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Blog posts tagged Finance
Spend wisely at the start
July 28, 2010
When starting a new business, the way that you spend your limited resources is critical to your chances of success. There are places where you can’t afford to scrimp, and there are places where you simply must not waste. You need to keep the chance of failure down by spending what you have very wisely.
- For a business with any risk, forming a limited liability company is a must. Then if the business goes down, loans and debts owed by the company won’t follow you. So set up a company by searching for “Company formation” on Google. It’s unbelievably cheap.
- There are other things to consider too. You need to keep all of your paperwork, including sales invoices and supplier charges, so that you will be able to do accounts and tax returns. But this doesn’t mean setting up a complex and expensive accounting system. It means employing a cheap book keeper for a few hours a week, or even keeping all of the paperwork in one tidy pile, so you or an accountant will be able to do the accounts when the time comes around.
- Registering for VAT, the Data Protection Act and possibly other specialist health and safety laws are other start up activities. Do these at the minimum possible cost and effort. These are overheads, not keys to your business success. You can nearly always find out everything you need to know with a few hours of research online. Everything possible like this should wait if it can.
- Don’t spend money on things that you don’t need yet. In a start up situation, tomorrow can take care of itself. The critical thing is to concentrate your money on getting your product right, making sure that your customers are happy, then selling like crazy. This is much more important than a slick operation. I’ve seen a number of people spend precious resources on preparing for massive success, only to have that success elude them because not enough attention was paid to sales growth.
- When you have a growing business with satisfied customers, then it’s the time to get better organised. As you grow, you will need to invest in systems to maintain quality, and you should also be able to drive down costs as a proportion of your sales. But all of that is for later.
It sounds easy, which it isn’t. However, following these tips will increase your chances of success. Good luck.
In summary:
- Spend the minimum on being legal and decent
- Focus on getting something customers want, and make sure that they are happy
- With that core in place, sell, sell, sell
- With sales growing strongly, invest in operations to maintain service and reduce costs
Chris Barling is CEO of ecommerce software supplier Actinic
How can I raise more finance?
June 21, 2010
In her latest video blog, Marcela of Rico Mexican Kitchen asks questions about business finance.
Marcela in Fishbowl Two has never started her own business before. Nor has she seen anyone else start a business. And, being one of the first businesses to feature on inafishbowl.com, she has never had the opportunity to learn from the experiences of others.
In this video, Marcela asks how the finances of early stage businesses usually work during the first two years, and how she should be going about raising more finance.
You can find out more about Marcela on the new interactive business website www.inafishbowl.com
The importance of family and friends when starting a business
June 18, 2010
I would like to look at an aspect of starting a business that isn’t often considered. Mostly discussions are about finance, marketing, recruiting a great team, VAT, legals and all of the other stuff of start ups. But most people need the support of family, friends, and partners. Start ups are hard, and you must be sure that everyone is with you, everyone is supporting you, and everyone understands what you are doing.
My decision to start a new business was made jointly with my wife. Although she’s had limited involvement in the management, she was a full participant in the original decision. And as a result, she has supported me in every up and down since then, which has been a real help. Similarly, my sister and a friend both lent me money when we had an early cash flow crisis. They wouldn’t have done this if they hadn’t been taken on the journey beforehand.
And that’s the rub. If people close to you aren’t with you, they may be a source of discouragement. In the extreme, broken relationships can greatly increase the chance of business failure. I’ve actually seen this with a friend, where they ultimately ended up with nothing. On the other hand, constant encouragement and reassurance can be a real help – as can financial support.
If you start a business, it won’t only affect you, it will impact those close to you as well. They deserve to be told what that will involve and to be consulted for their opinions. Do this, and you will increase your chances of success significantly.
Chris Barling is CEO of ecommerce software supplier Actinic
Mumpreneurs and money
June 16, 2010
Most mums with businesses are serious and committed, but don’t always find it easy to turn this commitment into big bucks.
Many women need to change the way they think about money and how they feel asking for money. Research has shown that women are less comfortable to ‘name their price’ than men, and women in ‘helping’ professions are less comfortable than, say, women working in IT. Say how much you want for your service out loud: are you comfortable saying this or do you feel a bit apologetic? I know I do.
