I have just read an article claiming that 10% of companies that America’s top ten venture capital firms or VCs [ie private equity firms] invest in actually succeed. This correlates exactly with the yardstick that VCs and seed corn capitalists I know use. 10%!
One chance in ten. We know that only 10% of small businesses actually make it to year five, so it could be reasonable to suggest that anything greater than 1:10 (10%) odds would be better than you get from starting a business. Just 10%.
So, is it worth it for a 10% gamble? Well, to put all this in perspective, here are the chances of winning at the casino:
Slot machines 32%
Horse racing 41%
Here are some conclusions (if you are in any way rational).
Do not gamble at small business unless… Unless what?
Coinciding with graduation ceremonies taking place up and down the country, the news that the UK economy has slipped deeper into a double-dip recession is a far from ideal way to welcome graduates of the class of 2012 into the world of work.
The Job Centre has advised graduates in Scotland to ‘dumb down’ their CVs to increase their chances of getting a job, while the Association of Graduate Recruiters has warned that, overwhelmed with applications, some top employers are automatically discounting graduates who don’t have first-class degrees.
The traditional job market, therefore, might not seem the most inviting place for those recent graduates currently considering their next move. Who can blame them? I’d encourage those dissuaded from going straight into work by the doom and gloom headlines to take a step back and think over the next few months about starting up their own business as an alternative.
With this group in mind, it’s timely that we have just announced the theme for Global Entrepreneurship Week 2012. To ensure the Week gets practical help and support to individuals contemplating starting new ventures, as well as small businesses in their early stages, this year’s focus is on encouraging people to ‘pass it on’.
We’re looking for as many people as possible to get involved in the Week and ‘pass on’ their best advice. This might be through holding or attending an event or joining in a discussion via our social media channels. By working together to make a better environment for enterprise, we can help create businesses that will have a genuine, positive impact on the UK economy – helping generate income and employment for many years to come.
Anyone deliberating that next step, looking for inspiration or wanting to find out more and get involved can visit the newly launched Global Entrepreneurship Week 2012 website.
Since the credit crunch first began to bite, some UK businesses have had to extend their agreed payment dates and terms, which means that some firms now face waiting as long as five months for payment. The average time it takes for businesses to settle their bills after agreed terms has also extended. Consequently, businesses must ensure their billing process is effective when it comes to overdue payments.
By addressing issues such as cashflow or order book problems early enough, businesses can stop them from escalating. But what action should you take and when do you need to start? Many businesses are too wary of being over-zealous when chasing payment so as not to upset a customer, but avoiding the issue could have a catastrophic effect. Here are ten tips for what to look out for and what steps to take:
1 Know your customer
Whether the customer relationship is new or long-standing, regular credit reports are essential. They are quick and cheap and enable you to be fully informed of any changes with the business. Perhaps you could use a particularly large order as a trigger to run a check or simply implement one every quarter or six months. As well as granting peace of mind it limits your exposure. The next stage is to identify and weed out any high-risk business prospects.
2 Assess payment behaviour
Keep an eye on changes in payment patterns, times and delays, as well as a move from BACS to cheques. These small factors can indicate something is happening behind the scenes. It doesn’t hurt to call the customer and have an informal chat, just to make them aware of your interest. These checks can also indicate how long you will be waiting for payment. Also be aware that bills being settled later and later each month is a key indicator of a business’s deteriorating cashflow.
3 Introduce changes
Your customers may just have a culture of late payment but to combat this, steps should be taken to encourage faster payment, such as direct payment methods or more creative collection strategies. Also monitor CCJs, because these can be a trigger to exercise some caution and review the relationship before extending credit.
4 Carry out checks
Regular company credit checks will also highlight small but possibly significant changes, such as who is on the board and any alteration in the addresses of those members. Also for smaller and newly formed companies, cross reference consumer and business information to build a picture of the personal and wider business interests and the track record of those running the business. Knowing what happened in the past creates confidence in future co-operation. When financial details are limited this can be the best indicator of a business’s commercial integrity.
