How to Attract Business
I really don’t care what language people use in private, but are new powers for the Welsh Assembly to force companies and organisations to provide services in Welsh a good idea?
If I was thinking about relocating a company to Wales, I would think again, as if at some future date, I’d have to go to the expense of providing everything in Welsh as well as English. I would go to part of the UK, where things were less strict. In these days, where business efficiency is the key, then imposing rules like this doesn’t make sense for the vast majority of companies and organisations.
Cutting Unemployment
I run a couple of small businesses; one is a computer software firm and the other is a thoroughbred stud.
I have a problem on the stud in that work is distinctly seasonal and so some of the essential maintenance jobs that no-one really likes to do, get put to the bottom of the queue, when other more important things come up. For instance, if it means having an injured horse for rest after a racing injury, which requires extra care time, then this will take precedence over say painting fences or renewing a badly worn gateway, because the former is better for your cash flow.
In the past twenty years or so, whilst my late wife and I have run the stud, we’ve often needed someone for say a month or two for these maintenance and other tasks. Usually, we’ve subcontracted to a building firm, who don’t like these sort of small jobs and charge much more than say employing someone for a couple of months.
What is needed is a computer system based on the technology used on many web sites, to match the unemployed to the small jobs available. The site might be something like a cross between a dating-site for something like The Times and eBay.
Suppose you chose someone from this web site for a job that would last anything upwards of a week.
You would pay the site, which would then pay the employee directly and automatically adjust their benefit, so that they avoided the problem of going on and off benefit. After they’d finished, you would then assess their work and post it with ratings on the web site.
I think that this would have benefits for both employers and claimants.
Employers and especially small ones, would have a simple means of bridging that temporary labour problem without any great hassle. They could also read the references of those available for employment in their area and may well choose an employee whose skills and experience matched their needs. In the case of the stud, I’d probably do jobs where I can easily find people to do them. For instance, I have several painting jobs that need doing, so if I found someone, who had experience of industrial painting, then that job would be done.
Claimants would benefit from the work and the extra money, and because they were rated, this would increase their chances of getting full employment. The system would also benefit, those who perhaps because of circumstances like age, children and disability, did not need or want to work all of the year.
It is an idea, that I feel needs to be examined. As a computer scientist, I don’t believe that setting it up would be the biggest of technological problems, although asking the government to do it would probably be a disaster.
A Year of Zopa
I have now had a Zopa account since October 2008.
But it is now over a year since I started taking proper statistics of the lending, so that I can now put together proper results for the first time.
Overall Figures
As of the eighth of January 2010, I how have £39,473.90 invested in just nine hundred and fifteen separate contracts. This means that the average contract size is just over £43.
It should be noted that I generally lend in the two top Zopa markets, A and A*. This is because these markets have the lesser risks as people have a better credit rating. There are also two lower markets, B and C, that I ignore. I also lend a small amount in the youth or Y markets. All money is lent over three years.
Bad Debt
Bad debts are just two contracts, which total £278.13 or about 0.7% of the total. In terms of numbers is about 0.2% of the loans. Note that one contract is a Y and the other is an A.
So is that a figure that is in line with Zopa‘s predictions?
They predicted that debt for the type of lending I do, defaults would be of the order of two percent. There are two provisos to this.
- Loans between one and two years old are showing about a four to five percent level of default. Most of this was probably down to the credit crunch.
- Those issued recently are now checked to much tighter criteria and are showing lower predicted and actual levels of bad debt.
But both these levels are higher than I have encountered.
Let’s put it down to good luck.
Or did I just join Zopa at the right time with the worst of the bad lending bulge being just about in the past?
Arrears
Arrears are different to bad debt, in that they tend to be accounts that limp on. Sometimes they consistently pay a few days late and one or two I think will probably end up in bad debt.
The numbers of accounts in arrears vary between about two and seven. Interestingly the number grow at the beginning of the month and then decline until about the twenty-fifth. Some even if they do go bad will not be a problem, as I’ve only lent these people ten or twenty pounds or so. But others are more serious.
I have five in arrears at the moment.
