Expanding in 2018: Should you focus on growth or profit?

Expanding in 2018: Should you focus on growth or profit?

Extra funding can be a huge boost for any small business with a burning desire to expand. But how should you spend an influx of cash? Should you go for growth or profit?

Scaling up can be a make-or-break moment. Perhaps your launch went well and now you’ve got some traction? With a well-designed core product or service, some encouraging financial figures, and a thriving customer base, you’ll be on your way to attracting a second round of investment. But should you focus additional funding on growth or profit?

It’s good to have a clear idea of whether you’ll use funding for growth or profit before you even start approaching investors.

 

Going giddy over growth

Broadly speaking, young business bosses usually look for growth because they need to get known, and are maybe challenging established players, if not industry assumptions. This is understandable.

However, focusing on growth does not mean the business model shouldn’t be profitable, or that the business should give its products or services away for the sake of reaching as many customers as possible.

There’s also the temptation to grow by starting to own more things and employing lots of salespeople and other staff on permanent contracts. Then you need a lease on a larger premises, heftier insurance, HR people, lots of IT and much more. This might feel good at first. But in reality, you’re narrowing your options for the future and increasing your liabilities.

It’s also possible to run into problems quickly. Without orders, you’ll be like an empty machine. With too many orders, the operations side of your business may feel overwhelmed and unable to keep up with the delivery of products or services.

 

Note: this post has been published as an article on Real Business, where you can find the full version.

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Big versus Small: Which is better?

Big versus Small: Which is better?

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Towards the end of last year, I was invited to FT Innovate, a flagship event organised by FT Live, the global events arm of the Financial Times.

It was an intense two days of presentations, meetings and discussions. I met many interesting people and attended a dinner with the founder of Evernote and the CIO of Eurostar. I also joined a debate hosted by TableCrowd.

The buzz was around ‘Big vs. Small: which one is better?’ For me, this is always a hot topic, because I left the corporate world to focus on growth strategy for SMEs.

The debate was all around how companies of any size generate, propagate and scale innovation. Some familiar themes emerged …

Big companies have the availability of resources, but they face the pressure of the quarterly results, and innovation can sometimes be stifled by corporate processes. In contrast, small companies can engage with great new ideas more easily, but struggle with getting expertise and how to scale up without sizeable investment.

It was a good discussion. But I felt we had missed something.

Afterwards, I wondered: Are we simply accepting the traditional ‘rules’ of the game? If you win in one way, do you automatically lose in another? And what about the medium-sized companies? Are they forever doomed to be caught in the middle – beaten by the smalls or eaten by the bigs?

If you were a small company with big ambitions, how could you go about growth in a better way? Is it possible to get the best of all worlds?

I think the answer is ‘Yes’ if you take a step back and consider three simple truths.

Truth #1: Success isn’t measured by what you own physically

Unless people have a burning ambition to build an empire, then success shouldn’t be about size in terms of buildings, people or even product ranges. Success should be about growing, profitable revenue.

In effect, you could be small business – let’s say 10 people – and be astonishingly profitable without needing to add to your headcount or invest much at all in new equipment.

Truth #2: Success is often linked to being very good at one thing

Can you sum up what makes your business special in just a few words?

It’s much better to do one thing exceptionally well, rather than being a mile wide and an inch deep. Often it’s helpful to get some outside expertise to help capture your USP (unique selling point) – and revisit this from time to time. Otherwise, it’s very easy to lose focus and drift when you start to grow. Staying fairly small – in terms of your core team – can keep you focused on what you do best.

Truth #3: Other people are willing to handle 99% of the cost and risk of investing

Cash-flow is the lifeblood of smaller companies. But as you start to grow, there’s the temptation to start owning things and employing lots of people on permanent contracts. Then you need a lease on a larger premises, bigger insurance, HR people, lots of IT and much more. This might feel good at first. But, in reality, you’re narrowing your options for the future and increasing your liabilities.

