Good Practice for a Successful Business

This year again I have helped many businesses, some whom were on the road to success and needed help to step up to the next phase of growth, but also a lot that were in trouble.

Of the successful ones that I helped to grow significantly there were a number of elements that were common:

We ensured that they researched their marketplace.
We developed a good USP.
They had been set up with sufficient capital investment at the start and ensured enough finance to fund the growth.
Marketing effort was fully controlled and measured.
We also established good financial and business controls.

Lastly and very importantly they got outside advice and guidance, listened and implemented the suggestions and techniques.

Alan Briggs

Dynamic Business Strategies Ltd
The Counting House
14 Walford Place
Chelmsford
Essex
CM2 6PG

Tel: 07917 446068
E-Mail: info@dynamicbusinessstrategies.co.uk
Website: www.dynamicbusinessstrategies.co.uk

David & Goliath, or a Case Stranger than Fiction!

Sometimes I am asked to deal with a problem that everyone else has turned down i.e. ‘the lost cause,’ often these are the most satisfying and on the face of it challenging projects.

The strangest one last year was the owners of an ostrich farm based in the heart of a residential commuter area who wanted to build a family home on the site. Sounds reasonable one would think especially as the couple and their children in their twenties had been living in a mobile home on the site for ten years.

The couple had established a farm business which predominately was based on a breeding flock of some 40 female ostriches – they also had incubation and hatching facilities developed in the last few years so that they could sell young ostrich chicks and eggs.

The local Borough Council planning committee had turned down their application for an agricultural workers dwelling earlier that year, despite a Council Officer’s recommendation for approval. Although their agricultural consultant provided additional information – mainly financial and related data during the course of the previous year this did not change the elected Councillors minds, although Officers maintained their recommendation for approval throughout.

There was considerable local opposition to the business from neighbours, including the local Residents Association; it was believed that their representations had strongly influenced Councillors to go against their Officer’s advice. One or two Councillors in particular had been very vocal in their objection to the business – and it was believed to have clouded their judgement in their interpretation of the relevant Government criteria against which the business should be judged in a democratic society.

As the case had been refused a Local Council planning appeal it was now going to a Planning Public Inquiry within the next 6 weeks and they needed to get an argument ready for the planning application appeal and issue evidence to the Inspectorate quickly.

In agricultural dwelling cases there are two tests that the Government requires to be met before an agricultural tied dwelling can be built – the functional and financial tests.

There was no disagreement between the parties that the daily welfare needs of the ostriches meant the functional test was met. Furthermore, the financial test breaks down into a number of component parts as follows:-

“The unit and the agricultural activity concerned must have been established for at least three years” – the Council accept this test was met.

“The business must have been profitable for at least one of these last three years” – the Council accept this test was met.
“That the unit and the agricultural activity are currently financially sound” – again, the Council accept that this was met.

The fourth test is that the business must have a reasonable prospect of remaining so, i.e. profitable/viable/sound.

The stumbling point that was the key to the problem was the fourth test. It was this test that the Council and more especially the objectors did not accept as satisfied, and did not accept on the basis of the information that had been provided, including markets for the ostrich meat etc. that the business is likely to remain viable into the future.
So having met with the couple and their agricultural consultant at the farm I identified that the chair of the residents association happened to own the house next to the farm, also she had a long term happy relationship with the council officers and councillors and had a strong weight of local support.
I recognised that the solution was to the problem was to produce a business viability report to support the application the report needed to be heavily based around undeniable market research that proved a long term growth market for both the ostrich meat and the eggs.

The Council produced no professional evidence or other analysis to show that the market for ostrich products is likely to fail but argued that despite the reasonable past performance a large supermarket had tried to sell ostrich meat as a pilot and it had withdrawn the products due to poor sales.

The report that I produced within a week included an analysis on the likely future prospects for ostrich products within the UK- low fat, high protein, locally grown meats – sold at farmers’ markets and other specialist outlets and proved that the prospects for the business were excellent. Our key argument was that the meat produced should be marketed through what is now a vibrant farmer’s market sector where a large and growingly informed public are making food choices based on health, the environment and the wish to try new things. All of this market information was gathered using the internet.

So what was the result? The public enquiry was held and evidence was heard from the Council, the objectors and the owner’s team.

