HOW WE MADE ITMatt Miller andJohn SinclairFounders of Ustwo

ACOMPANYCARWILLINCURHIGHER TAXCMwrites:Mycompanyhasbuiltupahealthybankbalance. Ineedtoreplace the familycar andhaveheard Imightbenefit bybuying itpersonally rather than throughthecompany. I havebeenquoted£50,000withcarbondioxideemissionsof 156g/km.HowshouldIproceed?

If thecompanybuys thecarand it isavailable for you touseprivately,youwillhaveanannualbenefit-in-kindchargebasedon theemissionsof thecarand its listprice, includinganyaccessories,writes JonDawson,partneratKingstonSmithLLP.Thecompanywill, however,assume theriskof owning thevehicleandbe responsible forlookingafter it.Assuming thepricequoted to

you is the list price, basedon theseemissionsyouwill be taxedonabenefit calculatedas 26%of£50,000in this taxyear.Fora40%taxpayer, thecostwill

beadditional incometax eachyearof£5,200and thecompanywill alsopay£1,794 innational insurance.Therewouldbea further taxablebenefit ifthecompanypaid for fuelusedbyyou forpersonal journeys.Youcanavoid these chargesby

buying thecarpersonally.Dependingonyourcircumstances,youmightneed to takecashoutof thecompanytocover thepurchaseandrunningcosts,but this canbedone throughadividendpayment thatwouldgenerallyhavea lowerpersonal taxcharge than threeormoreyearsofbenefit-in-kindcharges.Forbusiness travel inyourown

car,youcanrecover amileageratefromthecompany.HMRevenue&Customsallowyou to receivetax-freemileage reimbursementsat45pamile for the first 10,000businessmiles and25pamilethereafter. If youdoa lot ofbusinessmiles, these rates cancontributesignificantly to theannual runningcostsof thecar.

EMPLOYEEOFFERSNOPROOFOF ILLNESSBTwrites: I haveanemployeewhohasneededtovisit thedoctor threetimes in 10days. Each time Iask foranappointment card,hemakesanexcuse.When Iaskedhimwhat theproblemwas,he said itwasprivate.Whatcan Ido?

There isno requirement foremployees to tell you thenatureof their illness and theymayhavegoodreasons forkeeping it tothemselves,writesPeterDone,managingdirector ofPeninsulaBusinessServices.However,youremployeewill have to realise thatyourposition ismade inflexiblebyhis secrecy.Ifhe is takingunpaid timeoff to

attendthedoctor’s appointments,or ismakinguphishoursoutsidenormalworking time, thenyoucan’t reasonablycomplain thatheisnotgettinghisworkdoneor isbeingpaid for timewhenhe isnotatwork.It isn’t alwayspossible to get

anappointment cardbefore theappointment takesplace,becausetheseareoften set over thephoneorthroughanonlinebookingsystem.However, it is reasonable toask theemployee toproduce anappointmentcardafter the event.Manyorganisations include theproductionof evidenceof thevisit as acontractual obligation.Explain to theemployee that,

althoughyouare sympathetic tohissituation,youhavearight to expectthathe ispresent toperformhisworkandalso tobesure thathe iswherehesayshe iswhenhecannotattendwork.Advisehimthatyouaregiving

himareasonablemanagementinstruction that forall futureappointments,hemustprovideevidence thathehasbeenat thedoctor’s. Ifhe continually fails todoso,youcould takeactionandcarryouta fairdisciplinaryprocedure.Askinghimtoprovideevidence is

different toaskinghimthereason forseeingadoctor, and, if he isnottakingany timeoff sick, thenyoucannotdealwith thisunder anyabsencemanagementprocedure.Ifhewere to start taking timeoff

sick, it is reasonable toexpecthimtotell youwhat iswrong. If hedoesn’t,hecannot expectyou to fulfil yourdutyof care towardshim.