Today, virtually every kind of service can be purchased on a pay-as-you-go basis. And the list seems to be getting longer: office space, cars, people, telephony, IT hardware, software, hosted services, videoconferencing and more. Simply let other people invest in these things and make them brilliant. Just pick the best of them rather than try to create or own them. Then simply only pay for what you use, month by month, scaling up and down easily. That’s optimum efficiency.

What will the small-big company of the future look like?

In the extreme, I suppose it might look like a large company in marketing and financial terms – a brand with a massive turnover, recognised within every home and business.

But behind the logo, there might simply be a handful of innovators and their intellectual property. They might not even own a desk between them. If they want to change direction by 180-degrees, they can – or they might set up other ‘small-big’ businesses on the side (which entrepreneurs love to do).

As a result, they combine that ‘small company’ innovative spirit and agility with those ‘big company’ resources and scalability.

 

Note: the original post dates back to the beginning of 2016; it’s been recently published as an article on MyEntrepreneurMagazine.

 

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The entrepreneurial vision: built to last

The entrepreneurial vision: built to last

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“You don’t always need an exit plan – especially with small companies, where life and business are really interwoven,” says Stefano Maifreni, founder of business-expansion consultancy Eggcelerate. “It all depends on what you want to do: do you want to conquer the world, or do you want a decent life with no real dream of being the next ‘unicorn’ [a start-up worth $1bn or more]? It’s perfectly OK to keep running a business for as long as it makes you happy.”

Maifreni agrees that finding your niche is imperative: “Look for something that is not quite grabbing the headlines yet, but is growing,” he says. “Ride on a trend that you will be able to scale.”

He says it’s equally important for founders of ‘lifestyle’ businesses to know that their market will probably be very different in five years’ time to what it looks like today. “You need to be open and to constantly question your business model,” he says. “You need people who can help you, and you’ll also need to be able to delegate as you’ll have less and less time to do the things you did when the business first started.”

Read the full article on Natwest Content Live.

Why Marketing can be your best friend or your worst enemy

Why Marketing can be your best friend or your worst enemy

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Giving birth to a new product can feel awesome. You’re full of pride as your idea comes to life, passes important tests and gets ready for the big wide world. But your product needs a partner, someone who will help your product to blossom. As a proud parent, you want the best. So when a flashy individual called marketing steps out from the shadows, you might have mixed feelings.

Love it or hate it, marketing is essential. It translates great products into great sales.

But few SMEs have a chief marketing officer. Often, it’s the owner or managing director who decides what approach to take – or maybe it’s the sales manager?

If you’re about to launch a new product, you’ve most likely set aside some funds for marketing. But maybe you’re not sure what to do next, and everyone wants your money. Some may even promise instant results.

It’s wise to be very cautious about what you spend – and how you spend it. Things can go horribly and expensively wrong, and the reputation of both your product and company are on the line.

Here are some helpful principles for getting it right.

Hold yourself back – think strategy first

In some ways, marketing has never been easier. Making announcements on Facebook and Twitter means you can start promoting your new product within seconds of reading this blog. You can send emails to a list of targets in moments. Then there’s pay-per-click, print advertising, trade shows, websites and much more.

No-one likes to curb enthusiasm. But don’t start marketing your product before you’ve developed your strategy and your ‘story’. Without this, you’ll waste budget, get poor results and your stress levels will rocket.

Please read the full article on London Business Matter (page 33). The article was also featured on SME Insider.

When you only need 48 hours in every day

When you only need 48 hours in every day

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Too much to do, too little time? If that’s the story of your life right now as you run a small business, then you need to make important changes. Changes that may help your sanity, your relationships, and your business’s bottom line.

Does this sound like you?
Owners of small companies often find themselves so engrossed that business becomes all consuming. That’s understandable: It happened to me too. But when this carries on for months, it’s unhealthy.

Time is a limited resource — something we can never get back. If the work / life balance breaks down, that creates a spiral of stress and lack of sleep. This can impact your personal relationships, self-confidence, and business judgement. And any time off is no longer ‘quality time’. Rather, it’s time spent worrying.