When I run courses the majority of women attendees are in business to HELP in some way. You can only be truly effective as a helper if your business is strong and making a profit will allow your business to grow and help more people.
If you are in the position of running a business that doesn’t make enough profit you could:
- Pay close attention to where the money comes from. Which clients/product lines bring in most profit? What can you do to maximise these?
- Look at your outgoings. Could you source more cheaply, alter suppliers to ones with bigger discounts or buy in bulk?
- Work out which jobs you should outsource to allow you to work more effectively. Pick tasks that you struggle with which someone else could do more efficiently.
- Ask clients and customers about the value your business offers. Collect their feedback and spontaneous thanks to help build your confidence in what you offer.
- Work out what motivates you to earn through the business. Is it the feeling of independence, the need to put food on the table or the ability to pay for treats? Remember this when it is time to chase for payments.
Follow these tips, stay in control of your finances and you will see your business grow.
Antonia Chitty of Family Friendly Working
Managing my business finances
May 17, 2010
Entrepreneurship is all about making things happen and turning ideas into a profitable business. However, it’s impossible to have all the skills and attributes in one single individual- no matter how motivated or how working one can be, to turn an idea into a long-term profitable proposition requires a team of people who complement each other.
I realised a while ago that I could do with bringing into the team someone who has the skill sets to help me really get the numbers behind the forecasts right, and to help me negotiate with banks, funders and other possible stake holders. Someone who can help me turn the forecasts into a reality; in other words, an experienced, trustworthy financial director.
It was time for me to call in the experts. I came across an organisation which offers the services of a “virtual” or part-time FD who will work with a company for a minimum of 1-2 days per month and helps with all the financial strategic stuff. I met with the regional director of that organisation and my FD-to-be if we will take things further. It was a pleasant, purposeful meeting, and I felt I could trust the guy. They call it the “barbecue test”, in other words, would you invite the person to a barbecue. We will go to the next step and meet for a full day to discuss the business past, present, future and financial strategy.
I think this model will be the affordable way to bring an experienced helping hand to complement my winning team and turn my proposition into a reality.
You can find out more about Marcela on the new interactive business website www.inafishbowl.com
Are the Politicians dumb or is the electorate deaf?
May 05, 2010
The election messages continue to dance around reality. I did arithmetic at primary school, but did the politicians?
Here’s my maths. The government spends £400 for every £300 it receives, spending half our national income. If the country earned £800 per annum, the government spends £400, of which £100 is borrowed. Total government debt would be £500, rising by £100 per annum. This is less than six years away from going down the pan like Greece.
If we protect health, the government would have to cut a third of all spending to balance the books. That is an unimaginable level of cuts implying public sector pay falling by a third, which in turn would depress GDP severely making things even more difficult.
If GDP grows, it will be better. But we live in an uncertain world, with huge financial risks still lurking all around. Still all of the talk is about additional spending and what will be protected.
We have a financial crisis worse than anything seen in our lifetimes. Why are the politicians playing dumb and not getting totally real with the electorate. Maybe we still don’t want to hear?
Chris Barling, Actinic
Small business finance - so where’s the money, then?
May 04, 2010
Perhaps controversially, I believe that too much emphasis and, indeed, money is spent on encouraging people to start their own business. In my opinion, resources should be restructured to offer more help to people once they have actually taken the plunge.
I believe people should be shown that business is a genuine career option, and I am a strong advocate of Young Enterprise. But I’ve seen too much money wasted on national campaigns encouraging Joe Bloggs to start a business while someone who has a great small business cannot get to the next stage because of unnecessary barriers.
A prime example of a product which should help but which doesn’t is the Government’s Small Firms Loan Guarantee (SFLG). The idea behind this is that the Government covers some of the risk of the loan in order to allow banks to lend more easily to small businesses.
This was re-launched last year as the Enterprise Finance Guarantee Scheme and the Labour Party’s manifesto tells us it has helped 9,000 businesses. Writing as someone who has first-hand experience of the SFLG, I can tell you that if I was to start the process over again, I certainly wouldn’t bother. In the end we gave over so many of our own guarantees that the entire point was lost; despite whatever their PR says, the banks are simply not ready and willing to lend on this scheme.
