Royalty Income

Dominic Thomas
Dec 2023 • 1 min read

Royalty Income

For those of you who are business minded or ‘entrepreneurial’ (perhaps the most overused business word), the ‘rules’ around royalty income may be changing.

In recent decades we have all seen, particularly in the arts, how doing your work once and then getting paid repeatedly for it is the most honest definition of a ‘passive income’.

This is most evident in the music and film sector where stars of the past continue to earn income from repeats, resales, commissions and so on of a performance long ago. In fact I think it was George Lucas and his Star Wars franchise that really brought this to most people’s attention.

Imagine, you worked hard, made an album or wrote a book and forty years later you are still collecting money for your labour. Some of our clients are in this happy position.

So the twist is that this appears to be changing, well for some anyway. Various financially successful artists have been selling their back catalogue for a single, substantial lump sum, forfeiting the future royalties.

I wonder what this suggests? Perhaps that they would prefer to have the lump sum to spend, invest or gift rather than a lifetime of income. Perhaps they are concerned about the ability and resources to prevent plagiarism in the future or to restrict the use of their materials in other ways. Perhaps they are concerned that AI will actually make them irrelevant. I don’t know why, but it’s certainly an unexpected change to the basic business model in some sectors.

In September we learned that pop princess Katy Perry has agreed a deal to sell her back catalogue for around $225m. Her actor husband Orlando Bloom played Will Turner in Pirates of the Caribbean, so no need for bootleg albums for Katy (or perhaps bootstrap albums, with such a load of pieces of eight).

Katy Perry reportedly makes $225m by selling her music catalogue: https://www.bbc.co.uk/news/entertainment-arts-66853047

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Royalty IncomeJemima Thomas2023-12-17T13:36:40+00:00

Delicious

Solomons-financial-advisor-wimbledon-blogger

Delicious

I wonder if you have seen a new Sky 4-part mini series starring Dawn French, Emilia Fox and Iain Glen called “Delicious”. I don’t think I’m giving too much away by saying that it is the story of an apparently successful, once divorced remarried chef, who has an affair with his first wife, who it turns out is the real culinary genius.

Like most good stories, the drama of ordinary lives holds our attention when under the scrutiny of dramatic pressures. The series exposes the problems beneath a beautiful façade of a middle-class life. Set on the idyllic banks of the Tamar river, an entrepreneurial temple of hotelier cuisine is the bling that diverts the eye from seeing what needs to be seen.

Just below the surface

There is an understandable and customary dig at middle-aged men but with a twist on the usual, predictable affair with a younger model, with Leo attempting to have his cake and eat it. A setting of fine dining, lends itself to the customary style over substance debate and of course the market price of every thing.

Wood for the trees

From a financial planning point of view there are numerous warnings that I would hope business owners can heed. One of the problems that business owners, or indeed anyone has, is that they are often too close to the problems to be able to see them clearly, let alone any workable solutions. It is certainly hard to fathom how any decent financial planner could not draw attention to what is revealed within the plot (which I shall not spoil).

Virtually reality?

One of the most popular criticisms of social medial is that it has encouraged us to live false lives, like those contained within magazines, or indeed within television or film. Whilst I’m sure this has some truth and resonance, this all rather depends upon each of our ability to be truthful, yet mindful of impact, timing and social etiquette. There is nothing new about attempting to be something you are not, which is perhaps one of the oldest dramatic tools.

The truth can be painful

Of course, not everyone wants to see or hear the truth, particularly when it is going to require some change. I sometimes wonder if this is what puts most of population off from seeking financial advice. Deep down most of us know that we need to master our money lest it master us. A financial plan is designed based around your values, grounded in truth and enables you to see ahead to any potential “surprises”. In essence making sure your plans for style have substance.

Here’s the trailer for the series on Sky.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

DeliciousDominic2025-01-21T15:41:32+00:00

Social Media can kill

Social media can kill

Social media is a mixed blessing, it is almost unparalleled in unforgiving speed, much like an F1 car in the wrong hands. In a climate of assessing the value that we all bring to the smorgasbord of life, the mixture of new technology, aspiration and creativity form the backdrop for a new movie called Chef.

