Business Angel Blog

At University I read Economics and the courses that fascinated me were around managerial economics. One of the most exciting courses for me was looking at the relative industrial decline of Britain since the start of the twentieth century. The usual suspects include Trade Unions.

There was though a very interesting theory put forward though that the problem with trade unions in the UK is that they have always been too weak! The argument goes that in Germany where trade unions have management representation and see themselves on the board of companies, union leaders are able to help companies, because they have access to all the information and realise what must be done. It is also fair to say that along with most places outside of UK and North America, the German culture does not have the same obsession with maximising shareholder value.

The thought is that if companies find it hard to adopt hire and fire policies, they will have to take longer in the recruitment process, they will have greater incentive to train and to be very productive. It does seem that ‘left-leaning’ economies like the Nordic countries have much higher productivity than free-market economies.
What interests me though is the role that Trade Unions have played in recent innovations. Fax machines only really took off during a large scale postal strike in the UK in the mid 1980s. (By the way I would really like to meet the sales person who sold the first fax machine – that is a sales person!)
More recently in the US, the screenwriters in Hollywood went on strike for a long period of time. Of course television needs to carry on and the studios response set in motion an innovation we are all tragically living with now; reality TV. It is cheap to produce and needs no writers. Of course we had reality TV before the strike – but it was the strike that really got it to take off.
So lets see what innovations come out of the BA strike!

As you can probably gather from the title of this blog, I am in Halifax Canada at the moment. I am at my best here (and my next Blog – Momentum looks at what drives this). About six weeks ago, I ran the second “From Mind to Market” course for around 12 businesses. An innovation on this course was that after the course, each business would get one hour of coaching. This week I visited the companies to do this. One of the CEO’s said that he thought I had the best job in the world – I agree!

I thought it might be interesting to share some of the key learnings from the coaching for other entrepreneurs. The interesting thing was that each business had very different issues and different personalities – but were all looking for high growth.

1. If you are in a declining business or a sector where margins are being eroded, look at a niche within that sector that is growing. (Sounds nonsense but just try it – what is growing within your industry?)

2. Always ensure you have the skills to deliver in your chosen space. Profitable business is always about repeat business (you rarely make money in a product or service offering on the first sale – doing a great job is necessary)

3. Stick to Marketing/ Selling your solution – don’t try and sell your industry. (Let the association do that and support them)

4. Don’t do market research which is costly unless there is a significant capital outlay required before you can commence business. It does not make sense to spend time and money on this – if you can “just do it”

5. If you are a start up – don’t engage in channel or distribution partner strategies. The effort and skills required to motivate partners is not feasible for a start up

6. Price your solutions to make a profit! (obvious but how many times do we have pricing which reflects industry ‘norms’ rather than this truth?)

7. Control your costs – profit is sales less costs.

8. When you are growing fast – remember it is really draining on cash. Growth brings a difficult cash flow situation. Most businesses that go bust do so when they are growing! FACT

9. Borrow ideas unashamedly

10. Look at what employment solutions are available through the public sector (in every country there is bound to something to that encourages employers to employ people) Use these schemes. Especially if you are looking to engage a new skill set – or you are a service business heavily reliant on labour

11. Really understand what your customers are buying – not just what you are selling

There were some more key learnings as well – but they were a bit too specific to go into here.

I do hope you find this useful.

The economic environment we are in is a big determinant on entrepreneurial activity. I am a believer that start ups which start in a recession can often do better than companies starting up in a boom. I do think though that the UK economy is going to be heading into another recession/ slump very soon.

It is important that entrepreneurs recognise the circumstances that they will be trading in. Starting in a recession is very different from trading into a recession.

My views on why we will go into another recession are just mine – and better placed people than me, will no doubt disagree. Firstly, the recovery the UK is going through at the moment is very fragile and although inflation is higher than the target range, it is predicted to fall sharply.

Public expenditure is coming down sharply in the UK. Some cuts (£6bn) have already been announced and another set of cuts will be announced on the 22nd of June. This will of course negatively affect total demand in the economy. Taxes are also set to rise, and if VAT goes up as widely predicted to 20%, it will have the effect of adding 1% to the inflation rate.

Sterling being very low at the moment against the US$ and Euro also adds to pressure on inflation (by increasing the price of imports). The ‘problem’ with this type of inflationary pressure (as well as with VAT increases) is that they are shocks to the inflation rate and don’t represent excessive demand. Nonetheless, the Bank of England which is charged with maintaining a low inflation rate may need to raise interest rates.