- Y – £10 with just the last payment missing – 4 out of 5
- Y – £20 that just limps on a bit that has missed four payments, but they’ve all come in late – 3 out of 5
- Y – £100 that is a real limper but always manages the payment about ten days late – 3 out of 5
- A* – £120 with just the last payment missing – 4 out of 5
- A* – £30 that has limped and now appears to be going terminal – 1 out of 5
In total there is £211.34 in total outstanding on these loans, with total arrears of £12.06. So it would be unlikely that all this money will eventually be lost.
I suspect that the numbers will reduce as the month goes on. But I also expect others to be in arrears.
Returns
Working out a Zopa return is not easy, as money is going round and round, up and down and I have been adding about a thousand pounds a month to my lending.
According to my accountant the only fair measure is to take the amount of money earned a year ago and subtract it from today’s figure to get the yearly earnings. Dividing this by the average amount of money in the account over the year, should give a sensible answer.
This method also takes into account any monies in the holding account, bad debts and charges from Zopa.
As of today this yearly percentage is 5.44%. If I assume that all of the current arrears go bad, then this figure drops to 4.77%.
Is that a good rate of return in the current circumstances, where banks offer a lot less?
Strategy
When I started using Zopa, I didn’t have a strategy.
This was very wrong.
On the other hand, I had enough money to be able to afford any losses.
It is interesting that the two bad debts I have are one in A lending for £200 and another in Y lending for £100. Now, my limits are much lower.
As I said in this post, Zopa as a Lender, I started with the money from the sale of my late wife’s Porsche. But after testing Zopa for a few weeks, I started to be too aggressive in my lending, by allowing people to borrow too much. In some cases because two lending offers overlapped, I lent as much as £400 to some people.
Now, I have just two offers, one for A and A* borrowers and one for Y, with limits of £50 and £20 respectively. My average loan size is just over £40 now. I am not sure of the statistics but I believe that this makes it less likely I will suffer a major hit. Although, there are still some individuals with impeccable payment records, who owe me more than in an ideal world I would like.
So the strategy I now use is lend little and often and don’t be too aggressive in getting your money into the marketplace.
It also is essential that you check Zopa as often as possible, to make sure that your interest rates are up to date. I keep these at the highest level, that still gives a High rate of lending.
Farewell Saab
I’ve never owned a Saab, possibly because I have tended to buy British cars, but feel rather sad that General Motors have decided to pull the plug on a quintessential Swedish and European brand.
But it is only a gradual process, where cars splitting into mainstream and niches. Saab unfortunately couldn’t find a niche big enough to live in. Just like MG-Rover!
And just like MG-Rover, I doubt that they will be able to survive if someone else buys them. After all, their product line seems rather stale and it is in desperate need of new models.
The RBS Dilemma
The Royal Bank of Scotland is now 70% owned by the taxpayer. Note the word taxpayer and that means you and me. Well, I suppose it might not mean you, as you might be in New York, New South Wales, New Zealand or New Caledonia.
But the dilemma will hit us all in the next few years as we struggle to get the economy under control.
In the red corner you have the public and the government, who for all sorts of reasons find million pound bonuses obscene. And in the blue corner you have the Banks, who say that they need to pay these bonuses to attract the best talent, so that they make higher profits in complex and difficult to understand markets.
This excellent article in The Times sums it all up well. The government wants to veto the bonuses and if they do, then the board of RBS will resign.
The Treasury signalled last night that it was prepared to veto a £1.5 billion bonus pool at Royal Bank of Scotland in a move that could trigger the resignation of the bank’s board.
RBS directors have been advised by the bank’s lawyers to resign if a Treasury bonus veto means they are unable to run the bank commercially and in the best interests of all shareholders.
People close to the Treasury signalled last night that Alistair Darling would throw out any bonus plan at RBS that was much higher than last year’s £1 billion. “We would not expect to see any significant increases in bonus payments. I think most people would see 50 per cent as a major increase,” one Treasury insider said.
RBS is expected to make £6 billion in profits this year from investment banking, implying a bonus pool 50 per cent higher than last year.
Is this blackmail? Yes! But is it sound business? Yes!
It’s actually more complex than you think.
Take total tax. Corporation tax on companies is lower than that for individuals. So am I right in thinking that high bonuses might actually return more money to the government? But that is a practical not an emotional response.
How true is RBS’s assertion that they need to pay the bonuses to get the right people to manage their investments? In my business life, I have often found that you have a lot more talent in a company than you think you have, but those in charge like to keep the minions down, as they see them as a threat. So perhaps, a little bit of intelligent management might improve matters. I don’t know! But I have worked with people at the highest level in a clearing bank and know that there is a lot of nonsense there. I suspect there still is!