In a nation of more than 60 million, 9,000 people on this scheme is not a claim to fame but an admission of failure. The figure should be tenfold. The Government needs to seriously and quickly address this issue and they should not be putting forward a scheme which the banks may or may not promote. They should be telling the banks that if a business comes in and meets a set of criteria, then they must allow them finance under a scheme where the risk of the loan is partially covered by the Government itself.
Adam Ewart, Karacha
Too much salsa on my plate?
April 05, 2010
I was up until til 2:30am cooking to fulfil orders and make samples. I am feeling hyper and excited, with that butterflies-in-stomach feeling about what lies ahead and the opportunities that I have. I am equally overwhelmed about what to do next and I'm tired. Whatever I do, it means that I’m not doing something else that is equally important.
The bookkeeper came this morning and we are getting our new system in tip-top condition. It required my attention because we are changing to a new accounting system and I need to know how it works. So I couldn’t make the follow-up sales calls I needed to do, or pay the bills, or organise tasting sessions, etc. I also teach Spanish on a Wednesday and I haven’t prepared yet.
More orders are coming through, but I'm not able to cook tomorrow because I’m at a “Meet the Buyer” event. I hope the buyers do buy! So it looks like another 2:30am bed time tomorrow, as my kids are in a local panto and I won’t miss their debut!
Wish me luck, I’ll keep the coffee flowing...
You can find out more about Marcela on the new interactive business website www.inafishbowl.com
Getting to grips with cashflow
March 19, 2010
Cashflow is the lifeblood of any organisation. Getting it wrong means that your business will fail, but getting it right at a time of economic uncertainty is a significant challenge.
Having a healthy cashflow is crucial for all companies, but can have a massive impact for start-ups. A new business can only survive for a short time with a negative cash flow, and ultimately the business will end up insolvent. Start-ups must adopt processes to help manage their cashflow from the moment they are set up.
Late payments are a significant problem for entrepreneurs to deal with. Half of the small businesses polled by Sage in its monthly Omnibus said they had been impacted by late payments over the last twelve months.
For start-ups waiting to improve their business cashflow, there are a number of steps to take, including:
Know where your money is – It sounds simple, but a lot of small businesses will fail because their owner doesn’t keep a close eye on the funds coming in and out of the business. That visibility is best achieved by maintaining regular updates on your cashflow forecasts.
Know your customers – Many businesses have a set date for paying invoices, learn when these are for your customers and record the date. If the date passes and you are yet to be paid, then there is a good chance that something is not right and you can follow up with your customer.
Set-up an online automated contingency plan – This will help you actively manage your cashflow. It is critical that start-ups remain aware of how much money they are owed and when payments are due, so that late payments do not occur in the first instance. However, if they do occur good management can ensure the late payment does not have a damaging effect on the overall cashflow. These are all aspects that business accounting software can help you get to grips with.
By implementing theses correct processes a start-up will be able to manage their financial planning effectively, forecast the year ahead and identify any potential cashflow issues. By following these guidelines and implementing the right software, businesses can make sure they remain strong and cash positive.
Brendan Flattery is the Managing Director of the Small Business Division at Sage UK and Ireland.
Marcela's story continues... Off to the bank
February 22, 2010
I had always thought that the word “entrepreneur” sounded so glamorous. The truth is that you are “it”, from key decision maker and strategist to garlic peeler. When people ask me what my position is in my company I laugh - I’m the CEO and the cleaner.
If you decide to start your own business without your finances completely sorted and you can’t afford staff, you are in for a difficult time trying to do everything. Even if you have a business plan that maps out incomings and outgoings, there is always that extra marketing opportunity that you don’t want to miss, or that packaging that you had to buy etc... spend, spend spend. I left my job early on in the planning of the business to throw myself fully into the project - maybe I should’ve been more patient and kept my salary for a bit longer.
Having said that, somebody said to me at the very beginning of my business journey that I should just go for it and borrow £100k from the bank. Thank goodness I didn’t do that. Yes, life would’ve been so much easier, I'd have a budget for machinery and packaging, maybe one or two part-time staff and a salary, but I wouldn’t have known how to spend it as well as I do now. Now, I have proved a concept, I understand which things worked or didn’t work and I know exactly what I need to do next. The only small detail missing is the cash itself.