If this is happening to you right now, then it’s time to reset the clock — and take back time.

You cannot fix everything in life by following the ground rules I’m about to suggest … but you can bring order to the chaos and make the best use of every hour.

10 ground rules for smarter time management

Rule #1: Take a super-hero reality check
You’re not Superman or Wonder Woman, even if you look great in tights. There’s a limited number of things you can do in one day — even if you get up at 6am and work until 10pm. But crazy hours should be the exception, not the rule. Work regular hours and just accept that sometimes you can’t fit in everything. Get over it!

Rule #2: Focus on your business goals
Have a business plan and keep it up to date. Then translate this into operational objectives for each month. This will help to keep your activities on track while giving you focus and believe that your business is getting somewhere.

Please read the full article on MBA World.

 

Are you allergic to consultants?

Are you allergic to consultants?

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The symptoms can creep up on you. There’s a sensation that you’re losing control. Perhaps you’re overcome by a feeling of weariness. And maybe your wallet seems mysteriously lighter. The symptoms can come and go, every few years …

 

Over the years, I’ve worked with many clients that want to achieve and manage growth for their businesses. In most cases, this meant difficult change at some level. But they all managed to go through it and achieve their objectives.

However, all of them loathed the word ‘consultant’.

Why? Well, they had some previous experience with consulting firms that came in and told them what to do. The consultant’s report or presentation was slick and stylish. Then they disappeared, leaving behind a huge bill.

Their recommendations didn’t really work either. But it was easy for the consultants to claim that the execution, not the strategy, was to blame. And therefore, another consulting assignment was needed to fix things!

Does that sounds familiar?

Simply telling small businesses what to do isn’t enough. Neither is coming up with a strategy. You need to be accountable for the execution.

Small businesses don’t require consultants. What they really need are ‘committed experts’.

So how can you identify one? Here are five ways capabilities they will display.

1) They can provide the answers that small businesses need – and put them into effect
Usually, ‘committed experts’ have experience working for major corporations as well as for small businesses. They understand the pressures weighing on business owners and senior decision-makers, whether it’s the daily decisions faced by a small family firm, or a key change to a portfolio of products worth millions of pounds. They know what works and what doesn’t. They put their proposals into action for you.

2) They are multi-skilled. One person is usually enough.
Their skill-set extends across many overlapping areas of business expertise: strategy, marketing, business development, restructuring and funding. Normally, hiring just one person is enough. This means you can make smarter decisions faster, without endless meetings with large groups of people.

3) They are committed
They don’t suddenly appear, make a few general observations and then vanish, leaving you with a large bill. They’re willing to work hand-in-hand with your business at a deeper, employee level. You can trust them. They’re open, honest, knowledgeable, committed and genuinely care about making your company a success. They’ll stay for as long as you need them.

4) When you invest, they’ll help you to get more back
During times of business growth, it’s very easy for companies to waste money on marketing plans, product launches and campaigns that turn out to be flawed. When working for your company, they’ll help you to avoid these approaches and focus only on proven strategies that will deliver the maximum return on investment (ROI).

5) They see the ‘big picture’ and can make success sustainable
Expanding in a profitable way is great news for any company. But it often leads to ‘growing pains’ as the business needs to reshape and re-organise around different objectives, products/services and customers. These experts will enable you to plan ahead, so you can prepare for these extra challenges in advance. This way, you can adapt easily, avoid the pressures of unforeseen consequences and protect the morale of your staff. With their help, you can make your profitability sustainable.

Maybe at this point you’re asking whether these people exist!

They do. But you have to look closely.

For a start, try to spot those who ask questions, rather than giving answers straight away.

That’s a good sign they’re focused on you and solving your problems – rather than making a quick dollar and a fast getaway!

 

This post was also published as an article on SME Insider and on the Great British Entrepreneurs Award website.