Now let’s suppose that to get round the bonuses, RBS got some other company to manage their investments. I don’t know whether this is possible, but I suspect that it would probably cost them an arm and a leg to make the same six billion pounds. Probably one and a half billions of arms and legs. And most of that would probably never see a British tax authority again, so we, the tax payers, would lose.
So it’s difficult!
What we actually need is a change of culture.
Banks, no matter what we think, are a short-term business. For instance, a main board director of a major clearing bank, once told me that a third of their profits came from overnight money and the interest on money that had not been cleared. That’s why banks don’t transfer money instantly!
So how can we make things better?
Economists have talked of a transaction tax on banks, to move them away from short-term thinking, but that would only move the business to somewhere that doesn’t charge. So as with anything we need global standards and a level playing field.
So it will be a difficult and long uphill struggle to make the banks appear ethical in everybody’s eyes.
For my personal banking, I don’t use a bank, but a building society through the Internet and Zopa, the peer-to-peer lender. The former transfers my money efficiently and manages my credit cards. And the latter pays me around five percent on savings, with the ability to withdraw the money gradually if I need it. To get the same rate with a bank, I’d have to lock the money in for ever.
This is a model that many others will follow, leaving the global fruit machine to the so-called professionals. Unfortunately, banks will probably do their utmost to strangle innovative competitors like Zopa.
So we must educate everybody in the Internet and personal finance, so that they can make reasonable decisions for themselves. Many web sites do this very successfully.
But to return to the original dilemma.
Should the government limit bonuses for banks in which we have the major shareholding?
In my view they should not!
Why?
It will heap more bad publicity on the banks and hopefully push most of us to look for better and more ethical ways of handling our money.
A New Bank
Years ago, I worked as a consultant for a major bank writing a software system to calculate the cost of the various operations of the bank. What was interesting, is that a significant part of the cost of transactions such as clearing cheques, standing orders, direct debits etc., was the cost of the buildings and premises. In fact, when a new branch opened, because of the premises cost, it was a long time before that branch’s costs were down to the average level.
So the suggestion of one of the callers on Radio 5, that banks open branches in areas that are poorly served, although admirable will never happen. Or only after intense pressure and inducements.
But!
We live in a technological age, with nearly everyone having a mobile phone. Also about 50% of the population bank on-line and about 70% or more of the population have access to the Internet.
So any new bank must maximise this technology to provide a service to everyone.
Banks too, need to introduce more personal service and if customers can’t get to see the bank manager, then the managers should go to the customer. How many people have ever had a visit from a bank manager? I rarely have and I’ve dealt in seven figures sums with banks for many years.
Returning to my costings of a major bank. Small sub branches were an interesting way of providing service in areas away from the main branch. They have now been replaced by cash machines, but why do we not see such branches in places like supermarkets, hospitals and garages?
Whatever happens, a new bank must innovate and draw on the experience of the past; good and bad.
Best of Salineville Awards
I received this from the US. As with most things like this, I recognise they are spam and completely worthless.
In recognition of your achievement, a 2009 Best of Salineville Award has been designed for display at your place of business. You may arrange to have your award sent directly to James Miller by following the simple steps on the 2009 Best of Salineville Award order form.
Each year, the US Commerce Association (USCA) identifies companies that we believe have achieved exceptional marketing success in their local community and business category. These are local companies that enhance the positive image of small business through service to their customers and community.
Also, a copy of the press release publicizing the selection of James Miller has been posted on our website. The USCA hereby grants James Miller a non-exclusive, royalty-free license to use, reproduce, distribute, and display this press release in any media formats and through any media channels.
An Award Code has been assigned to your company that can be used on our website for quick access to your award information and press release.
Your Award Code is: 8A3F-WX2B
Sincerely,
Ashley Carter
Selection Committee Chair
US Commerce Association
So I searched for Ashley Carter and the US Commerce Association. It is just a rather dubious vanity award and as I thought completely worthless.
Communicate with these people at your peril.
Mount Pleasant
The largest postal site in London, if not UK is Mount Pleasant.
Years ago, when I lived in the Barbican and worked at Time Sharing in Great Portland Street, I used to cycle past the site to get between the two locations. I could never understand, why most of this valuable site is just a ground-level car-park. The site is still mainly undeveloped in an area of London, where property prices are sky-high.