5 Revise regularly
The validity and worth of credit reports lies in their frequency, which could be related to the value of business done, the importance of the account or the volatility of the market they are in. There is no point running one at the start of a working relationship and believing that will ensure there is no risk.
6 Be aware
Be mindful of external economic pressures because if you are feeling them you can be sure your customers are, too. The warning signs these present can be more effective than any internal procedures and controls. There is help - use the credit community, it's what it's there for; share information about your debtors and listen to what other industry people have to say.
7 Be accountable
Often businesses with poor trading results tend to delay submitting their accounts as long as possible. Experian research has shown the late filing of annual returns, which is a statutorily required list of directors and shareholders, is a characteristic of failing companies and at the very least can indicate a level of management inefficiency within the business.
8 Keep talking
Keeping communication lines open is key. As long as businesses are talking to their customers, resolutions can be swiftly and easily achieved without the need for legal action that can prove costly.
9 Take action
Don't delay. It’s tempting to wait and hope the payment will be made, but if the process is not started immediately, resolutions will take longer, putting cashflow under greater pressure and leaving you more vulnerable.
10 Call for help
While a business that can demonstrate a clear action plan is in place and was adhered to will more likely achieve a successful outcome, don’t be afraid to ask for help and advice. A quick chat with an adviser could help you identify the next most appropriate step. For example, a legal letter might be enough to bring the matter to an end.
Christopher Moore is the Marketing Manager at ICSM Credit
Entrepreneurial spirit in the UK is thriving, with one in four people wanting to start a business, according to new research published by business software and services provider Sage.
The study also suggests that the country’s current economic dependence on the South East will start to move northwards, with the North East set to become the recognised home of UK start-ups over the next two years, as people take greater control of their future.
Up to 500,000 new businesses are starting each year in the UK, with about seven in 10 owners starting up because they want to be their own boss. According to research by The Global Entrepreneurship and Development Index and Imperial College Business School, the UK scores fifth in the world for its level of start-up activity. This is largely because of its share of technology sector start-ups and the quality of resources in start-up firms.
While the British economy may have slowed down in recent years, British entrepreneurs refuse to let their ambitions slide. Manufacturers, internet-based start-ups and retailers are all well represented in the UK’s small business landscape. Prime Minister David Cameron recently said: “Small businesses and entrepreneurs are the lifeblood of the British economy and I am determined that we, working with the private sector, do everything we can to help them to start up and to grow in 2012.”
However, potential entrepreneurs should be aware of the numerous challenges involved in starting up and growing a profitable business before committing to launching a business idea. Pressures include:
With proper preparation, determination and a clear vision, entrepreneurs can successfully overcome these challenges. As Michael Hayman, co-founder of Start Up Britain, summarises: “All around the country people are proving that you can make it in Britain, be your own boss and create jobs that can help transform communities.”
An online presence is essential for modern businesses. The chance to reach a global customer base and to be ‘open’ 24/7 gives you a great advantage over the traditional high street set up. Sounds good, but what you need to know is just HOW to get your website online. Here are the key things to consider for getting your business online…
1 Choose your domain name (website address)
Use a name relevant to your business that includes keywords. It is advisable to keep the domain name short and easy to remember. The most popular extensions are .co.uk and .com. You may want to think about protecting your brand by registering multiple extensions.
2 Creating your website
Now you need to think about a home for your site and actually create it, which is where you have a few options:
3 Think about SEO
Obviously, you want your website to appear high up in rankings when people use search engines such as Google. Implementing basic SEO (search engine opitmisation) techniques will get your site higher up in search engine results, such as using keyword in sufficient density on your website; filling your site with fresh and relevant content that is updated regularly; and using backlinks to pages on your site and others. Harnessing the power of social media sites such as Twitter and Facebook can also help to drive traffic to your website.
