Partner, Mary Schofield recently spoke with Eleanor Pringle from Archant about her experience in working with tech businesses.
Mary Schofield is a partner at Lovewell Blake, specialising in corporation and international tax issues. However, with an ever-increasing tech client base, she has needed to get to grips with the needs and nuances of the sector.
She said, “Tech businesses are a growing part of our client base. I am an accountant, not an expert in technology, but understanding what clients’ innovations actually do is very important. However, more important is understanding how the tech sector does business – which can be very different to more traditional sectors.“Tech businesses are generally ideas-based, and bringing that idea to market can take a lot longer than in some more traditional businesses. So cashflow and development funding are right at the heart of helping them.“Keeping things going before there is a defined revenue stream is often the biggest challenge. Many tech entrepreneurs are scientists first rather than business people, and perhaps don’t realise the options available in terms of R&D tax credits, and accessing funding and investment.
“Research and development tax credits are an excellent way of boosting the cashflow at those early stages of a tech business’s development. Many people don’t realise how much is included in the R&D category – including staff costs – or that there is up to 230% tax relief on qualifying R&D costs. That can be a real lifeline in the start-up phase.“Getting funding and investment is equally important. Banks are becoming more willing to land against intellectual property and even forecast revenues, but there are many alternative sources of funding such as crowd-funding, private equity, venture capital and the Enterprise Investment Scheme. “In a sector where the original idea is often that of the founder, fear of losing control to funders is natural, but investors in turn will want to see a well-organised business with identified KPIs and a robust structure.
“The other factor in an ideas-based sector is retaining talent, especially in businesses where there is no immediate revenue stream to incentivise key people. Letting these employees share in the future success of the enterprise is the key, and the Enterprise Management Scheme (EMI) can be a powerful tool for attracting potential staff and incentivising and retaining existing talent.
“It means if you bring someone on but can’t afford to pay them a lot in the short-term, you can tie them in by offering them a stake in, for example, a future sale further down the line.
“That talent is being nurtured here in Norfolk, in places like UEA, where we are very involved in mentoring student entrepreneurs at the university’s Enterprise Centre. Not only does this offer real business support to these nascent enterprises, but it also allows us to keep our finger on the pulse of both technological developments, but also attitudes to business amongst this new generation of tech entrepreneurs.
“Businesses in the tech sector are not just creating and developing technological innovations, they have rewritten the rulebook on how businesses are structured as well.
“That means a whole new way of defining, working towards and achieving success, and a whole new need for business advisers who really understand what the tech sectors is all about – whether it is a question of helping businesses organise their R&D to ensure they receive maximum tax relief, attracting investment, retaining key talent, protecting their IP, or structuring their businesses for an ultimate sale.”
to find out how she can help you.