The chair of the enquiry then arrived at the decision to approve the application allowing the building of the house. The chair spoke a great length about how the decision had been swayed by the viability report’s evidence and the argument about the potential market and the change in public tastes and buying choices.

The lessons here are:

The devil is in the detail, good market research no matter how simply collected is always critical for any business situation.

Remember if you make sure that you have the right ammunition in your slingshot, then you too can fell a giant with a single shot.

Alan Briggs

Dynamic Business Strategies Ltd
Tel: 07917 446068
E-Mail: info@dynamicbusinessstrategies.co.uk
Website: www.dynamicbusinessstrategies.co.uk

Why Don't Businesses Seek Help Until Too Late?

As a business consultant probably 20% of the businesses that I have referred to me are seriously under performing or are in big trouble.

So why is that?

Well a mixture of reasons:

The ostrich syndrome, "its too painful to deal with so I'll ignore it."
The miracle wisher "if we could only get a big order it will all come right."
The change resister, (they ignore what's changing around them), and in any case, "we have always done it this way."
Ignoring the obvious, "I know we should not have reallied on one big customer for 80% of our sales, but we got on so well with them."
Ignorance, "We don't have time to keep monthly management accounts."

Often they only time many of these cases really see any figure is the end of year accounts from their accountant and even then they don't understand them.

But the two biggest reasons these businesses don't get help are:
They are too embarrassed or feel a loss of pride.
Or the old chestnut, "I don't need to pay someone else to come in and tell me what I already know."

Be honest, with yourself, If any of this sound s familiar then get help quickly, often if the businesses that failed got advice earlier on they could have been rescued.

Alan Briggs
Dynamic Business Strategies Ltd
Tel: 07917 446068
E-Mail: info@dynamicbusinessstrategies.co.uk
Website: www.dynamicbusinessstrategies.co.uk

Is The Customer King?

For those of us who have been around the business world for more years that we want to admit to, the phrase ‘The Customer is King’ is a familiar cry.

Unfortunately on a daily basis I seem to be falling over suppliers, shops and businesses that have forgotten this vital rule.

My wife tells me that I am the world worst customer, I guess thats true if that means I only give one second chance to get it right to suppliers and shops.

In many cases these are businesses that are quality accredited. They have great systems to register complaints, customer service people by the drove and lots of quality policies and procedures. The trouble is that if all this forgets that at the centre of it all should be one aim, satisfying the customer, then it’s all just been a paper exercise.

Several things should be remembered:

Customers will often remember and recommend the supplier’s who go the extra mile to put right a mistake or redress a problem quickly and without fuss, (probably more so than the suppliers who have not caused them a problem).

Quality service is not expensive, but lost business and reputation is.

At the end of the day it’s the customer who pays for the wages of everyone they deal with!

Alan Briggs

Dynamic Business Strategies Ltd

The Counting House
14 Walford Place
Chelmsford
Essex
England
CM2 6PG

Tel: 07917 446068
E-Mail: alanb@dynamicbusinessstrategies.co.uk
Website: www.dynamicbusinessstrategies.co.uk

Succession Planning for Smaller Businesses

Any business owner, especially those in a family business, will tell you how hard it was to establish their businesses, then build it and make it successful, let alone having to worry about how they might ever leave them!

But those who are trapped in their business know is not a happy place to be. Unfortunately too many owner-managers find themselves completely shackled to their businesses because they didn’t plan ahead. Once a business is up-and-running successfully, there should be no more important an issue to address than Succession Planning, with as long a time-scale for its execution as you can possibly manage.

Clarification - Exit Strategies versus Succession Planning

Those owners who have had to raise funds to buy or develop their business may have been asked by their accountants, ‘what about your exit strategy’? If they have ever approached business angels or venture capitalists, they most certainly will have!

But, ‘exit strategies’ are not the same as ‘succession plans’. Exit strategies tend to focus specifically on how the owners may optimise the capital value of the investment in their business through an eventual sale. Of course you may not want to sell your business when the time comes to move on from your executive duties. Or you may have family members or loyal colleagues already identified to whom you want to pass the business on to. Whatever the choice, you will still need to plan for your succession.

An exit strategy without a succession plan is rather like a car with no engine: worth no more than scrap value. Neither will take you very far…

Why plan for your succession?