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Help! My business partner is from another planet

Help! My business partner is from another planet

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It can feel like that sometimes. When companies are growing fast, pressures can bring personal differences to the surface … surprising things you didn’t realise were there! So what should you expect and how can you deal with it in a professional way?

 

My experience has brought me into contact with a number of start-ups in different capacities (mentor, strategist, product marketer and business developer, to name a few). I’ve also worked at different stages of product development, from the birth of an idea, to testing its commercial viability and then looking for growth capital to bring it to market on a major scale.

Working alongside company founders and CEOs gives you a unique perspective. You’re exposed to the rollercoaster of emotions that inevitably happens when companies are growing rapidly.

The excitement of a start-up or new product can take over. Targets, finances, campaigns, spreadsheets and the regular business issues are vital. But all this activity can mask significant differences.

It’s crucial not to neglect the personal and emotional side of your business – and how the company’s founders feel about how things are going and about each other. After all, will the partnership between partners be strong enough to last the distance?

Let’s explore four key areas where differences can put a strain on working together.

1) Different dreams

What do each of the founders want in 5, 10 or 25 years? Is their vision to change the world or simply to get acquired by a large player and then exit with wads of cash for an easier lifestyle?

It’s important to be on the same page from Day 1. Otherwise, this can lead to conflict and affect the company’s direction in a serious way – for example, when deciding what to do about a future round of financing.

An outside expert can provide a listening ear and work to create a common objective at the outset, giving a strong sense of direction and purpose. This can be kept in review of course.

2) Different geographies

Is it viable to have a co-founder based in a different city or country to most of the other founders? This is linked to the ability to manage expectations.

The people that live and work in the same place (often the same room!) can meet, discuss and decide what to do. This can often be spontaneous. But their remote colleague can feel more and more excluded from the decision-making process – and simply be told what’s been decided already.

It’s as if they have become a ‘virtual’ partner, not a real one. Even with the latest tech, face-to-face communication is always better in this kind of scenario. It’s so easy to misunderstand the tone of an email, isn’t it? Miscommunications can have disruptive effects – eroding trust in a way that may destroy the business.

I’ll be honest, sometimes having a remote partner doesn’t work. But it can succeed with good communications, equal input from everyone and regular calls – not simply unstructured decision-making. Sometimes decisions need to be taken quickly, so the remote partner needs to make themselves easy to contact – or be happy to delegate some decisions. You can’t have it both ways.

3) Different planets!

Often, friends go into business together, which is great! But it can be difficult for everyone to enjoy the same strength of relationship at a serious, professional level.

It’s important to have a structure in place, to define how to make decisions and what to do in case of disagreements. Formulating a shareholders’ agreement at the outset is fundamental. Someone told me once that it’s a document you write when you’re sober – to use when your drunk, and I agree.

Think about what can go wrong and add it to the agreement: if things work you’ll never read it again. But if things become challenging, it’s essential. I know of co-founders having an equal share and no agreement. They were unable to decide if/how to take their start-up to the next level – and lacked the legal ground to unlock this difficult situation either way.

4) Different levels of resilience

If two people always agree, only one is needed; if they always disagree, both are not needed!

Disagreements can drain the life out of people – and your early enthusiasm for the business ebbs away. Companies grind to a halt. So how can you keep going during tougher times?

Even in healthy and active working relationships, sooner or later, you disagree and get to a conflict situation. This is usually amplified by the stress, the workload, the lack of sleep … and ultimately governed by the level of resilience of each person.

It’s here where points 1-3 all come together. But on top, you need a deep respect for each other, enormous patience and an acknowledgement that the skills/roles/experience of each person may be different, so should carry weight accordingly. Sometimes a decision is more to do with the other person’s side of the business. Sometimes you just have to ‘let things go’ on some issues, while the other person does the same on points that matter most to you. It’s give and take, which gives you balance. In many ways, this is the sharp end that may decide the fate of any company.

Conclusion

The points above speak for themselves and are worth considering seriously before going very far with any new start-up business or offshoot operation.