So, this week has been about focusing on raising finances and boosting my sales. I'm looking after my key customers and revising my business plan so it reflects what I know now to allow me to get to the next stage. I’m off to the bank today and, hopefully, the bank manager will like it and believe that I can make it work. Hopefully I will be able to raise the finances and afford to pay a member of staff and the machinery I need. Feeling positive. I’m not superstitious.
You can find out more about Marcela on the new interactive business website www.inafishbowl.com
Notes from a ‘board meeting’ (9/2/2010)
February 12, 2010
Ross (manager): “Welcome everyone, I trust you’re well. Item one: whether to invest in a company branded doormat.”
Ruth (marketing): “A company-branded mat will create a more welcoming entrance and make us look more professional.”
David (finance director; deep, gruff voice): “Make us look more professional? How exactly will a mat make us look more professional? Unless, of course, you intend the staff to wear it?”
Ruth (slightly squeakier now): “Professionalism is about the whole package, David.”
David: “How professional are we going to look when we go bust because you keep buying all this frivolous rubbish?”
Ruth (really squeaky): “If you don’t stop thinking like that, we’ll never go anywhere.”
Ross (calm, obviously): “Ok, David, can we actually afford the mat?”
David: “...........................(long pause)....................................... Er, yes”
Ross: “Ruth, do we need the extra gold tassels or will it still be fit for purpose if it’s bright pink and hardwearing?”
Ruth: “.......................(Not squeaky at all).................. Mmm… We don’t really need the tassels, no....”
Ross: “Right then, got there in the end, didn’t we? Let’s buy the mat.”
Of course, my company has but 10 staff, including me. We don’t have a boardroom or a marketing expert called Ruth or a finance director called David. I don’t know how other business owners make decisions, but when it comes to cost-benefit analysis, this type of things usually works for me.
Ross Campbell, The Exercise Club
The problem with money (too much)
December 17, 2009
Last month we talked about starting a business on very limited resources. This time, I would like to think about the problem of having too much time or money.
Having too many resources can distract you. In contrast, when money is tight, you’re focused on just doing what is truly important. In any start up situation, you should only care about discovering two things:
- What customers want and your capacity to deliver it.
- How to get it into the customer’s hands at a cost that makes a profit.
Cracking the above two points and then becoming cashflow positive is the surest route to business success. Failing to focus on this is the surest route to failure, whatever the bank balance. I speak as someone who has not only started their own company, but who has invested in a variety of start ups, some with tremendous success, and one that has been an abject failure.
Two of my investments (actually the ones with the most potential and both of whom have raised millions), are also teetering on the brink of failure. The reason? Too much money, with one having raised more than £10m over several funding rounds. Having too much money encouraged both to try and tackle multiple markets before they had fully established themselves in one. It made them feel that becoming cash positive was an optional extra. After all, they could always raise more capital. And they seem to pay enormous salaries, far above what I pay for higher caliber staff in my own business.
In my opinion the lesson is simple. Focus your efforts on providing what is wanted. Then deliver it at a profit. Don’t do anything else. Becoming profitable as fast as possible makes long term success much more likely.
How to set up a business at home - regulatory
November 18, 2009
My first blog post on setting up a business at home proved popular - I thought I would follow it up with some tips on the regulatory side to working from home.
- Decide whether to trade as a sole trader or to set up a limited company.
- Incorporate a company using a formation agent (e.g. @UKplc) or an accountant. This is easy and you should not have to pay more than £150 - including disbursements.
- As a sole trader, you will need to register as self employed with HM Revenue & Customs.
- You will be able to offset a portion of your home costs against your profits. This is a great way of reducing tax.
- VAT registration – this is compulsory if your sales are greater than £70,000. You can register voluntarily if wish to reclaim VAT suffered on purchases. It’s a complex area and you should seek the advice of an accountant. Make sure your accountant is set up to register and file returns online for you.
- PAYE registration – you will need to do this if you plan to pay yourself and/or your staff a salary. Again, use an accountant and make sure that the accountant is set up to make all the necessary submissions online.