4 Use Google analytics
Make use of Google analytics to get information about what customers are looking at on your website and how long they are spending on each page. This will allow you to continuously improve your site based on actual customer activity.
This blog was written by Sally Tomkotowicz, Marketing Manager, Namesco
A business plan is the equivalent of a roadmap for businesses. It is a document that provides vision, goals and benchmarking. It creates momentum and also provides an opportunity for a reality check – what worked last year, where the gaps are and what next year is going to look like.
Many start-ups fail because they lack a map to guide them through their new business venture. A research study conducted by simplybusiness.co.uk with 400 British entrepreneurs shows that 54% have no written business plan and more than two-thirds make decisions based on gut instinct alone. According to the Federation of Small Businesses: “Britain’s best performing small companies are being hampered by a failure of the planning system to allow them to expand”.
Writing and maintaining a regularly updated plan can have a profound impact on business success, helping to demonstrate the viability and value of a business to potential investors and illustrating how investment will be used to grow sales and profit. It also provides a useful reference point and motivational tool for the business owner.
In terms of content, a plan should document objectives and strategy across three key business areas; marketing, operations and finance. These aims should be quantifiable and split between short term (next 12 months) and longer term (next three years). Other sections can include:
In summary, a business plan helps to focus clear roles and goals and motivates business success. As Matthew Brearley, former board director of Vodafone, said: “With a great plan you can engage others with a sense of direction and purpose, align all activities and review progress."
John Davis is managing director of Business Centric Services Group.
I was a bit worried when I saw that Hilary Devey was investigating why more women don’t get to the top in business on BBC2. I have to confess that I thought she might have pulled the ladder up behind her.
She started out by saying: “if I can do it, why can’t every woman do it?”
Hats off to her though. Not only is she one of the few women at the top of business — she’s in the very male-oriented world of haulage. But would she be the right person to find out why more women don’t get into the boardroom?
As it turned out, she was excellent and she made some fascinating discoveries — not least in her own company Pall-Ex.
The figures on women at the top speak for themselves. Girls outshine boys at school and outnumber male students at university. But things change in the world of work. The male/female ratio in middle management is 70/30 and it is a staggering 83/17 in senior management.
All credit to Sir Roger Carr, president of the CBI, who called this a “shocking waste of talent”.
The lessons learned by Procter & Gamble
Of course, it’s very easy to put the statistics down to the simple fact that women tend to do the majority of childcare. That’s what Procter & Gamble assumed at a time when its senior management team was dominated by men. But when it investigated the mass exodus of women — by interviewing those that had left — it found that 95% had gone on to another job, not to become stay-at-home mums.
The problem was that the women couldn’t find the work-life balance they needed at P&G and they didn’t see a career path for themselves in a company that was dominated by men at the top.
P&G knew something had to change. Their own research showed that mixed teams performed 5% better than single sex teams — enough to add serious revenue to the bottom line.
By introducing flexible working they manage to retain more of their female talent and promote more women into the top jobs.
Vive la difference
The effectiveness of mixed teams was tested in the programme with a tower-building challenge. Lo and behold, the mixed team made the tallest and strongest tower, compared to the efforts of all-male and all-female teams. But what this experiment also showed was that women and men have very different leadership and communication styles.
These differences are not a problem — indeed, combining the approaches of both men and women ensures a better outcome — but traditionally, some of the more male attributes in business have been celebrated more than the female.
So businesses that want to attract and retain talented staff need to appeal to and cater for both sexes. As one of the contributors said, recruitment adverts calling for candidates with gravitas, for instance, might as well say, “man wanted”.
The cost of parental leave
OK, now we get to the thorny issue of parental leave. Hilary Devey addressed it head on. Is it detrimental to a business to employ women of child-rearing age? The business owners she spoke to were adamant that their recruitment process was aimed at finding the right person for the job.