I would strongly urge anyone in this situation to get outside expertise to set a whole range of ground rules – from goals to communications. I know it’s often the last thing of people’s minds – and no-one likes to think of worst-case scenarios during those giddy early days of a new venture.

Getting a sympathetic expert to work alongside everyone to agree some helpful ground rules doesn’t have to be a dry, awkward, clinical experience. It’s a good way of thrashing out important details before politics or other problems raise their ugly heads. You could even decide how partners can exit the business gracefully if they wish (which is to be expected, almost inevitably). Sort these things while everyone is in a good mood and feeling positive. It can actually prove to be a motivating experience too, unlocking ideas and goals.

Ground rules will give everyone that added confidence as you move forwards. Over time, they’ll effectively serve as that grounded and sensible voice in the boardroom – that everyone can call on for impartial guidance.

Without thinking ahead, that first rush of enthusiasm that got your company started could disappear as quickly as it arrived.

 

This post was also published as an article on SME Insider and on the Federation of Small Businesses website.

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“Loyalty as you go”: Capitalising on a new business phenomenon

“Loyalty as you go”: Capitalising on a new business phenomenon

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According to studies, traditional brand fidelity is declining. This is bad news for large, established players. But it’s a golden opportunity for SMEs to capitalise on a new phenomenon… “loyalty as you go”.

“Nobody ever got fired for buying IBM”. This well-known axiom from decades ago made the point that emotions are a big driver in purchasing decisions in the B2B marketplace. A trusted brand can make everyone feel safe. But trust in any company doesn’t come with the same certainty – and thus loyalty – today.

Heritage brands can disappear from the high street and the Internet overnight, often after a brutal price war against sharper competitors with deeper pockets. In a world of price comparison websites and discounts, being a household name doesn’t guarantee your future anymore.

So how can SMEs win loyalty?

If striving for years to achieve a “cool brand” won’t ultimately be enough to keep your valuable customers and you don’t have the economies of scale to battle it out on price, then where do you go? How is it possible to build a secure customer base in today’s fickle world? The answer is “loyalty as you go”.

Put simply, this approach is about nurturing loyalty at every step of the pre-sales and post-sales process – by giving customers something unique. And it’s still very much about emotion.

If someone believes buying from dependable company X will keep their job safe, or choosing supplier Z will make them look good at one level or another, then emotions will be key to your sale. And this is almost always the case.

As an SME, it’s possible to break through and outsmart larger competitors by fixing long-standing issues that reside deep within your prospect’s operations – and trigger frustration and other emotions.

Read the full article on Real Business.

Connected cars: Five signs the market is finally taking off

Connected cars: Five signs the market is finally taking off

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When will the connected cars industry move into top gear? And when should small businesses enter this lucrative marketplace? Look closely and you may see the lights change from red … to green.

The connected cars marketplace has been around for a few years. But, at times, it feels like the industry is stuck on the starting grid, revving furiously without going anywhere. It’s as if everyone is trying to figure out where the sector is headed, who’s on board – and who’s paying for what?

You could compare the industry’s journey to a long road trip where the destination seems always “around the next bend” … but you never quite get there.

Patience will pay off

Despite the hold-ups, a change could come very soon. City A.M ran a story that suggested two out of every three cars sold by 2022 would have some sort of connectivity – and the market would be worth a jaw-dropping £120bn by then, according to PWC.

With all that potential, it’s no surprise large players are positioning themselves. There are those rumours of Apple taking a stake in McLaren, talk of Uber’s self-driving trials in Pittsbrough, Ford’s dynamic car-sharing experiment and Daimler working on VANs with auto-pilot.

But a lot of quiet innovation is happening too – in areas such as entertainment, telematics, cyber security and assisted driving. It’s not just the pure-play car giants involved either. Small companies in the automotive industry and adjacent industries are also doing some amazing things that could transform our driving experience very soon.

Many exciting breakthroughs could happen at once. But like a gridlocked city centre, there’s only so much that each player can do – unless someone else moves first, or at the same time.

Read the full article on Real Business.

