Man we were cool in the 80's !

I am off to Egypt for a week and I have promised myself no email or even phone access for that week. It remains to be seen how long I am able to survive. I have not been without the use of a phone for more than 24 hours in over ten years!

It is a funny thing, but I remember getting my first mobile phone (through my employer Duracell batteries). It was very strange technology and I couldn’t get over how cool I must have looked – talking into a phone whilst driving on the motorway with my jacket on a hanger and popping into Little Chef for tea (I didn’t know what a latte was at this stage. Yes my perception of what I thought was cool then is very different to what I think is cool now! At this point I should apologise to those thousands of salespeople who live this life – yes it is still cool (especially white socks with dark trousers).

Again, I remember when emails started. Again it felt very strange to use this new technology. I was at Fujifilm and I remember how the sales team had a secretary who used to do the typing for us. The process was as follows

1. We used to first write something up on paper and then submit it to her
2. She would type it in draft and then let us have it back to check.
3. There would always be error so we would then make the corrections and then submit it back
4. We would then get a letter printed out on proper paper which we would sign and send

This was a little over ten years ago. It is amazing to think that a business which was producing cutting edge digital technology (1Mega Pixel cameras!) were not using laptops.

Again I remember when we did get a laptop, we only used it for sales presentations – and the sales team had to share one between four people!

My point is that the way we do things can rapidly become obsolete. And it is very difficult to know what technology will work. I remember getting my first text message (Thank you Mark Bryant) and thinking how stupid that was. I remember saying “that will never take off!”

If you are working on a new technology, my advice would be to learn from 3M Post it Notes. This is a classic case study of how a failure (glue which was too weak to stick) became a massive new market which did not exist before. The key thing that happened here was that what led to the success of the product was the company giving out lots and lots of these products as free samples. People were free to invent the way they wanted to use this product – and I think the result is that now you would be hard pressed to find any office which does not have Post it notes.

If you have come up with new a new product or solution, my advice would be to ensure that you have allowed enough budget to just give out a lot of your new solution. And let people to play with it. The most amazing thing about new technology is that we all different reasons for using it. The classic case is the iPod and the iPhone. The way the iPod was sold to me is very different from the way I perceive the benefits. I travel a lot and I like the idea that I can take my entire music library with me wherever I am.

When I run my sales training courses, one of the key things I try to teach is for sales people to appreciate the difference between knowing what you are selling and what your buyer is buying. This is very important when selling a new solution. If you let the buyer ‘get it’, you are more likely to get a sale!

Happy playing with technology

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When I invested in Amano, the founders told me that they found inspiration from a chain based in New York called Cosi. I was walking around the World Financial Centre (next to Ground Zero – which was an emotional experience) and came across a Cosi store.

It really like was meeting the mother of the girl I have fallen in love with! I was pleased to see how busy it was and how it looked very similar to Amano and yet was definitely an American version of it.

The great thing about this experience was that it brought to life a couple of blogs I recently wrote; one on national advantages and the other on not having an idea. Amano is a great example of taking a look at what New York has to offer in terms of fast food and then seeing what needed to be done to adapt it for the UK market.

I then went to a great restaurant which is built under a bridge next to the Grand Central Station (Pershing square). Those Americans! They see a place in a prime location and carve a restaurant out of it! Mind you, I am pleased to say that around the London Bridge area (where I live) they have made the most of the arches there with a Nando’s (why does that business work?) and a Wagamama (yum!) creating good sites.

Finally, I would like to share a great experience I had on Sunday morning. Americans are a very friendly bunch and it is not strange to just get talking to complete strangers. When I was in a Starbucks (same one as I wrote about on Monday’s blog) I spotted an accent which was definitely from Liverpool. I got talking to the person and we ended up having a good conversation. We are meeting tomorrow to discuss some business.

The person told me that there was nothing strange for him to pitch his business to a stranger in a coffee shop. He was ready with a great elevator pitch – and his business cards. People who know me in the UK would say I am a friendly guy and I will go up to anyone and talk to them. But I have never had anyone ready to pitch to me in the UK by random.

Again, this is something that seems to be engrained in the US psyche. Every meeting with anyone is an opportunity so you should be positive and prepared. In the UK we are more reserved. I do like that in places but when it comes to business we do ourselves serious damage by not being ready 24/7.

I want to back businesses where the owner has sufficient enthusiasm (can we stop using the word passion? – which means either the suffering of Christ or a strong sexual desire) for his or her business.

Regular readers will know that I am in Amano on a Saturday morning – perhaps you could say hello and pitch your business? But that just wouldn’t be cricket would it?

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Calorie counting in NYC

So after my political ‘column’ about New York yesterday, I hope you find my observations today more useful. I hope that I spark off some ideas for you to think about in terms of your own businesses.