I hope they do not raise rates as I think demand is going to be considerably lower in the economy without a rise in rates. An increase in the interest rate would precipitate a recession.

The point of this blog is that if you are looking at starting up – now is a time to be a bit more cautious than normal. You may be better off starting in a year or two. Equally, if you are trading already – just be careful, we are most certainly in for a bumpy ride

I love being busy. I find I get a lot more done when I don’t have time to stop and think about what needs to be done (which means my effectiveness is not perhaps what it should be – but that’s another blog). I find that when I am not busy – procrastination sets in.

There are many great jokes about procrastination. “I always find its best to procrastinate when you have something to do” would be my favourite – or the T-Shirt which said “ Top 10 reasons to procrastinate. 1….”

I have always needed to come up with clever ways to avoid doing nothing. The impression people always have of entrepreneurs is that they are always busy and they manage their time really well; my experience (now working with just over 100 start ups!) is that most entrepreneurs are really bad with their time management and do indeed procrastinate,

The really bad habit for me was working from home. I could not do it. I would find it too tempting to watch the Jeremy Kyle (a poor version of the Jerry Springer show). It really is an awful program – and he is the personification of a parasite, but I had to watch it. And then there are those wonderful crime programs on the Hallmark Channel like Monk, Law & Order (both Criminal Intent and SVU: Special Victims Unit). I could so easily spend all day watching TV – and not feel bad! Here I go again procrastinating…

Anyway, at the start of this year I got myself an office and started working with someone. This has seen an amazing increase in my productivity – I have to be in the office by 9am – the hard thing for me is starting work. Once I start, I really enjoy the work and can easily stay till about 7:30 in the evening. I also find that working in an office means that when I am home, I can switch off (although iPhones don’t help!)

Other things that seem to work for me are making lists of what I need to do. It is not that I have a problem remembering what to do, I just really enjoy ticking off things from a list once I have done them. (If I could have my way, I would even list things like brushing teeth, having lunch etc – just so that I get more easy ticks). And hence I still need old fashioned paper and pen. Point is whatever works for you is good.

Finally, my new business partner in Canada (great to have you on board April) told me about this concept she sometimes uses called The Life Manager. If you employed a Life Manager and you were reviewing how well they were doing managing your life/ your week/ your day, what marks would you give them?

Well – you are that Life manager and if you are not giving yourself top marks – why would you continue to employ them? This concept is mainly used with weight management – but I do feel that it can so easily be extended to your professional life. Like I say – whatever works for you is good. Now- can someone tell me how to get myself motivated to go to the gym?

I am spending about one week a month working in Canada. Whilst there, I work with many start ups and I have started angel investing in Canada. There are no notable differences between the issues and the challenges that start ups face no matter where they are located. Sadly, I have though noticed I am giving very different advice in the UK to start ups wanting to obtain support or contracts from government.

In the UK my advice for a start up is to stay well away from Government (any agency of government). In Canada, I would advocate the company to get involved with a government agency as soon as possible. Why the difference?

For cultural reasons, Canadian government staff tend to be of a much higher calibre than the people I have come across with government agencies in London.

The sheer hard work required to win government work in the UK even for relatively small value contracts means that I really think it is a flawed strategy for a start up to try and seek government contracts.

In the UK, I recently looked at pitching for some work which I felt I would be well placed to do but once I looked at the requirements involved in pitching, I decided it simply was not worth the effort to go for it. The risk/reward ratio was skewed against me.

For a start, I would have to partner with another organisation that had at least a £3m turnover. The paperwork required would mean that at least two members of the team would be fully occupied for at least two weeks. And as a business that has not won this type of work before, I felt that the effort was not worth it. Compare this to my Canadian experience.

I came up with an idea to help Canadian companies and after writing a four page proposal for a local government agency, it was accepted and I have started working on this project.

The people I have worked with in Canada seem more commercially aware – they ‘get it’. So, I do find it ironic that in the current climate when the British Government is trying so hard to try and support small businesses and start ups, that they do not start closer to home! They should temporarily lower the high barriers that prevent companies from getting government work. And they should actively discriminate against the same old companies that seem to win most of the big pieces of government work.

I was at a very nice lunch last week hosted by my lawyers (and who said there was no such thing as a free lunch?). The lunch was simply wonderful and during the conversation I naturally explained what I was doing in Canada, and that I now spend at least one week a month there. This then led one of the people at the lunch to say I was a great example of an entrepreneur.

Of course I was flattered, but in all honesty I do not consider myself an entrepreneur. I would describe myself as someone who just stumbles from one thing to another and hopes that one of the things I stumble across works. As a very successful angel investor described his investment approach “spray and pray”.