Make your pitch – but avoid a horror show

Make your pitch – but avoid a horror show

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Cringe-making, toe-curling, awkward, confusing, arrogant, shabby, disorganised, unbelievable, deluded … all words that could be used to describe the worst business pitches. And most of us have been there, at one side of the table or another. If you want to avoid pitfalls with pitches, then read on …

First up, I don’t consider myself to be a ‘pitch guru’. However, over the years, I spent some time in the vibrant start-up London ecosystem, and have mentored start-ups in the UK and across the channel.

I come across pitches a lot – and I’m usually in the audience or watching from the wings. Sometimes it’s on a one-to-one, confidential basis. Other times, it’s at so-called pitching events. The latest one was the PitchFire event, which was part of the RoboBusiness Expo in Milan earlier this year. It was interesting and well organised. Well done to them.

This experience prompted me to clarify some thoughts about pitching. I haven’t provided any ‘general rules’. But this article might prove helpful as a checklist when you’re preparing your next pitch. These points are based on what I’ve actually heard before at pitches, time and again.

5 things you need in a pitch – but what’s often said

1) What you do

Q) I didn’t understand what you do

A) Well, the timeslot was too short to talk about our business model

If you can’t articulate what you do in a pitch to potential investors, partners or others, then how will customers have any a chance of understanding? Be very clear at the outset. You should be able to give anyone a good idea within 30 seconds.

2) Unique selling point (USP)

Q) What is your USP?

A) My what … ?

What makes you different? Why does the marketplace need your products or services? Three reasons are ideal. Make them clear, compelling and unique. And show you know the TLA! (That’s a three-letter acronym standing for ‘three-letter acronym’! 😉 )

3) Competitors

Q) Who are you competing against?

A) Oh, we have no competitors

Unless you’ve designed the world’s first teleportation machine or pizzas that deliver themselves, then you will surely have competitors. But even in that case, you have substitutes or at least one competing technology, maybe from adjacent industries (for some time, bicycle would be a competitor to teleportation to me!). The answer above is naive. Prepare for this question. Research competitors, even if their offering is slightly different. Know their strengths and weaknesses. Work out if your advantages are sustainable.

4) Your team

Q) Tell me about your team

A) We have known one another for so long and have very diverse skills – pretty unique

So many people respond this way. But we are all unique in some way. This kind of answer also points to a slightly unhealthy inward looking approach to the business that could be viewed as self serving. Much better to explain the business benefit of each individual, which might be their experience, contacts, etc. Then your ‘stock’ will grow in their minds of investors. After all, they are investing in your team. So why should they?

5) Finance

Q) What will you be using the money for?

A) Mainly product development. And BizDev. Oh, and people.

This is where many pitches come unstuck. Until now you’ve been talking about ‘your world’. Now you’re firmly in their territory. And they are the experts. Make sure you have the right answers and figures to back up everything you say – otherwise your pitch will unravel at this point (if it’s still intact). Be detailed about what you’re using the money for. Use an expert to help you with this – so you’re absolutely confident in all you say.

Other points

There are plenty more I could add which are important too: trademarks/patents, working capital, return on investment, and exit strategies … to name a few.

Then we could get into all the detail beneath of each of these, which is really crucial because your audience may push you for more information. The conversation could take all sorts of twists and turns. But each pitch will be so unique for every company that a single article can’t do the job.

Parting advice

I have mentored many start-ups in different sectors (telecoms, IT, agriculture, maritime, tech manufacturing, fin-tech, and more). But when it comes to pitches, many of the ground rules are exactly the same and they all need to work towards answering a single question: Is this a viable business worth investing in?

What I hope you’ll take from this article is the need to be 100% prepared for your next pitch. Work with someone who will give you clear, honest and constructive feedback. Much better to take it from them and work together on making it better, than emerging from a pitch with your dream in tatters and a potentially brilliant business plan that’s failed at the first hurdle.

 

This article was also published on London Business Matter, sign up to  our newsletter here if you liked it.