As I have mentioned in the past, New York seems to be ahead of the curve when it comes to food. If you are contemplating starting a chain of food stores, it is always worth a visit to New York to see the latest trends.

By the way, you may think that now is the worst time to start a food business. I would just say that Pret started at the height of the last property recession. It took off precisely because there was a glut of cheap properties available at the time and it was being offered very good deals on properties. So who knows…..

My first comment is around a change that has taken place because of the law. I noticed that a Starbucks (yes I know it shows a lack of imagination to visit Starbucks in the USA!) in NYC had a full list of the calories with every item for sale. I learnt that a law has passed in NY that requires the calories to be displayed on every item for sale.

This is not a nationwide measure – and in Starbucks New Jersey – they did not display the calories. But I think the rest of the nation will follow in the footsteps. Early indications suggest that sales of low calorie items are significantly up. I do not know how calories are measured, but there must be a new and fast growing market in being a ‘calorie auditor and consultant’. Again, by the way, do you know what a calorie is? I was fascinated by the answer; it is defined as the energy required to heat one gram of water by one degree C. There must be a business here?

I then went to ice cream store called – Cold Stone. It was a fantastic experience. Basically, they do a tailor made ice cream service. You start off by choosing a base ice cream such as Vanilla, Banana etc and then you choose lots of different toppings such as chocolate chips, walnuts, jelly babies, M&Ms, raspberries etc. What they then do is ‘bash’ the toppings together and blend it into the ice cream and the result is simply fabulous. I do think that the idea of the ‘Subway’ process is set to grow. You choose a base (say porridge or a smoothie base etc) and then you choose lots of different toppings to end up with a unique product but from a ‘factory’ process.

I was impressed with the product and the process. Time after time feedback shows that what consumers are looking for from retailers is ‘theatre’. Amano (give me a break – it has been at least three weeks since I have mentioned them!) has a stone oven which provides theatre. Process is often just as important as product. I think this is what works so well for Wagamama for instance – seeing the chefs at work is brilliant.

If you like these ideas – and are going to pursue them – feel free to give me some shares in your business. That is something that New York has also inspired me to do – not to be shy in asking for what you want!

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When I was at school I used to love taking parts in Debates. I was a good speaker and I seemed to enjoy standing up in front of lots of people and just talking - perhaps this explains why I enjoy writing a blog!

One of the ‘rules’ of debating is that you are not allowed to introduce new material into your closing remarks at the end of a debate. It is a great discipline to get into as it forces you to make your strong case at the right time.

I have noticed that many people who pitch business plans could benefit from using the same discipline. There is this idea that you reveal your ‘killer fact’ at the end. Or you close with a ‘bang’. I hate this style I must warn you. Speaking to a few angels - they don’t care for it much either.

This style makes me feel stupid. I end up spending a lot of my time during the presentation focused on the wrong area! If you have a trump card - play it at the right time, which if you are pitching to an investor is towards the middle.

The structure I like is

1. Who you are (very briefly)
2. What is your business (explain it in terms of what you do for your customers)
3. How you make money (if this takes more than two sentences - forget it)
4. What makes you qualified to do this (In terms of who are the management team - spend some time on this)
5. The journey (how you got to this point)
6. The vision (repeat a bit from point 2)
7. The proposal

This should take no more than 15 minutes

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I was asked last night at a function I was at, what kind of sectors I like to invest in. I did reply that I looked at management teams rather than sector approaches. But the question did get me thinking, and I asked myself, if I was giving advice to an entrepreneur now in terms of what areas to position the business in, what would my answer be?

Well, below are the results of my thoughts. They are just my thoughts and I will add to them as and when I do my ‘screening for ideas’. If I could predict the future……..

1. Anything to do with Alternative Energy. I am really bullish about this. Because of the lifestyles we are increasingly leading, the demand for energy is going to be increasing exponentially over the next half century. Alternative and less harmful forms of energy have got to be found in the future. I think any business which can generate energy from renewable sources and sell it at a profit is very well placed for the future
2. Lifestyle management. This is going to be an area of huge growth simply because of the lives we are increasingly leading. We are getting busier and busier and yet wish to do more in life outside of work. Companies which can allow us to ‘outsource’ some of our routine will do well from a revenue point of view. My issue with this area as an investor is that as it is a service based business, margins are very tight and barriers to entry are very low (if in place at all). If someone can think of a way of truly scaling up this area, whilst retaining the personal touch required, they will do well (and let me please see the business plan)
3. ‘Hire businesses’. I have been amazed at the success of car rental businesses in London such as streetcar (I am a member and I love it). www.streetcar.co.uk Living in Central London, it simply does not make sense for me to own a car. However, I do have access to a car if I wish to have one on an hourly basis. People are becoming increasingly sophisticated and will question the wisdom in owning expensive assets they rarely use. Just as timeshare has proved so popular with Holiday homes, I am sure other items will soon see the merit of temporary ownership. Ladies shoes (Do you really need that many pairs all the time?) Handbags, watches, pens, expensive dresses etc - there have got to be business models here!
4. Internet Protocol TV. I think (humble opinion here) that we have yet to see Andy Warhol’s saying that we will all be famous for 15 minutes come true. We are rapidly approaching that point - with programs like X factor leading the way. However, I think in the very near future, everyone who wants one, can have their own TV channel on an internet site. Why look up business angel blog - when you can have a dedicated TV channel from me? (If you think advertising is getting tough now - wait till this era unfolds!). The money will be made though not by the TV ‘owners’ but by the companies that provide services for this space.