- Home insurance – make sure that your building and contents policy covers you for working from home. Similarly, make sure that your car insurance covers business use. There should be no/minimal extra cost.
- Liability insurance – if you need it, you might want to make sure that it covers Public Liability Insurance at your home, particularly if you plan to regularly host clients, suppliers and/or staff.
- Business Rates – there is an element of scale to consider here – you on a laptop on the sofa is not a problem. Five staff turning up every day to work in the spare-room may be. If in doubt, check out your local council’s position.
- Registered Office – if you set up a company, you will need to have an “official” address. If you use your home address, you will need to display the company name outside your front door. The sign can be business card size. Alternatively, use your accountant or virtual office service.
- Make a note in your diary of the dates and deadlines that matter – particularly on the submission of official documents - because you get fined if you are late.
I'm always looking for new topics to blog about so if you have any suggestions - do get in touch or leave a comment below.
Perfect business plans
November 06, 2009
If you have an idea for a business and want to progress it, you are probably thinking in earnest about your business plan. If you are looking for outside finance, you are no doubt keen that the business plan will be a great marketing tool for your idea to banks or other investors.
Years ago, when private equity was still called venture capital, I was involved in funding start-ups. I would look through countless business plans, trying to sort the ‘possible’ from the ‘dream-on’ varieties, with a view to investing in the best. Some plans were back-of-the-envelope affairs, with enthusiasm but no financial viability analysis; some described in depth inventive products, but showed no realism with regard to cost of production; others assumed world domination in a few months.
But what really put me off was the business plan that plainly had been written by someone other than the people who were going to make the idea happen. However slick the document, with every possible detail carefully analysed in beautiful spreadsheets, if the words do not reflect the essence of the entrepreneur – his enthusiasm, her conviction the idea will succeed, their commitment to the project – then the proposal will lack that essential ingredient that is the reason for making an investment. The basis of our decisions was mimicry of estate agents’ ‘location, location, location’ replacing the key word with ‘management’. Yes, of course we wanted to see that the projections made sense, and that the amount of investment required was adequate and would be wisely spent; that there was indeed a market for the product or service, and that it would be sold appropriately. But the key was always: is this the right person to make the proposed business succeed?
So if you do use professionals to help compile your business plan, make sure that the final result is imbued with your DNA, and that it convinces the reader why you are the one to turn the plan into the success you describe.
Introducing the Five Per Cent Plan
October 12, 2009
I once interviewed a highly successful and experienced business owner from Northern Ireland. He was a lovely, intelligent man, senior in years, who swore by his “Five Per Cent Plan” – something he said could make a tremendous difference to the profitability of any business. It goes something like this…
Look closely at all of your business expenses and try hard to reduce each one by just five per cent – a reasonably small and achievable figure. That might involve cutting out more waste, using less or driving a harder bargain with your suppliers (many will gladly say yes, if it means hanging on to your custom).
A five per cent saving can be achieved in many areas quite easily, he reckoned, especially when you’ve been in business for a number of years, by which time many inefficiencies can build up. You never know, you might even be able to make greater savings. If a cost makes no tangible contribution to your business, you should eliminate it altogether, of course.
If a five per cent saving isn’t possible, you should aim for four, he advised. If not four, then aim for three. If not three, aim for two. If not two, then just one, but never settle for no saving unless there genuinely is no alternative.
Our friend from Northern Ireland was a plain speaker and a realist. He smiled and conceded that reducing costs, even by just one per cent, would not be possible in every instance. But at least the exercise forces you to seriously consider what you spend your money on, what contribution it makes to your business and whether you’re getting maximum value for money. Continually monitoring expenditure and cutting unnecessary costs are both excellent habits to get into.
Time to focus on your prices. Good knowledge of your customers and competitors is vital, of course, but consider whether at least a five per cent increase is possible on some or all of your prices. Many businesses unnecessarily leave their prices set for many years for fear of losing customers, but this can mean needlessly throwing away profit. If you can enhance your product or service, you might even be able to achieve a greater price increase, providing you can explain how this gives your customers greater value.
Our friend from Northern Ireland recommended employing the “Five Per Cent Plan” at least every six months. Even a seemingly measly five per cent reduction or price increases here and there can seriously improve the profitability and well-being of all businesses, he said. That seems especially important in times like these. I’m sure he’d tell you that.