Here are three stories that will make you shiver – feel relaxed. Names have been changed to protect identities, but these are real people in real situations!

Alan set up a perfect business 20 years ago. Time came for Alan to move on, but he had made just one big mistake. No bank was willing to support an outside buyer because none believed his company was independent of him. Alan had no succession plan.

Alan’s business had been established for some years. Alan had found a highly profitable niche market that served a captive, long-term, customer base. His business model was sound. His company’s products carried no ‘big ticket’ purchase prices and therefore did not require main Board approvals. Even better, his products were only bought by large, financially secure customers whose main concern was faultless delivery.

Alan’s company had some great long-term contracts (which external funders will always look for), with many more prospective clients to develop (and funders love that too!), the business had a solid reputation which would support further growth - with proven potential for any new owner. Any investors would now be really excited!

Alan had a new wife and wanted to sell and go round the world with his new wife. He had three senior managers, all excellent at their jobs, but they were on ‘second careers’, working part-time for the fun of it. Not one of his senior managers was committed to staying with the business should he sell it.

Some ten years later, Alan has still not managed to find a buyer for his company. He is running a very profitable business, with part-time senior managers and still with no succession plan in place.

Alan’s his wife isn’t happy with him spending so much time on his business but he can’t find anyone who might run his business better than him.

And maybe he never will!

Liz was very different from Alan.

She established a business more than 15 years ago at the age of 50, within five years she realised she recognised that she needed a much larger infrastructure around to take the business to the next level and beyond, preferably with people young enough to take over from her in due course. So she set out to do just that.

First Liz first expanded the team recruiting younger people, which included her two oldest children as recently-qualified professionals.
However as the team developed, Liz found they didn’t always appreciate the difference between being an ‘expert’ in their professions and the vastly different management challenges of running a demanding business. Several said privately that what Liz did in actually running the business, was ‘self-evident’ and ‘trivial’ - compared to their own tactical but highly specialist contributions.
To make things worse (as many of my clients report in these situations!), Liz felt increasingly under-valued as the business founder. But, she persevered with her longer-term plans.

She then recruited some outside help for her business in the shape of a Non-Executive Director, and they drew up a strategic plan and devised long-term management development and mentoring for her next generation of managers. This was a challenging time for them all. But Liz’s visionary succession plans paid off in spades.

Seven years later, Liz began to sell her shares in the business to her management team in small parcels as they developed. She then passed on the post of MD to her eldest son and became Non-Executive Chairman.In the last three years, her business now has a hugely capable executive board comprising her two children and three other professionals, the business has grown more than threefold - and profits have quintupled. All her team have become very wealthy through her enlightened generosity. Alan would be deeply jealous!

Sometimes though, succession planning has nothing to do with your existing Team, or your own family.

Neil established a company based on his own academic research, and quickly gathered 4 more researchers like him to invest in his business idea. Of course building their business took a while because, unlike Alan and Liz, none was sure if there was a market for their ideas.

Happily, Neil and his colleagues did find a market. He also found that most of his founding investors didn’t want the tedium of business management, but they very much enjoyed contributing technically.

Neil’s had planned ahead of course – and considered not just how to commercialise the opportunities they had found, but how to develop them as a ‘real business’.

After recruiting brining in a consultant to guide him and to offer broader business mentoring, the first thing Neil did was to create a detailed succession planning strategy, to find some carefully-selected senior managers to fill the management gaps that were identified and start to devolve responsibilities in a smooth and planned way.

Less than eight years on, Neil sold his business and is a multi-millionaire. He has also made his original shareholders and senior managers millionaires.

The Moral

The lesson to be learned here is that every business and especially family businesses need to plan for succession or you will find the future that you had in mind doesn’t turn out as expected.

Contact us today on 07917 446068 or e-mail info@dynamicbusinessstrategies.co.uk for a free business diagnostic and plan for the brighter, richer future that you want and deserve.

New Requirements for Driving Impacts All Businesses!

A new Government initiative designed to impact businesses employing 5 employees and over could still affect those with less than 5 staff. The requirements cover both employees driving company vehicles but also employees driving their own cars during work related activities even on a limited basis.