Chef puts heart on the menu

Chef is one man’s journey of rediscovering who he really is, or perhaps more accurately who he could be. Many of us will have harboured dreams of “doing our own thing” some of us get to do this. Most do not; for a vast array of reasons, perhaps “financial security” being one of the more obvious and understandable concerns. This is not quite the usual “American Dream” yarn, but it certainly holds onto the vital ingredients of one.

In essence, we have a man trapped without realising that he is holding the keys. It takes a fairly pithy exchange on social media to expose his repressed feelings about the life he is leading, which catapults him into taking stock and renewing his passion for life….and love. Why I like the film, is that, ok it’s sentimental, (so what!) but in fairness, the main character is a decent guy, he works hard, he’s present, though not always available for his son and he’s making a good living by making great meals. He’s a good chef. Normally films of this genre are more heavy-handed, with the character in crisis at the bottom of his “luck”. This isn’t really the case in Chef.

What Chef offers is the view that life can be more fulfilling…. More flavoursome!…and that perhaps many of the answers are close at hand – perhaps close at home. That the skills you have are enough, but the courage of self belief is lacking. This is not a rags to riches story in the traditional sense, but an unveiling of life’s riches. It combines a sense of the authentic, natural but doesn’t lay waste to, or pour scorn on, the many advantages that modern technology can bring and its ability to make viable “new communities”.

Making a killing?

On one hand, this could be seen as a story about entrepreneurialism, though I don’t think this is really the case, there are admittedly similarities. Rather like entrepreneurs, there is a sense of creating a better future and making choices about it and then decisions to act. This reminded me of a podcast I recently listened to by Dan Sullivan who outlined the difference between choices and decisions. He argues that these are not interchangeable terms, but that a choice is about the future. A decision is about how much of the past you want to take into that future. He reminds us of the Latin root word for “decide” is found in patricide, suicide and so on, a sense of putting to death or killing parts of the past that are not welcomed into the future. So I wonder how many of us are living out a future that hasn’t properly been “chosen” and has yet to “kill off” the unhelpful elements of the past? How might this be the case in your financial planning?

Dominic Thomas: Solomons IFA

Social Media can killDominic2023-12-01T12:39:23+00:00

Adapt or die – warnings of an online world

Today Graham pulls no punches as he outlines the need for businesses to have a proper strategy for utilising new technology fully or face the plight of those that didn’t adapt quickly enough, such as Kodak or Polaroid.

Most businesses could collapse in the next decade

Let’s face facts: the digital world is fundamental to all businesses. Even if you sell offline or operate mainly in the “real world”, the digital world has an impact on your business. Whether it is for communications, such as email, or as a starting point for buyers researching your business, the Internet is central to customers.

The problem is that most businesses themselves use the Internet as a “nice-to-have” and not as central to their business. When I speak to Chief Executives and point out this difference they nod their heads in agreement. But then they say it is “impossible” to change their business to focus on the Internet because it would involve too much change.

Now, though, they are in for a shock. The highly respected consultancy firm Forrester has said that unless businesses make this change they will “face an extinction event” within the next decade.

They are saying this because their latest research shows that only 21% of companies have a clear vision for the future use of digital within their business. That’s in spite of 90% of firms agreeing that digital will revolutionise their sector within the next 12 months….! And they are not the only consultants sounding the warning bell – just three months ago Capgemini published their own research suggesting that businesses simply have to make the Internet central to their company, regardless of their sector or industry.

According to Forrester, businesses are now just “bolting on” the Internet to their existing business structures. But what is required, they say, is a complete “re-set” – a fundamental shift in the way businesses are structured and run. Business leaders I meet are totally unprepared to do this because of the seismic shift required. Yet the warning from Forrester is stark: do it or die.

When you look at successful businesses online they are mostly businesses which focus their firm on the Internet – Google, Facebook, Amazon for instance. But it is not just technology-based companies like these online startups which have embraced digital as central to their business. Back in 2012 Starbucks transformed itself into a digital centric company.

Business leaders, used to a non-digital world, find it hard to make the transformation necessary. So, what is the solution? The first step must surely be to conduct an immediate review of the kinds of people setting strategy and plans for your company. The data from Forrester and Capgemini both point to the need to use the services of those “digital natives” in central roles in your company. The future of your business could well depend upon giving the strategic reins to your grandchildren.