Enterprise Investment Scheme (EIS)
October 07, 2009
Start-ups, are you looking into angel investment as a finance option? You need to ensure you’re EIS compliant...
If you are raising capital for a start-up business and you plan to use angel investment, the investors will probably want to know whether the business will be EIS compliant.
The EIS is a government backed scheme that gives tax breaks to investors.
The benefits of investing in an EIS compliant business are principally two-fold:
- Investors get 20% of their investment back in the year they invest against their income tax bills
- If they hold the shares for 3 years, they will pay no Capital Gains Tax when they come to sell
There are a number of rules about the trade you will carry out and the investors who can make the claim. You accountant will be able to explain in more detail or take a look at the HMRC website for further information http://www.hmrc.gov.uk/eis.
If your planned start-up business ticks the boxes for EIS, make sure that you sell this to potential investors. The investors will feel more secure in the fact that it limits their downside risk and that they won’t have to pay capital gains tax when the business succeeds.
If I can help you further, I will - do get in touch.
Tim
In a muddle with your numbers? Pick up the phone
September 14, 2009
One of the first things you need to do when you set up your own business is to find yourself a good accountant. However simple or complicated your business’ finances are, you are going to get yourself in a muddle if you don’t know exactly what you need to record, how to fill in your tax returns or when to file your accounts.
Speaking to the Institute of Chartered Accountants in England and Wales (ICAEW)’s Clive Lewis the other day, I learned that many start-ups don’t use their accountant as much as they could or should.
You should be able to rely on your accountant to be there for you if you call up with a query about your book-keeping, however trivial it may seem, or if you have a sudden change of circumstances – for example if a client suddenly puts in a big order and your cashflow is thrown off-balance. They should also be reminding you of deadlines for self-assessment or, if you’re a limited company, when your accounts are due to be filed.
There is certain information your accountant will need from you in order for him or her to understand your business and do your accounts for you, too, but again, a good accountant will tell you what they need. According to Lewis, your relationship with your accountant should be a long-term one with regular contact.
Ask other business owners you know who they use, or visit one of the accountancy associations’ websites to do a search for your local accountants. Even if you have a good brain for maths, you still might need somebody to hold your hand while you work out how to use your new accountancy software. Ideally, you will choose an accountant who has previously worked with other businesses of your size and in your industry.
So, don’t be shy; pick up the phone and ask away. And if the person at the other end doesn’t want to help you out, take your fees elsewhere and find an accountant who will make life easier for you.
Hello Donut Lovers
September 01, 2009
Firstly, I guess I should tell you about my break for entrepreneurial freedom…
My brother and I left the security of good professional careers in June 1997 to buy a pub. Why? Well – it seemed like a good idea at the time, despite the fact that neither of us had even worked behind a bar in our lives! Despite a lack of experience, we raised equity from friends and family, got a loan from the bank and about a year later, bought and refurbished a pub.
Over the course of the next few years, we turned it into one of the most successful pubs in the area and in the process, more than quadrupled the turnover that the previous owners had achieved.
A big part of the original plan had been to produce our own beer; and once we had the pub operating well and a good operational team in place, we turned our attention to opening a micr0-brewery. Again, having no direct experience in the industry, we tracked down a consultant who advised us on brewery design and recipes. We converted an industrial unit in Battersea and started brewing. The beers we produced tasted great and sold well, even winning the occasional award! Sadly, the London market was not an easy market for brewers at that time, many pubs were tied and would not accept guest beers and the costs of distributing in London traffic meant that the brewery never did much more than wash its face.
One of our best sellers in the pub was a shot-sized vodka jelly product, until one day, our supplier stopped delivering. A (pre-Google) search on the internet did not reveal any alternatives, so we set about making our own. I got a recipe from an old friend, eventually sourced the pot and lid and started making vodka jellies in the pub kitchen. They sold well and after a while, we started getting calls from other bars wondering where we got the product from. One thing lead to another and we started selling nationally. Soon, we were attracting the interest of the big pub chains and it became clear that if we were going to have a proper go at it, a strategic investment was required. Nine months later we had a new round of investors, a new patented pot and lid, a manufacturing line in Wales, a storage unit in Liverpool and a full sales and marketing operation in place!