Although the new Department for Transport (DfT). ‘Driving for Work’ initiative was drafted to cover enterprises with 5 and over employees most businesses are unaware that the overarching duty of care for employees under Health and Safety at Work Act 1974 would mean that these requirements result in the need for businesses of all sizes to comply with most of the procedures. There is also a duty of care to others who may be affected by their business activities, which, in the case of driving, means all other road users. Therefore all enterprises should have a 'driving for work' policy then manage their risks accordingly.

Read the notes below and speak to us today to find out how we can help you to comply at minimal cost, for more information Click here

Still Not Convinced it’s Important That You to Act Today?

Here are some frightening statistics!

• There are an estimated 3 million company cars on the roads and roughly 1 in 3 will be involved in an accident each year.²
• Company drivers who drive more than 80% of their annual mileage on work related journeys have more than 50% more injury accidents than similar drivers who do no work related mileage.²
• Business drivers have collision rates that are 30 – 40% higher than those of private drivers.
• Every week around 200 road deaths and serious injuries involves someone at work.
  About 300 people are killed each year as a result of drivers falling asleep at the wheel.
• About 4 in 10 tiredness-related crashes involve someone driving a commercial vehicle.²
• Work-related road accidents are the biggest cause of work-related accidental death. Between 800 and 1000 people are killed annually in work-related road traffic accidents compared to approximately 250 fatalities due to accidents notified annually under the Reporting of Injuries Diseases and Dangerous Occurrences Regulations (RIDDOR).
  
  1 National Travel Survey
  2 DFT Road Research Report No. 51

So what is the business case for this initiative?

Work-related road accidents have more hidden costs many employers realise. The cost is much more than the garage bill for the damaged vehicle and in many cases less might be covered by insurance than can be assumed. It has been estimated that the full cost to the employer might be £8 to £36 for every pound paid on an insurance claim. Some items cannot be covered by insurance.

The following is a list of items business may find they have to cover themselves:

• Loss of company reputation and contracts
• Fines and costs of prosecution
• Damage to products/ plant/ building and equipment
• Staff down time for medical appointments/attendance at court etc
• Replacement staff costs and sick pay
• Loss of production or production delays
• Increased insurance premiums and excess
• Excess on a claim
• Offenders’ own legal fees
• Claims from third parties
• Accident investigation and paperwork
• Repairs to damaged equipment
• Alternative transport for repair duration
• Inconvenience
• Re-delivery
• Management and administrative time.

Of course it’s best not to have a crash in the first place - and it’s been proven that some simple measures any firm can take will make one much less likely.

The Benefits to the Employer
The benefits of implementing and managing a driving for work policy include:

• Reduced accident losses
• Defence against criminal prosecutions and civil litigation
• Lower insurance premiums
• Lower transport costs
• Improved business performance
• More effective vehicle use
• Less down time
• Improved safety culture
• Improved public image
• Higher staff morale

What do you need to do?

The basic system for managing ‘driving for work’ comprises the following elements:

• Draw up an overall policy statement
• carry out risk assessments
• minimise risk through control measures
• implement rules and procedures
• manage data recording
• audit, communication and review
  

Angels Rush in Where Banks Fear to Tread

A Guide to Business Angels and Venture Capital investment

Business Angels can offer investment, particularly in the early or growth stages of development, in return for equity.
Of course because of the risk to their funds, investors expect a higher potential return than for safer, more secure investments.

Equity Finance is often a suitable option where:
• the nature of a business or project deters other debt providers, e.g. banks
• the business does not have enough cash to pay loan interest because it is needed for business activities or funding growth.

The questions business owners should ask themselves include:

• Are they prepared to give up a share in their business and some control?
Investors expect to monitor progress and most will want involvement in significant decisions.
• Are the owners and their key people confident in the business 'product/service?
· Does the product or service have a unique selling point that singles it out?
• Do they have the drive to grow the business?
• What industry experience and knowledge does the management team have? Is there a variety of skills required to grow the business?

After considering the above, owners should seek advice from a professional adviser.

So what are Business Angels?

Business Angels (‘BA’s’) are independently wealthy individuals who invest in high-growth business in return for a significant equity share in the business. Some ‘BA’s’ invest on their own, others do so as part of a network, syndicate or investment club. In addition to money, ‘BA’s’ often make their own skills, experience and contacts available to the company.