Graham Jones

Adapt or die – warnings of an online worldDominic2023-12-01T12:39:06+00:00

Business owners heed lessons from online retail

Graham Jones is a man that knows a thing or two about the web and our relationship with it. He is an internet psychologist with a lot of useful insights, in particular for those that own or run a business in the UK. Here is his latest piece to get business owners thinking – which includes me. So let me know how I can help you too.

Business owners heed lessons from online retail

Where do you go to buy things these days? The chances are you use a variety of sources – local shops, out-of-town retail parks, town-based shopping centres and, of course, the Internet. However, increasing amounts of evidence show that the starting point for our purchases is the web, with Google being our “number one” place to go to start our shopping journey.

The latest piece of research comes from the incentives company, Parago. They found that the majority of shoppers begin their decisions about what to buy on the web. It means that if you are not using your website as central to selling, you are missing out – big time. Only for groceries, building supplies and pet supplies do people choose a retail store as the first port of call – though second on the list is either Google or Amazon for those shoppers.

But look deeper into the figures. They show that your products and services need to be found on Google – but that you also need to be on Amazon and have your own retail website too, if you are to pick up the most shoppers. Indeed, even for subscription services, people prefer to look for you on Amazon than in social media.

The study also found that the time taken to buy something is now down to 2.25 days. That suggests that if you don’t follow-up website visitors immediately, then you are losing out on sales because the decision to buy will have already been made if you wait more than a day or two to contact people.

In other words, to sell these days you have to be fast and you must have the web as central to your sales process.

Graham Jones

Business owners heed lessons from online retailDominic2023-12-01T12:39:04+00:00

Can Entrepreneurs Take Anything from Scorsese’s New Film?

Today, with eyes and ears very much fixed on the news about the Budget 2014, some thoughts for business owners and entrepreneurs that won’t be in the Chancellor’s Budget. Dave Landry Jr. guest blogs today, he is a financial consultant in California.

Can entrepreneurs take anything from Scorsese’s new film?

“Let me tell you something. There’s no nobility in poverty. I’ve been a poor man, and I’ve been a rich man. And I choose rich every

[expletive] time.” *^{^[1]}

Those are the morally questionable but undeniably entertaining words of the man known as Jordan Belfort, a real life wall street crook who spent 22 months imprisoned for fraud by manipulation of the stock market. Belfort screwed over a lot of people, and as most of us know recently became the antihero of the Leonardo DiCaprio/Martin Scorsese film The Wolf of Wall Street.

While many sat through the film and thought Mr. Belfort was a despicable force of nature, unrelatable and in need of being brought down by impending justice, I for one could not take my attention away from him no matter how hard I tried. While I refused to agree with any of his actions, his charisma, work ethic and creativity in finding new ways to make old business models fresh and functionable were incredibly inspiring. I found value in watching Mr. Belfort’s exploits, for better and for worse. Did you?

Here’s a monumental lesson entrepreneurs can take away from Scorsese’s picture, one that gets overlooked when building a brand: when Belfort ventures out on his own and begins building the foundations of what would later become his kingdom of white collar illegitimacy, grandeur, drugged-out decadence and bombastic success, Stratton Oakmont, Inc., he chose not to hire battle-hardened financial vets who knew how to work a prospect, but rather a group of young misfits lacking a purpose in life. He trained them, he motivated them, he incubated his young “pups” until they became the hungry wolves that finagled money by the millions. But his wolves were loyal: when Belfort asked them to move behind him into the trenches of controversial and downright illegal business procedures, not a one of them bit the hand that fed them while they couldn’t fend for themselves. Make no mistake, I am not trying to endorse illegal or unethical activity: my point here is that Belfort bought his employees’ undying allegiance by investing his own knowledge, charisma and power into each and every one of them. That’s an impression any budding entrepreneur should jot down.

A business of simplicity was also the model Belfort chose for Stratton Oakmont. He explained stock brokerage in terms that his people would understand rather than bore them with stocks and bonds 101. “And as word of this little secret began to spread throughout Long Island—that there was this wild office, in Lake Success, where all you had to do was show up, follow orders, swear your undying loyalty to the owner, and he would make you rich—young kids started showing up at the boardroom unannounced.” That’s the campaign that won Belfort his election. He started out with a simple savings account and apprenticeship at a well-to-do firm, learned the antiquated systems until he could design a fresh system based on what did and didn’t work, and built a loyal following of staff who admired and loved him, even as they helped him swindle the masses. That’s charisma, that’s strength. Now imagine applying that to legal operations?