The problem with the above is that it does not fit into the description that most people have of entrepreneurs or successful investors. I have often sensed the disappointment in business students when I am doing my talk at St Mary’s University when I explain that the route to where I am now was littered with accidents and very lucky coincidences. What a lot of us want to hear is that there was a plan and some positive thinking affirmations.

I personally have a real thing about people calling themselves an entrepreneur. I think it is for someone else to call you that. Most people I know who call themselves entrepreneurs are rather like waiters in Hollywood who call themselves actors. It means nothing to me.

If you had an enterprise which had launched or was running – you would talk about that. Calling yourself an entrepreneur implies you do not have one thing to talk about.

Judging upon whom I am talking to, I will describe myself either as a Salesman (my preferred description), Fund Manager, Angel investor, Blogger (is that a valid job?), Business consultant or trainer. The point is that I would never call myself an entrepreneur as it ends up meaning nothing other than tell the person I am describing myself to – that I have nothing substantive to point to. And trust me – I never want to invest in someone who describes themselves “as a bit of an entrepreneur”.

I was at another lunch recently where I asked someone what they did. The answer was “I run several businesses”. She did not know who I was at that point, but she had lost my interest straight away. I am involved in several businesses but I only run one – Help with Sales. I am sure some of you will disagree but I find it very difficult to imagine someone actually running more than one business.

Why do people do it? Just remember that great saying “money talks, bullshit walks – but wealth whispers”.

I have now made 24 investments. 20 of these could be described as a pure Angel investment, where I simply wrote a cheque to the company and that was the end of my involvement. The returns show that my investments in these companies have been very poor. (As in I have lost a lot of money). The most successful investment I have made to date is Flight & Partners. This is a business I co-founded and own a 25% stake in. What is the one key difference between all of these investments; People.

What I have learned from Flight & Partners is that the reason for the company’s success is the quality and experience of people. A key thing though is the relevance of the experience. I have been involved in many enterprises that have not been successful but I would like to believe I am good. The reason why I think Flight & Partners worked (and is working) is it allowed talent to focus on what they are specifically good at.

The key to Fund Management is the ability to raise Funds and the ability to manage them. My contribution to the Fund Management was limited to bringing the key parties together. It was the ability of each of the other three partners in their particular fields that made the business happen.

In many other businesses, you see talent being recruited and deployed and yet the results are often disappointing. With hindsight, using my own personal experience it is because talent is being used in a field which is not the area of expertise or relevance. I do believe very strongly that you can train business managers to become better general business managers. But at the start up phase (first year at least) you need people with strong credibility in their chosen field.

With coaching, training etc you can become a much better business person. That is you can be trained into making better decisions. It does not mean that you will always get it right; it just means you give yourself a better chance to get the decision right. It is like going to University. Very few graduates ever use their subject knowledge in their career but the degree has hopefully taught them how to organise their thoughts better and make a judgment on a sound and logical basis.

There is a lot more to say on this subject and I will of course come back to this. What I have learned though that simply backing a business idea – no matter how good it is, does not work. It is always about the people. So questions to ask yourself when launching a business include;

1. Do I have highly relevant skills in the chosen field of business?
2. Do I have a team who have shined in this particular field?
3. Have I demonstrated an ability to be a general manager rather than a functional manager? (as in being a project manager rather than just an IT/ Sales/ Finance specialist)
4. Do the team bring together all the skills and experience needed to manage the challenges of a start up situation?
5. If not, is there a pool of Non-Executive but motivated talent available?

Best of luck.

I have written about this before, but since my last blog on this subject a lot has changed and from the feedback I have had, this is a very big issue for a lot of entrepreneurs out there.

You do need to have a good team around you giving you advice and helping you make connections with other companies that can help accelerate the growth of your business. Having the right people on your board can also help you raise finance (either equity or debt).

The problem is that it is very hard to find good people who will agree to sit on your board. Looking at the way some of the Non-Exec’s performed in many of the companies that I had invested in, the performance was not great.

To be fair, it is a very hard role to perform. Many NEDs for small companies are paid in equity only. The problem with this is that it is human nature to prioritise work that pays money rather than work that may eventually pay out. It is unfair for an entrepreneur to assume someone else will share their enthusiasm to the same level for the business. If the Director has experience they will have seen a fair share of failure and they will not be so easily persuaded about the value of paper (shares).