‘BA’s’ will typically invest in businesses with:

• an investment requirement of between £10,000 and £250,000, (most initial investments are less than £75,000).
• who have the potential for generating a high return for the Angel – unlike other sources of finance ‘BA’s’ are not averse to high risk scenarios
• good early stage development or expansion
• a presence in a particular sector.

If a business successfully attracts a business angel investment, they're likely to find it easier to secure further funding from other sources.

The advantage of using a business angel is that they often make an investment decision quickly, without complex assessments.
However, owners will still need a professional and tailored business plan.
Most business angels can bring valuable first-hand experience of either working in a small business or running their own business venture. They're also likely to have local knowledge, as they tend to focus their investments within a small geographical area.

Some ‘BA’s’ may be eligible to have their investment funds matched by the UK
Government under its Enterprise Capital Funds (ECF’s) scheme. ECF’s are commercial funds, investing a combination of private and public money against a share of equity in small high-growth businesses seeking up to £2 million of equity finance.

There are of course disadvantages, business angels don't make investments very regularly and may not be actively looking for an opportunity, so they may be difficult to find. While you may decide to approach use an adviser to help you with this link up, business angels will place a lot of emphasis on the chemistry with the owner and how well they can work together directly with the owner and the management team. Tracking down the right investor may take longer than expected and can typically take several months but business owners can short cut this by working with an experienced consultant.

A consultant experienced in working with Business Angels and Venture Capitalists will guide a business owner through the minefield and help to get a business investment ready, helping to prepare an tailored business plan and to prepare the business owners for a presentation or ‘elevator pitch.’ The current TV series ‘The Dragons Den’ gives a flavour of the presentation process but of course it not entirely accurate as the ‘Dragons’ don’t get the business plan and a lot of dramatic licence is used.

The Exit
Usually at an agreed point in the future the BA will want to sell their shares and realise a significant return on their investment, when this happens in many cases the owners will want to buy out the ‘BA’s’ shareholding. Of course in a significant proportion of cases they don’t have enough money to do this. In this scenario the ‘BA’ will sell and the owner will be forced to agree or sell their share to the same buyer (this is known as the ‘drag along’ clause and is contained in the investor agreement which is set up at the beginning.
Alternatively If you the owners want to exit the business and sell their shares to a third party obviously the ‘BA’ would have to agree and would expect to also sell their share holding to the same buyer again this is included in the investor agreement (known as a ‘tag along’ clause.

Costs
This varies vastly dependent on the investment groups that are approached also there are seem to be some unscrupulous consultants charging extortionate fees to help prepare business plans and get owners investor ready.

Click here to contact us for more information and hear how we can help owners become investor ready and link owners directly to BA’s at low cost

Venture Capital
Venture Capital is also known as private equity finance. Unlike Business Angels, venture capitalists (VC’s) look to invest very large sums of money in return for some of a business' shares.

VC’s typically invest in businesses with:
• a minimum investment requirement of around £2 million, though many smaller regional VC organisations may invest from £50,000.
• an ambitious but realistic business plan.
• a product or service that provides a unique selling point or other competitive advantage
• a large earning potential and offering a high return on investment within a specific time frame, e.g. five years
• sound management expertise – unlike Business Angels, VC’s tend not to get involved in the day-to-day running of the business, although they may help with a business' strategy.
• a proven track record - for this reason start-ups are generally not considered by VC’s for investment

The advantages of securing a VC are that they can provide large sums of equity finance and bring a wealth of strategic expertise to a business. Again, like the business angel investment if a business successfully attracts a VC, they're likely to find it easier to secure further funding from other sources.

The disadvantage is that securing a deal with a VC can be a long, expensive and complex procedure. Businesses are required to draw up a very detailed business plan, including financial projections for which businesses are likely to need professional help.
Also, if owners get through to the deal negotiation stage, they will have to pay significant legal, accounting and other fees whether or not are successful in securing funds.

The Exit
At the exit point, (agreed at the beginning) normally the business is sold as a whole even if the owners don’t want to. So this needs to be kept in mind, (the only other options may be through a management buy out, (MBO) and refinancing which would normally involve refinancing the business.

Click here to contact us for more information and hear how we can help owners become VC ready and link owners directly to Venture Capitalists at low cost