Over the next couple of years, we sold around 5 million vodka jellies. Sadly though, it wasn’t enough. The pub chains were demanding increasingly competitive prices and the big players in the drinks industry (and boy are they protective of their markets) muscled us out. The impact was sufficient to leave our whole business in trouble and we had to sell the pub to clear the decks financially.
Licking our wounds with no interest in returning to corporate life, I was contemplating what we might do next when I took a call from a friend, asking if we knew of any good accountants. She ran a PR agency in the area and was looking for a new solution. The door to the new business opportunity opened before my eyes and we jumped in! For a start my brother and I are both trained accountants, plus we had spent the last 8 years running 3 small businesses – I think we had a good mix of technical grounds and commercial experience to make an accounting practice for small businesses work. Haggards Crowther, as it is now called, is now well-established and looks after over 600 clients.
The entrepreneurial fires have continued to burn brightly, more in me than my brother. He has been keen to keep the accounting practice focused on core products, whereas I wanted to expand into new areas. Thus, whilst I remain heavily involved in Haggards Crowther, I have started work on Start-up venture number 5 – My Bookkeeping Online.
Launching in autumn, this is an online platform designed to help small businesses keep on top of their bookkeeping. From the outset, it has been really important to me that owners of the smallest businesses with no bookkeeping knowledge can use it…and designing it accordingly has been a challenge! It is under development as I write and it is coming together well.
Watch this space as I’ll be blogging and tweeting about the progress.
Other than that, this blog is going to be about small business. No doubt my focus will head off in many tangents in the coming weeks and months, but the primary purpose is to talk about small businesses that are starting up, help with some broad advice and talk about the issues small business owners face in specific industries. Please forgive the occasional rant too!
Tim
A lesson from the Den
November 16, 2007
What does Dragon’s Den tell us about the world of small business? Not a great deal if you view it solely as entertainment. After all, this is reality TV, and reality TV’s stock-in-trade is the ritual humiliation of hapless members of the public. There are times when I find it excruciating to watch yet another hopeful squirming under the unforgiving scrutiny of the Dragons, their dreams visibly crumbling as Duncan Bannatyne spits a mocking question about sales projections that he knows they cannot answer. It’s like watching someone being skewered and roasted over an open fire.
Thankfully, there’s more to it than this. Dragon’s Den is not actually a game – these are serious investors with real cash to put into real businesses, and they’re not going to throw it away on a whim. Harsh as it is, their scrutiny has a purpose; they have to be sure that the risk is going to be worthwhile.
I know we’re supposed to boo and hiss at the Dragons whenever they grunt the dreaded “I’m out”, but I can’t help siding with them when I’m watching the show. Most of the entrepreneurs are so ill-prepared for their ordeal that they don’t deserve to be given any money to develop a business. This staggers me. There’s no secret here - they know the format, they know what sort of questions they’ll be asked and they know what’s going to happen if they can’t answer them.
Granted, it’s a nervewracking business and that’s going to affect their ability to recall information quickly and easily. Even so, if you’re seriously asking for £150,000 to open five retail outlets selling baseball caps in five major cities, you really should be able to demonstrate some sort of understanding of leases, health and safety regulations and employment law, as well as offering realistic cashflow forecasts, sales projections and some sort of basic marketing plan.
Unfortunately, too few of the applicants standing in the Den seem to grasp the fundamentals of running a sound business. They’ve got where they are on a wing and a prayer and a following wind. But the Dragons are hard-nosed business folk who don’t invest in dreamers – unless they can see a healthy profit at the end of it.
And I suppose that’s what makes the show compelling. We see, vividly, the collision between an entrepreneur’s dream and the realities of the marketplace. Every business reaches this point eventually, some sooner than others. If the entrepreneur has done their homework, they stand a good chance of getting over the wall, or around it or under it or even smashing straight through it. Their dream continues - a little tarnished maybe, but in a much better state to survive in a competitive environment.
What the Dragons offer is a reality check. It has to be harsh. It’s not easy to get a business up and running, but it is possible. And when it happens, nobody is more pleased than the Dragons who, after all, just want to invest in good businesses.
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