More to follow - what do you think will be the businesses of the future?

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In a recent business angel blog, I suggested that now was actually a good time to start a business. I do though have some general words of advice for managing through the current turmoil.

My advice for businesses would be

1)     Have a great relationship with your bank manager. Banks have contracted balance sheets at the moment and will be cutting down on their lending and will be looking to offload loans to any business that looks uncertain. (My fund is certainly benefiting from this!). You really do need to try and have a great relationship with your bank. Keep them in the picture at all times. Ask for advice, explain your plans (but be cautious not to reveal bad news without having solutions to offer) and make them feel ultra comfortable. On the commercial side of banking, you will be amazed at how much authority individual managers still have.

2)     Preserve cash. Cash is always king - but at the moment it is the Emperor! Really hold on to as much cash as you can. Manage your outflows and cut down on anything other than vital spending.

3)     Do not cut back on sales or marketing spend. Customers need to know that you are out there. Advertising makes a bold statement about your belief in your business and the future. I consider it a vital spend for any small business. What you do have to do is be certain of the return on investment on marketing activities. This is what I like about Google advertising. Because of the downturn you can also get great deals on placing adverts.

4)     Make sure your service is as close to a mandatory spend as possible. The items that will be cut back on over the next few months will be discretionary spend. There are simple exercises you can carry out (email me for them) to get your service moving away from a pure discretionary spend towards a mandatory spend.

5)      If it is a discretionary item or service, make sure it is really clearly defined. What exactly is the consumer getting through purchasing your service? Clarity is what you need to sell easily. I am amazed at how complicated so many businesses make it to understand what they are selling and who they are aiming at.

6)     Develop nerves of steel!

Best of luck!

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Given the massive turmoil in the markets over the last few weeks (and days), I have been amazed at how many people have recently asked me what if any, impact the event of the last few weeks will have on entrepreneurs. Here is my humble opinion.

One of the options I studied when I was reading Economics at the University of Leeds was The British Economy in the 1930s. At the time, it simply felt like one of the easiest subjects to read, but I remember some lessons from that course which is sharply relevant to today’s economic circumstances.

The 1930s started with a bang after the Wall Street Crash of 1929. The world was thrown into economic chaos and this gave birth to the scourge of Fascism and Nazism across Europe. What was interesting about Britain in the 1930s was how there were two economies in operation; the real economy and the financial economy. The real economy actually performed very well during the 1930s and we are at the moment witnessing what I would call a decoupling of the real and financial economy again.

I am bullish about the future. I believe that this current crisis has been more severe and quicker than any of us could have anticipated. However, unlike other economic downturns in the past, I think that we will come out of this one quickly and robustly. This is a great time to start a business, but you have to be careful (as always).

The price of oil has come down sharply in the last two months from $147 a barrel to around $92. The Olympics are over and Chinese factories are producing output at full capacity again. House Prices around the world are coming down sharply and as a result people feel ‘poorer’ and less inclined to spend money on discretionary items. These three factors combined will have a big deflationary effect, which will mean that Central Banks around the world will soon be able to cut interest rates. This will help businesses and consumers alike and I think will help get the economy moving again.

There is also ample evidence that people are spending money on well placed products. Retailers such as Greggs (a mass-market fresh bakery chain) and Thorntons (a middle-market chocolate retailer) are doing very well at the moment. Surprisingly, holiday bookings in the UK are also doing very well at the moment, especially holidays which cost more than £800 ($1500). So the lesson here is that if you have a differentiated offering, you will get the consumers. Know your market and speak to them clearly.

Now is a great time to start a business if you are realistic and start small. If you look at any business cycle, most of the great businesses to emerge have always started when the conditions appear to be adverse! In tomorrow’s  business angel blog, I will give some tips on managing a business through the current turmoil.

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I meet lots of would be entrepreneurs who want to start a business, but are just waiting to have an original idea. I have covered idea generation before (see STEEPL) and I have worked with a guy I consider to be a creative genius - check out his blog www.creativityintheboardroom.com who is always generating new ideas for his clients. But I also want to talk about the strength of simply ‘reversing’ an idea.

