into lemonade. We all have to find a way.