Like the Mittelstand?Try the Brittelstand

WHEN Matt Miller and John Sinclairdecided they were ready to leave thesafety of a big advertising agency andstart their own design studio, they weresure of two things. “We knew how toplease clients and how to get ripped off— we weren’t very good at negotiating,”saidSinclair.But the opportunity to let their creative

spirits run wild quickly brought rewards,saving them from falling into the hands ofmoneygrubbing clients. “We realised wecould be completely insanewith our ideas.Wewouldn’t have to be fake,we could justbeus,” saidMiller.Their company Ustwo has since been

responsible for the design of some game-changing technology products, includingthe Hudl, Tesco’s budget 7in tablet com-puter, andBarclays’Pingit app.Ustwo, based in Shoreditch, east

London, has 170 staff and big-name cli-ents including Tesco. It has added studiosin New York and Malmo, where it workson digital commerce for the Swedishfashion retailer H&M. In 2013, salesreached £15m and earnings were £2m.Thisyear, salesof£20mare forecast.That’s not bad for a business that

started in 2004 with a £5,000 loan fromMiller’s father. He and Sinclair grewup inTunbridgeWells,Kent.Millerhas twosis-ters and Sinclair has a brother. They metwhile at school at Uplands CommunityCollege in nearbyWadhurst. “We’re bestmates,” said Miller. “Even though we’repolaropposites,wegeton sowell.”His mother was a councillor and his

father works for Ovation Data. “He’s theclosest thing we had to a business mentorwhen we started.” Sinclair’s mother wasa typesetter andhis father a jazzmusician.Theboys both tooka foundation course

in design at Brighton College of Tech-nology in 1996. They then parted ways.Sinclair enrolled at Central Saint MartinsCollege of Art and Design in London tostudy graphic design while Miller tookthe samedegreeatBathSpaUniversity.On graduating in 2000, Sinclair “made

cups of tea” at the design consultancyFitch, where he soon came across a newdesign and animation studio called BigAnimal. He switched companies, but notbeforeaskinghisbestpal to joinhim.It was a lifestyle change as well as a

career change, as the Big Animal teamlivedandworked inawarehouse innorth-east London. “I had a garden shed for abedroom and Matt pitched a tent by thewall for a year before upgrading to ashed,”Sinclair said.Four years later, they decided it was

time to take their own ideas forward.With the loan from Miller’s father they

bought two laptops. It took just a year forthem to catch the attention of the tech-nologygiantSony.“We worked on its mobile projects,

which wasn’t the sexy business it istoday. Mobile wasn’t cool but it gave us afantasticgrounding,”Sinclair said.Their projects range fromsmartphones

and televisions to iOS and Android apps.Miller is particularly proud of Pingit,which allows users to transfer money byphone. “That is our biggest ‘wow’ piece.We have 20 people working on thataccount,” he said. “Tesco’s Hudl alsoreleased a huge fanfare. They are the heroprojectswewant tobeassociatedwith.”Though much of Ustwo’s revenue is

still generated by big clients, it is alsoworking on its own projects, such as theiOS children’s game Whale Trail, whichhas spawned a publishing deal with Pen-guinBooks.Miller said £1m a year is reinvested in

in-house projects. The profits are distrib-uted equally between all staff, creating

what he calls a “shared partnership”.“Everything is shared here. I’m thinkingabout the people and how we can createopportunities,” he said. “You can feel thepassion in the air, which is a huge part ofwhywe’vedonewell.”To build that feeling of community he

and Sinclair have designed a homelyoffice and offer generous pay and perks.Women receive sevenmonths’maternityleave on full pay and men have threemonths’paternity leave.“We understand thework-life balance

in a way we didn’t when we started 10years ago,” saidMiller, whohas two chil-dren. “We want to attract and secure thebest talent.”Sinclair is keen to expand the business

fartherafield,withSanFranciscoandAus-tralia next on the horizon. The pair own77.5% of the company, with the rest splitbetween three angel investors. They havehad plenty of offers to sell but are notinclined toentertainanyof them.“There have been somany acquisitions

in our industry — one a month of late —but we are not interested in selling. Weare driven to continue for another 10years,” saidSinclair, 35.He lives inHackney, east London,with

his partner, Deborah Harvey, a fashiondesigner at Stella McCartney. Miller, also35, lives in Claphamwith his wife, Lisa, astay-at-homemum.The partners’ advice to budding entre-

preneurs is: “Take on lots of differentprojects rather thanriskyourwholebusi-nesson thedemandsof oneclient.”