However, Kathy Tilbury, managing director of coach company Excelsior, was candid — she calculated that she had spent an additional “£8-10,000” covering her sales and marketing manager’s maternity leave. However, she also admitted that retaining talent in the long term saves on recruitment costs and time spent training new staff.
Eventually we got to the nitty gritty — was Pall-Ex a good place to work for women? Was Hilary (the only woman on the board) a queen bee using her “erotic capital” to rule her roost? (excuse the mixed metaphors). These were the questions that consultant Avivah Wittenberg-Cox was asking as part of a “gender balance audit” at Pall-Ex.
She discovered that women were only represented in the middle echelons of Pall-Ex. There were very few women in the warehouse and only one woman on the board. Avivah suggested that Hilary had succeeded in part because she was a woman — and a woman capable of making some of her male colleagues quake in their shoes at that. This seemed to come as a surprise to Hilary, but was obviously not an unpleasant discovery.
But the audit also revealed that the most profitable department in the business had a gender balance of 50/50. At this point, Hilary Devey really sat up and took notice.
The need for balance
What the programme demonstrated was that having a balanced workforce with men and women equally represented at all levels is good for business. And although it can be challenging managing parental leave and childcare — as much for working parents as for employers — this is a fact of life that we can’t change. But what we can change is how businesses operate. Which is precisely what Hilary Devey promises to do at Pall-Ex.
Next week: Hilary sets out to transform the prospects for women inside her own business.
What do you think? Please share your views and experiences in the comment box.
If you’ve started a small business recently, you’ll know how hard you have to work to succeed, especially in these times. Luckily, there are ways to save money on running your business, money that can either be reinvested or spent in your local community to help grow the economy. Saving money on your business energy bills is a great way to start.
So, perhaps you’ve just moved into new premises and inherited out-of-contract rates or ‘deemed rates’ from the previous contracted tenants. Getting your quotes in quick and signing for a proper tariff could see you save as more than 65% on your bills instantly. Setting up a direct debit to pay your supplier straight away can also bring a saving of about 3% on average, but you need to make sure you have the money in the account on the DD day.
Once you’ve got your new contract in place, check the expiry date and make a note of it in your diary… Now flick back a few pages so you’re at about eight weeks before the expiration date... Now flick back a few more pages and write in big letters “NOTIFY ENERGY SUPPLIER IN WRITING OF TERMINATION OF CONTRACT”.
On this day, you need to write a letter informing your supplier that you are terminating the contract. Why? Because contracts have an automatic renewal clause, and once this kicks in, you’ll find that you’re the victim of price increase – sometimes up to 40%!
Yes – FORTY PERCENT!
A letter of termination is straightforward to write. It doesn’t have to be fancy, just a simple letter stating from the expiry date you will not be renewing your current contract. Pop this in the post and use the ‘signed-for’ service, so you have a record of when it’s received. Once you know your contract is no longer going to be renewed, you can gather quotes, but remember that business energy quotes are only legitimate for the day upon which it’s been quoted, after that, they cease to be valid.
You should find that your supplier and other suppliers will be just itching to give you the lowest rates they can for the next contract period. Coincide this with seasons of low energy usage (eg the summer months) and you can secure a nice low rate for the next 12 months.
Forget mainstream price comparison sites and consider chatting to a UIA energy broker. They’re specialists in business energy suppliers and how to get the best deals. Many offer free advice and consultation, so you’ve got nothing to lose by giving them a call. Energy brokers will actively negotiate with suppliers to lower your energy rates, so you’re not being quoted from an automated system.
With all the Olympic hype in the media you may have missed a less glamorous initiative that got off the starting blocks on 1 August.
The new flagship Funding for Lending (FLS) scheme was launched to replace the National Loan Guarantee Scheme. The FLS is another attempt by the Government to encourage banks to lend to growing businesses.