If you take other large organisations, who used to have large premises of this sort in central London, they have closed and redeveloped them. As an example, a lot of London rail stations are new and spectacular, with or without offices, shops and apartments. These developments have enriched the environment and the organisations that owned the sites.
So why have Royal Mail not closed these massive sites in central London and developed perhaps four large sorting centres on the M25, with just smaller delivery offices in the centre?
It surely must be a much more efficient way of doing things. Or am I talking garbage?
The union will say I am. But then if you start with new sorting centres, you’ll probably break the power of the unions to hold everybody to ransom.
On the other hand, as mail volumes are dropping substantially, it is the management of Royal Mail’s responsibility to provide an efficient service suitable for the new circumstances.
My post is getting through, but I have a feeling that the junk mail that goes straight in the bin is not being sent. So perhaps, we’re seeing a benefit of these silly strikes.
What Happened to Confidentiality?
Like most people in this country, I want a proper solution to the remuneration and expenses of our MPs. I say most, because I feel that there are some people, who just want MPs to go through the wringer again and again, as it is the latest spectator sport.
But what worries me about the two enquiries going on, is that they seem to be leaking their findings. Or at least testing the marketplace to see how they can be popular with the public and bring MPs into line.
As the title says, “What Happened to Confidentiality?”
To me though what we pay MPs is simple. We should cut their numbers and distribute seats fairly, pay those that remain more and then put all MPs under the same rules as we all are with our businesses. These rules would be enforced by Revenue and Customs.
The latter point may actually relax some rules, as say you are an MP for a distant rural constituency, you would get a lot of allowances and perhaps even pay, but someone who represented say Enfield in London, would be very much on the basics.
Years ago, when I was working for ICI, I did a job for some months, which meant that I was travelling at lunchtime between two places of work. Company rules, meant that I got a taxable bonus, because of the extra stress involved. So even in those far off days in the very early 1970s, industry recognised the stresses and strains of jobs and rewarded people accordingly.
Do we pay our MPs correctly for what they are supposed to do and the stress they suffer? Some yes, but others we don’t!
It would be interesting to also look at the rate of divorces and other problems in MPs families. As I write this, there is a local news story about a prospective candidate, who had a high-profile affair with an MP. I have no idea whether it is more than the national average, but MPs staying overnight in London, with their spouse in the constituency do seem to feature in the tabloids from time to time.
It’s a mess. And in my view, it’s a mess created because we do not pay MPs the going rate for a difficult job, that should attract the best talent in the country. More and more, it seems to attract political timeservers and yes-men, who want to get to the top, by any means possible.
There is one solution to the problem. Several countries have a political list system, where you vote for the party and then MPs are chosen proportionally. All are party hacks and all live near Parliament. It solves the expenses problem, as MPs don’t have particular constituencies, so they have few travel expenses.
Heaven save us from such a system.
The Facts Behind Royal Mail
We all know that the Post Office and Royal Mail are in trouble.
But what are the true facts behind the problems? This analysis on the BBC web site contains some interesting facts.
For a start, it always used to be the case that mail volumes followed the economy. But not any more and now, there is a large decline in volumes, due to technology, which has created a large gap in the traditional forecast. We now know, that if the economy picks up again, there will be no bounce in mail volumes.
I’ve said before that nearly everything I get now in the post, is either junk mail or a few bills. I probably get about five of the latter a month and about five pieces of junk that go straight in the bin every day. Only on birthdays and at Christmas, do I get a substantial amount of mail.
As the service gets more unreliable, I suspect that mail volumes will decline even further.
Many of the companies I deal with on the Internet, used to send catalogues. Many now do not. I even had a local charity send me a nice card yesterday, saying that they were moving to e-mail and would I sign up. So even the 59% of mail which makes up business to home letters is seriously under threat.
Suppose that this declined by half, which I suspect will happen in the next couple of years, as businesses will see no point in large amounts of direct mail. This would actually reduce total mail volumes by 30%. No business can suffer this sort of decline, without large amounts of industrial strife or insolvency.
Whichever way you look at it, the outlook for Royal Mail is grim.
You could also say that it’s grim for the taxpayer, as we will have to pick up the pension deficit.
The Anonymous Widower 