You may not have liked the film, but what did you learn from The Wolf of Wall Street?

Dave Landry Jr.

^{^[1]} This not a direct quote of Mr. Belfort, rather a quote from the film’s screenplay by Terence Winter and performed by Leonardo DiCaprio as Jordan Belfort.

Can Entrepreneurs Take Anything from Scorsese’s New Film?Dominic2023-12-01T12:39:02+00:00

What is the best way to save for retirement? Part 5

This is part 5 in the series “What is the best way to save for retirement?”

Using a business as a pension

Many of you, most of you, won’t currently be running a business. You are not excluded from this option. If you view a business as a type of bank account you wont go far wrong. The issue is generating revenue and making profit. A major advantage that business owners have is that they can put many things through a company as expenses, such as cars, pension contributions and so on. There are rules. However a business owner of a Limited company has shares in the company which pay dividends. The amount of dividends paid out can be adjusted regularly. In essence many people in this scenario pay themselves a low salary (low enough to pay little or not tax and national insurance). The rest of their income is paid as dividends, which have a lower tax rate than employed or self-employed tax rates. Yes this is daft, but blame the Governments we elect and HMRC not me. True businesses pay corporation tax, but this is currently only 20% on the first £300,000 of profits and profit is after costs such as salaries.

Unleash the entrepreneur in you

Over the years your business can build up cash, investments, property, goods, services and so on – even goodwill has a price. As the business owner your main objective is to run a successful business that provides the income you want. However the structure of the business should not be overlooked. You might sell the business upon retirement, but tax may be relatively small in this respect due to entrepreneur’s relief, where the first £10m of gains are only charged at 10% tax. Why? Because the Government believes that entrepreneurs create jobs and wealth, risking their own capital in the process in the pursuit of a “successful business”.

On track

However, keeping to our target of £20,000pa from age 65 a business is a shell into which any of the previously mentioned options (pension, portfolio, property) can be placed. Indeed one can place a commercial property into a pension owned by a business…with the pension charging rent to the business which is then paid back as pension contributions. All entirely legal, encouraged and workable in the right circumstances.

Setting aside various taxation issues, to achieve our goal, you need to have a business that generates £20,000 of profit a year. Whilst I wouldn’t wish to suggest that this is easy, is it as difficult as some would have us believe? £20,000 profit is £1,666 profit a month. The best business model is that of royalties. You do your work (say an album or book) and then it sells and sells. The royalties keep coming month after month for that work you did all those years ago. Now imagine that you have several “products” or services that achieve this. Anything from a design on a T-shirt to selling soap or widgets. A successful business is a money printing machine. However the biggest risk or blind spot that businesses face is failing to adapt.

Adapt or die?

In a world of rapidly evolving technology, this years best selling gadget is forgotten in 5 years. Technology is everywhere, not just in IT, in processes and systems. How you do business requires considerable thought. You are now probably not printing off your holiday snaps, or using a travel agent, or actually going to a Bank.. or…or… the world is changing and every business needs to adapt, that is the real risk to any and every business, however as an investment it can be ideal, provided that you only sell (if you do) when you don’t need to.

So I hope you will excuse me for not putting any numbers on this one, but it is a vehicle limited only by your imagination. However before we unleash your creativity, I think it best to blow your mind with some facts about that all very familiar but not well understood concept of inflation, which will challenge many of the numbers and assumptions that we have considered.

Dominic Thomas: Solomons IFA

What is the best way to save for retirement? Part 5Dominic2023-12-01T12:38:53+00:00

The Best Tax Systems In The World

The Best Tax Systems For Entrepreneurs

The UK is currently 16th in the world when it comes to the best tax system in the world for small to medium sized businesses. PWC, the big Accountancy firm conducted research on a global scale over several years. They considered the rates of tax, the time taken to pay it and comply with tax rules as well as the number of times tax has to be paid in a year. The UK’s position is improving, but still not in the top ten. This suggests that UK Governments are making it a little easier for entrepreneurs to start and develop their businesses. This after all is where economic growth is found and where wealth for individuals and the nation is created. However Ireland our closest neighbours is rather more favourable and ranked 6th by PWC.