In its March 2012 budget, the Coalition announced that it would be setting up a new credit-easing plan called the National Loan Guarantee Scheme. The NGLS was designed to help businesses access cheaper finance, by reducing the cost of borrowing under the scheme by 1 percentage point. It guaranteed £20bn worth of loans. Since March, only 16,000 loans were applied for, equalling a total of £2.5bn. This has been declared a failure, and so the Treasury has sidelined that plan and come up with another bright idea in the form of the FLS.
Loans worth £80bn have been pledged for the FLS. The scheme will run for the next 18 months (1 August 2012 to 31 January 2014) and then it will then be assessed. Under the scheme, for every £1 of additional lending made by a bank, it will be able to access an extra £1 of cheap funding from the FLS. Those banks that reduce lending will have to pay higher fees to use the scheme.
According to the Bank of England, the FLS is "designed to incentivise banks and building societies to boost their lending to UK households and non-financial companies". Under the initiative, commercial banks will be able to exchange collateral, such as existing loans, for pieces of paper known as “Treasury bills”, on which they will pay an interest rate of 0.25%. They will then be able to use these bills as backing with which to borrow cash cheaply on the wholesale markets, money they can then lend to businesses and homeowners.
The purpose of the Bank of England's scheme is not just to inject some life into the moribund property market, but also to make cheaper loans available to small and medium-sized firms who are outside the financial sector. SMEs have complained for several years that the banks are hoarding cash rather than lending – even to relatively safe borrowers.
Official figures show that lending to non-financial firms has indeed been falling, a trend that the Bank of England would like to reverse. In the past four years the stock of outstanding loans to such companies has shrunk by 17% from its peak, to £420bn in June this year. At the start of August, the RBS group (which includes NatWest) announced that it will take advantage of the new scheme and cut £2.5bn off the loan interest charges it expects to make available to SMEs.
If this means that start-ups and SMEs are able to access the funds that they have been desperate for since the banking crisis of 2007/8, then we should award the Government a gold medal for providing an impetus for business growth.
As we approach the autumn, what better time to get ready for the season’s key HR tasks? Here is my handy HR checklist of things you should be thinking about over the coming months.
Feedback is important to us all. Constructive feedback helps to motivate people, but poorly delivered feedback can have the opposite effect. So it’s essential to get it right every time. If you’re running a small business or or start-up, resources are likely to be tight and you need everyone working efficiently, so it’s even more important to ensure your feedback generates the necessary results.
We’ve developed these seven top tips to help get it right every time…
Thank the person for their contribution and make them feel great about themselves. Praise them for their efforts and let them know you understand how much work was involved.
This is your opportunity to empathise and encourage the person to develop and improve their skills. Take an interest in the person’s goals. It is not about perfection every time; it’s about progress towards a goal. Encourage them to never give up.
To demonstrate you really understand how the person’s contribution added value to your business, give specific examples. Collect your comments into meaningful sets to make them easier to digest. Start each set with praise for what they did well and then make constructive suggestions as appropriate.
Explain to the person how their work contributes to the running of the organisation. This is very inspirational and will often help them to understand how to do the job better.
If you want the person to change their behaviour, give an example of the behaviour you want to change. Point out ways their behaviour has affected other people within your business. Allow the person to tell their side of the story. There may have been genuine reasons for their behaviour. The request to change should be made in a non-aggressive manner and take their comments into consideration. Both the giver and receiver of the feedback should walk away feeling that a fair resolution was achieved.
Ask yourself if the person's performance was adequate for the purpose, rather than comparing it with how you would have done it.
A successful model for feedback is to start with positive comments about the person’s strengths and successes. Follow this with constructive suggestions about how to perform even better, allowing them to comment and ask questions. Finally bring in some additional positive points and encourage them to feel motivated to introduce the changes you have suggested.
Many people find delivering “negative feedback” difficult, but by following these suggestions giving feedback can be a constructive and rewarding process for both parties.
Mairead Dillon and Jane Penson are members of Toastmasters International, a worldwide not-for-profit organisation focused on developing communication and leadership skills