HattieWilliams

ForKateEdwards,Ger-many meant morethan Beethoven,BMWs and th eBundesliga. Shewanted to cast her

engineering venture in themould of Germany’s businesssuccesses.“I’ve always had my eye

on German companies,” saidEdwards, who runs J8 Precisionin Aston, Birmingham. “Theirbusiness models are ones weshould lookatmore.”The company the 34-year-

old founded four years ago withher brother Jack has 11 staff andseveral Formula One teams onitsbooks.Keen to learn more about the

German recipe for success,Edwards joined like-mindedentrepreneurs at a conferencelast month. “Meet the Mittel-stand”was organised by financeprovider GE Capital and broughttogether 200 British businesspeople and about 20 Germanmid-market companies that hadflown in to share their secrets.Edwards noted a key part of

the way Germans do business,which she believes to be behindtheir success: “Theyhaveaman-datory approach to their cham-bers of commerce. Companiesmust all bemembers.Wehavesomany networks and organisa-tions but there isn’t a big enoughgroupthat getsheard.”It is no surprise that entrepre-

neurs like Edwards look to Ger-many for tips when trying toscale up. For many decades, theGermanshavedevelopedamulti-tude of middle-sized companiesthat prop up the economy. Today,Germany’s medium-sized com-panies are responsible for onethird of the country’s sales, jobsand GDP. Many are family-ownedand focusonexports.The 9,000 British mid-

market companies (with sales of£25m to £250m) account for onefifth of the country’s sales, butexperts believe that, with the

right help, they could challengethe German Mittelstand. Twoyears ago, the CBI released areport onwhat it called Britain’s“forgotten army” and said mid-marketcompanieshadthepoten-tial to inject £20bn-£50bn intotheeconomyby2020.“The chancellor of Germany

has historically taken companieson trade trips but before thisprimeminister, Britain didn’t dothat,” saidLordLivingston,min-ister for trade and investmentand former chief executive of BT.Since the coalition was formedin 2010, Britain’s exports toChina, Korea and Russia havedoubled. This was largelyhelped, many believe, by thehigh-profile trade missionsDavidCameron led.“What the Germans have

been doing right they have beendoing for over 50 years,” saidLivingston, “andwe can’t create50 years of experience over-

night.” He added that Britainaccounts for 1.1% of China’simports, while Germany holds2%. “The stability of Germany’seconomy and structure of theirfinancing has allowed them tomake long-term investments.”Livingston has vowed to focus

more on expanding the medi-um-sized enterprises that, heclaims, tend tobe forgotten.“We usually focus on the S in

SME and the larger corpora-tions,”he said.Hewants firms toexploit their potential to export.He claimed that only 17% ofBritain’s mid-market compa-nies sell overseas, far behind theMittelstand, of which a quarteroperateoutsideGermany.Totackleuntappedopportuni-

ties, Livingston has instructed300 trade advisers to contacteach medium-sized business inBritain and offer a personaladviceservice.Eachwillingcom-panywill be assigned an account

manager to give guidance onroutes toalternativemarkets.“Manycompanieswere strug-

gling for survival for a long timebut now there is a more stableenvironment and schemes forfinance,” said Livingston. “Wehave introduced many thingsthat have helped Germany but itwill take time.”He added that there are many

things British mid-market firmsdo well, and which should becelebrated. “It’s easy to have a‘woe is us’ attitude but we haveworld-leading companies and agreat start-up scene. We are theworld’s second largest exporterof services.”The success of the Mittelstand

is not solely due to a focus on theobvious parts of a business plan.In Germany, four out of fiveapprenticeships are delivered bythe middle-market. “It showshow important the Mittelstandis to everyone. It is an education

machine,” said Joachim Secker,chief executive at GE Capital inGermany. Both Secker’s chil-dren,who qualified to go to uni-versity straight from school,took time out in between to joinmid-market companies. “Theyunderstand the value of thattrainingandexperience.”Last year, GE Capital pub-

lished a report bringing togetherresearch onmedium-sized busi-nesses in Britain, Germany,France and Italy. It found thatmanufacturing remains a largepart of Britain’s middle-market,accounting for 18.5% of jobscreated by middle-sized comp-anies. Manufacturing companiesare mostly based outside south-eastEngland,while service firmsdominate the sector.“The results aren’t bad,” said

Secker. “German mid-marketfirms posted the strongest rev-enue growth last year but Britainwasveryclosebehind.”

San Francisco and Australia are the next targets for John Sinclair, left, and Matt Miller

From a shed to Shoreditch: theapp brains behind Tesco’s Hudl

ALVAROARREGUI

KingstonSmithLLP, the charteredaccountant, andPeninsula, theemployment law firm, canadviseowner-managers on their problems.Sendyourquestions toBusinessDoctor,TheSundayTimes,3ThomasMoreSquare,LondonE98 1ST.Advice isgivenwithout legal responsibility.

bizdoc@kingstonsmith.co.uk

Business doctor

Kate Edwards has lookedat German businessmodels for tips on

expanding J8 Precision

ANDREW FOX

There ismuch tolearn from howmedium-sizedcompanies drivethe Germaneconomy, writesKiki Loizou

BUSIN

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