I met the founders of Café Nero a few years ago and was struck by how they had come up with such a strong brand and vision for their business. Café Nero is a large chain of coffee shops based primarily in the UK which is doing very well at the moment. The founders explained that their idea came simply by looking at Starbucks. They realized that for every Coke, there is also a very profitable Pepsi. They decided, in their own words, “to become a Pepsi to Starbuck’s Coke”.

They looked at all the things Starbucks was and made a list

• American
• Milky coffees
• Played jazz type music
• Non smoking
• Heavily machined - so low skilled staff could work there
• Mainly a cake/ muffin play with your coffee
• Prime locations

They then simply made Café Nero opposite from all of these characteristics. (The smoking one now no longer applies as it is now illegal to smoke in places of work).

The point from the above is that you can create a very successful business model by simply differentiating yourselves from an established operator. Providing there are enough customers in the market place, this is a great strategy to pursue. And if those differentiators are what customers want, they will pay a premium over the existing provider. The PC v Apple computers are a great example of a profitable niche.

I passionately believe (simply believing doesn’t appear to be good enough these days!) that great ideas exist all around us. The challenge is to think big!

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I was having a chat with a business colleague of mine and between us we had a great idea about how to improve some of the businesses that we were jointly involved with. The problem was the idea existed in a ‘vacuum’

I recalled an anecdote to my friend who liked it and I hope you like it as a cautionary tale about some of the problems of having a great idea. It is not meant to be a negative business angel blog, it is just meant to illustrate the need for a dose of reality in great idea generation.

There is a happy community of mice that live in a lovely home. Sadly for them, their happy nirvana is disturbed when a cat moves in to the home. Life is made intolerable for them all. After a while the mice get together to do something about this imposition to their way of life.

After hours of discussions, one of the mice had a magic moment of inspiration. “Why don’t we simply put a bell on the neck of the cat? Then everytime the cat comes anywhere near us, we will be able to hear her approaching and hide”.

Brilliant idea the rest of the mice agreed. The idea was put to a vote and passed. The mice were all celebrating the brilliance of the idea before a wise old mouse asked “who will put the bell on the cat’s neck?”

I apologize if you feel this anecdote is patronizing. The point of the story is that it is all too easy to come up with great ideas. “Thinking outside the box” is fabulous - but sometimes the only tools you have to solve a problem are firmly placed inside the box!

I once saw a great business idea (it was over five years ago - so I trust it is OK to mention it now). The plan started off by telling me how many people go snorkeling and scuba diving every year to see exotic fish. (I myself simply adore snorkeling). The idea was brilliant.

Why not create a massive ‘swimming pool’ just outside London? The pool would be filled with sea water and filled with coral and have some sunken ships. Finally, you would bring thousands of fish to the pool.

As an idea it is compelling. I could see myself visiting the centre occasionally. The problem was that the proposition would not cost millions but a billion. You could never have made any money on it. Even the government could not have justified this expenditure (Although I believe the United Arab Emirates are trying something like this!)

The lesson is - make sure your idea passes the common sense test. If not, seek investors in the UAE!

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One of the very first blogs I ever wrote was about the scanning the environmental landscape. I wrote about how using STEEPL can help you validate an idea.

The first process I go through when I look at investing in a business is to validate an idea. I simply use the STEEPL framework to see if the forces shaping the environment are in favour of the business proposal in front of me.

This week I made an investment in a fund (something I rarely do) and I thought it might be helpful to explain the process I went through in making the decision. I have to emphasize that this business angel blog should not be considered as investment advice. And to avoid any hint of bias, I will not name the fund I have decided to invest in as that would be wrong.

For the last few months, there has been one story which has been dominating the business agenda; the rising price of oil. The long term trends suggest that the demand for energy is increasing. The International Energy Agency has suggested that by 2030, the rise in demand will be around 50% of current levels. At the same time, the supply of oil, coal and gas is finite. Long term prices are going to rise.

However, there are other concerns on the energy agenda. It struck me when candidate Obama said that he would work to make the USA independent of foreign oil within 10 years. The recent trouble in Georgia has again highlighted the issue of energy security in terms of the reliability of dealing with a newly resurgent Russia.

All of the above (STEEPL) analysis got me to look at alternative energy as an area for investment. The issue then was would I invest in individual businesses in this space or in a fund? The concern for me was that although I have a good feeling for the long term trend, when it came to which sector (wind, solar, geothermal, biofuels, efficiency etc) I had no idea. The area is a very technical one and I felt that I do need expertise in making the right decisions.

So I then looked at funds in this area and assessed the different fund managers who operate in this space and then finally made my choice and decided to invest in a fund.

The reason for outlining this process was to demonstrate that as an investor you go through a funneling process. You start out looking at wide angles and then successively narrow your selection criteria. If you are pitching to an investor, you need to show that you understand this process and make them feel comfortable that they are backing the right skills within the right sector within the right long term growth area.

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