I can understand the obvious desire to preserve cash and pay a NED with share, but the big advantage of paying cash is that if the NED is not performing to the level that you hope and expect you can remove them from the role. It is common to see shares being issued – but they only get ‘vested’ after three years or so. The problem is that if you do fall out with an NED, it becomes difficult and complicated to sort this out. Time that you do not want to spend on it!

Always get references about NEDs. Do not believe the hype about how great someone is – always ask someone to prove it. You would be amazed at what people will be prepared to tell you if you ask them nicely.

I for one do not perform the role of NED as I simply have too many other projects on the go. I always had it in my mind that until I got to the age of 40, I would be too young to be a NED.

I am going to be 40 this August – so I will unashamedly shopping around for NED roles then! But till then, make sure you spend a lot of time appointing your NEDs. Most of all ensure not just that they are aligned with your motivation – but you understand theirs.

Some of my regular readers will notice that I have been reflecting a lot recently about the investments I have made and what I look for in new investment opportunities. This theme brings me onto key people in a business. It may surprise you that I think (and you can dismiss my thoughts as I seem to be in a very small minority) the most important person in a business is not the entrepreneur but the No.2

I have come across too many great entrepreneurs; that is people with vision, flair, leadership skills and salesmanship, who have never delivered so much as a single dollar in profit. What distinguishes these people from successful entrepreneurs is having a great Chief Operating Officer or a great No.2

These are the people who are equally entrepreneurial but are able to understand what needs to be done and when (and using how much resource). Consistently I have noticed that good businesses have a really good operator running the business.

I have also noticed recently that some ‘entrepreneurs’ I come across are looking for that person. Recently I met someone who thought they had a high profile (although diminishing fast) and they were looking to partner up with someone to be the COO. The deal they were offering was a 50-50 partnership. Their contribution to the deal would be their ‘brand’ and that would be it. Sorry – that is a bad deal. The only person I would team up with on that basis is someone like Richard Branson who really does have a great brand and will not let you ‘borrow it’ unless he is convinced it has a good chance of succeeding.

And yet in terms of market values – the entrepreneur seems to be more highly valued than the COO. It is probably the same as a band – the singer is always the one with the glory – although the talent is with the songwriter/ musician.

If you come to me with a business plan, I need to know that you have a great COO with you. Someone who has a proven ability to get things done. This is not the same as a person who can win business (very important as well – and my key skill) but someone who can turn the business won into profits and cash.

I would go as far as to say that I would find it easier to replace a CEO than to find a really good COO. The other curious thing I have noticed is that a business can survive without a CEO – or by having the CEO replaced by a COO. But a business rarely survives when they lose a COO and don’t replace them quickly.

Entrepreneurs have an uncanny ability to keep going and be visionary. Most of the nation collectively has this ability at the turn of the year. But now that we are just one month into the year, most of the will power has been sapped. McDonalds is busy again, cigarette sales are back to normal and thankfully gyms are empty again (or so my friends tell me!) This is what separates entrepreneurs from everyone else – ‘bouncability’

I always find it depressing that the ‘worst day’ of the year is the third Monday of January. The thing I find depressing is that it is so close to the beginning of the year. I love January – even though the weather has this year sorely tested that love.

The thing I admire most about entrepreneurs is that never ending enthusiasm they have for projects and they are living embodiment of that quote “success is how high you can jump from your last failure”.

So how do you keep going?

1. Never stop believing in yourself. Really tough at times. Over the last few years, I have had a real roller coaster of a journey with business. My self-belief took a knock – but never a dive.
2. Remember that the line between success and failure is very thin. Sometimes luck and timing does play a part in your success. My biggest success to date is Flight & Partners. Yet this business came about because of huge dollops of luck. To deny this is arrogance. But yes, lots of things happened to ensure that when the opportunity arose I was able to take advantage. But in that sense we make ourselves willing recipients of luck!
3. Keep yourself fresh. I find going to the gym a real struggle and mostly I fail! But it is a proven way to keep your emotions in a good place. Other ways include reading new books, cooking something new, going out to watch a movie. Anything will do.
4. Work with great people. The best thing I learned from the F&P experience was that when you work with truly great people who are experts in their field – you get the leverage effect. Your time is the most precious resource – so spend it wisely
5. Make sure you meet your friends on a regular basis. I always feel recharged about life after a good chat with friends.
6. Most of all, be honest with yourself and make sure you remain enthused about your business. I do think that sometimes we feel compelled to carry on supporting something, long after we have lost its allure. If you are at this point, find someone else to run it.
7. But the best tip I would urge you to follow is to set yourself monthly resolutions. Hope springs eternal! Just like New Year resolutions lets you set aside the failures of last year – and start again, why not just do it on a monthly basis.