Cutting Through The Red Tape

PWC are reported to have found that the typical UK SME now spends 267 hours a year complying with tax rules. A decrease of 54 hours over the eight year period that was reviewed, representing a 17% improvement. They also found that the average medium sized firm pays a tax rate of 44.7% on profits.

The Top Twenty Tax Systems

For those of you that like lists, the top twenty are as follows:

United Arab Emirates
Qatar
Saudi Arabia
Hong Kong
Singapore
Ireland
Bahrain
Canada
Kiribati
Oman
Kuwait
Mauritius
Denmark
Luxembourg
Malaysia
UK
Kazakhstan
Switzerland
Norway
Seychelles

Of course, entrepreneurs seek solutions to all manner of problems when it comes to running a business. A common trait amongst successful entrepreneurs is that they collaborate creatively and take responsibility for their actions. These are precisely the sort of people I work with.

The Best Tax Systems In The WorldDominic2025-01-21T16:35:26+00:00

Planning Beneath The Surface

Planning beneath the surface

I am delighted that the blog has now reached over 30,000 hits this week. In a world where social media is a full-time job, it is satisfying that even a small company can achieve some fairly large results. Thank you for making the time to have a look at my blog. As you will have gathered I use is as a way of keeping clients up to date with things that I think are of relevance, as well as using it as a reminder, prompt or source to those that are not yet clients, but recognise that financial planning has got to have rather more to it than simply picking funds and products.

As readers and clients will appreciate, financial planning is all about identifying the lifestyle that you really want and then putting into action a series of steps to ensure that you get there. For some these steps and actions are easier than they are for others. In particular, for those that are able to control their income either be being a business owner, entrepreneur, artist or freelancer, it is considerably easier than for those living as employees, who are on set salaries. By way of a reminder, to my mind, there are only really three possible types of client, those that don’t have enough, those that do and those that do but don’t know.

The main purpose of financial planning is to reveal what is required and then determine what, if any actions need to be taken. I hope that this blog is a pointer to some of the processes that we take our clients though and also a reminder that it isn’t always about big numbers, sometimes the numbers can be surprisingly small and very achievable.

If you have any suggestions about how to improve the content, or indeed topics that you would value being covered, please send me an email with your request. The way this works best is with your interaction, which means, retweeting, “liking” and adding comments.

Dominic Thomas
Solomons IFA

Planning Beneath The SurfaceDominic2023-12-01T12:22:05+00:00

Fifty Percent Tax can be avoided: Enterprise and Entrepreneurialism

There has been coverage in the media this week about the high profile group of economists that suggested that the 50% tax rate is counter-productive and results in reduced tax collection. This is a debate that is probably most likely argued based upon which side of £150,000 your income falls.

In practice there are things that can be done to reduce income tax for any individual, however in practice it is generally the more affluent that can really use allowances fully.

Pension contributions up to £50,000 would attract tax relief at 40% and perhaps 50% depending on income. In other words a 50% taxpayer is really investing £25,000 to get £50,000 invested. This does of course depend entirely on the figures involved and in theory under the new rules unused allowances from the two previous years could be used as well.

ISAs are not tax reducers immediately, but they grow free of capital gains tax and the bulk of income tax. £10,680 is the current full allowance, per person over 18.

Anyone can gift money and this acts in a similar way to pension payments, in that the charity receive the extra grossed up payment.

For those that are keen to help the UK grow businesses and create jobs, there are Enterprise Investment Schemes, which can provide 30% tax relief on the investment and can also be used to defer capital gains tax. These are higher risk investments than the majority of normal investment funds. An EIS can swallow up to a £500,000 investment from an individual, providing a tax relief of £150,000.

So there are things that can be done to reduce taxable income and use allowances (there are other too). Those least able to take advantage are those in good pension schemes and high incomes, who may get caught out by new rules that would mean paying even more tax – even if they already pay 50% on some of their earnings.

I think it unlikely that the Coalition Government will remove the 50% rate at the moment, preferring to wait until the economy is obviously improving.

We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
Call us today or visit our website for more information and to arrange a meeting

Fifty Percent Tax can be avoided: Enterprise and EntrepreneurialismDominic2025-01-21T16:36:31+00:00

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