commercial implications of budget 2012 on sme’s
TRANSCRIPT
Commercial Implications of Budget 2012 on SME’sFunding for Growth – Commercial Briefing
Budget 2012Budget 2012Give Give
Static Corporation TaxR&D Tax Credits (€100k milestone, restrictions light touched, employee incentives)Special Assignment Relief Programme (SARP)Foreign Earnings Deduction BRIC & ASStart Up Companies to 2014International Financial Services Support MeasuresStatic Income Tax - lift in USC earnings thresholdPension funding and exit relief unchanged - but flagged for reformStamp Duty - Commercial Property (& business assets), Family Transfers
TakeTake
Cessation of Employer PRSI Relief on Pension contributions - now 100%PRSI on Investment Income for PAYE worker from 2013(share based remuneration \last year)Relevant Contracts Taxes - new 20% tier Absenteeism tax relief benefits removedRedundancy Rebate Scheme - from 60% to 15%DIRTARF's & PRSA's imputed distributionCGT - Rates, 7 year relief and Retirement Relief (Shrinking Cap +66 years)CAT - Rates and Child ThresholdsVAT & Fuel increases
Last Years Measures
Strategic Trends ReconfirmedFrom Individualism to Corporatism
Pension Restrictions• Late Retirements - continuing payments for services / consultancy• Downgrading of a core transition strategy for SME owners = more focus on |Succession | Sale | Hold as passive• Points Finger at marked absence of effective transition planning strategy in the past• Lock in of capital with pension restrictionsRestrictions on Personal Relief's• ROI will become a more relevant key indicator of performance - less off balance sheet assets & debt• Capital Flight risks• Migration of personal business debt to corporate - securitisation and cost issues• Future borrowings will favour corporate structure• Asset purchases will be corporate - increasing use of special purpose vehiclesContinuance of Low CT Relief• Capital Growth in a low tax environment in preference to larger annual revenue streams• More complexity in debt and equity instruments?• Commencement of a post retirement dividend culture?Capital Funding Initiatives• Channelling of free capital to corporate investment - EIIS• 30% DIRT• Unsophisticated investors unable to critically evaluate investment opportunities• Requirement for more robust investor ready business plans stress testing and sensitivity analysis
IndustryIndustry
BusinessBusinessEnvironmentEnvironment
Stakeholders
TechnologTechnologyy
CompetitionCompetition
Customers
Budget2012
Need to be careful abouttaking on risks
Should only consider very low risk options
Can pursue higher risks with caution
Positioned to take on higher risk options
Assess Impact on Strategic positioning
Identify and Develop
Core Competence
“Selectively Expand”
“Shore Up”
“Defend”“Exit” “Diversify”
“Acquire”
“Aggressively Develop”
Numerous Opportunities
Major StrengthsCritical Weaknesses
Significant Threats
OT AnalysisOT Analysis for yourAction PortfolioAction Portfolio
Vision Strategy Structure & Culture/ Shareholder Circumstance + Business EnvironmentTransition Planning | Pension DowngradingPlan and manage alternative funding strategy | EIIS & Interest Restrictions Implement external stakeholder management system | Respond to market demand for private equity perspective
Products &Services/ IndustryProduct / Services development review | Optimising & synergising with R&D ReliefOutsourcing Evaluation | Loosening of Restrictions for Relief
Marketing & Sales/ Customers & CompetitionDevelop Pricing & Promotion strategy | Retail & End users seeking to have VAT/Overhead hikes underwritten Update International marketing Strategy | To leverage the foreign earning exemption opportunity
FinanceConduct overhead analysis & strategy (logistics / outsourcing) | Increased costs- Fuel, power and transport Remodel MIS Reporting– adopt stakeholder perspective | EIIS / Banks & Stakeholders (including yourself!)Conduct Cost Benefit Analysis -Commercial Property & Loan Rationalisation | Stamp Duty, CGT, Tax Rate leverageRoll Cash Flows & P/L | Budget impact assessment – development scenarios for all rocket elements
PeopleConduct productivity & HR policy review | Absenteeism benefit restrictionsImplement recruitment & inward investment study | Special assignment relief program leverageReappraise Remuneration Package Elements | Foreign Earning Exemption 60 Days | Share Option schemes
Systems, Processes & Support / TechnologyUpdate share subscription mechanisms and housekeeping |Systems review for all Business Model Drivers and Enablers | All function areas impacted strategically or operationally i
Action PortfolioAction Portfolio covers how many FunctionsFunctions?
Develop Vision and Strategy
Plan and Manage Funding
Set Policies and Manage Performance
Manage External
Stakeholders
Design Production Marketing Selling Customer Service
Accounting and Finance
Physical Resource
Management
People Management
Information and
Technology Management
Strategic Management Functions
Value Creating Functions
Support Functions
It’s all about:
1.Converting Strategy into Action
2.Turning common sense........ into common practice