Then ask how much time they devote to improving their meeting skills and you’ll get blank looks. We spend most of our time on an activity we were never trained for.

What happens in most meetings? The most senior person — who usually called the meeting — sits at the head of a table. Others drift in. If you’re lucky, you start only 5 or 10 minutes late. The issue, problem or question is identified, and then the ritual begins. Just like some people at school always sat in the front row, some in meetings always speak first — and there will always be the laggards who wait to see how the wind is blowing. And then there are what psychologists call the ‘social loafers’ — the individuals who always turn up and contribute nothing. For half an hour or more, a vast amount of second-guessing occurs, as everyone gropes for the answer that will receive the leader’s blessing.

What’s wrong with this picture? Well, first of all, meetings are expensive. If 6 people are 10 minutes late, the firm’s lost an hour of productive labor. Then, there’s rarely much conflict (a topic for a later post). The range of options proposed tends to be pretty narrow and everyone leaves less energetic than they arrived. But the biggest problem of all is the boss, the person who called the meeting. Because his or her presence alone encourages everyone to compete for attention and approval. Whether we like it or not, leaders set an invisible agenda which implicitly curtails thought and exploration.

I’ve seen two relatively successful attempts at combating this. Donna Shirley, who ran NASA’s only successful mission to Mars, always made a point of not sitting at the head of the table. She wanted to be part of the team, not its focal point. Her highly collaborative style was controversial within NASA — but it worked.

If anyone’s more impressive than Shirley, it may be Mona Eliassen, CEO of the Eliassen Group. Eliassen doesn’t chair her own meetings; she gets a facilitator or someone else in the business to do it. Monthly and quarterly management meetings are run by someone from outside the company who has no power to make the final decision; that’s left up to the team. But more often, because she suffers from chronic fatigue syndrome, she doesn’t turn up at all. She has devoted years to developing her leadership team, and she expects them to be able to find solutions that secure everyone’s support.

One of the mistakes I see leaders make most often (and that I know I’ve been guilty of) is to underestimate the power of one’s own presence. This has nothing to do with charisma. If you’re the most senior person in the room, people will defer to you, and that usually means they’ll think less. So if you have a very hard problem to solve, call a meeting — and don’t turn up. You may be dazzled by the results.

Understanding your position

A cash flow definition is the forecasting of a business’s real cash inflows and real cash outflows over a period; usually on a weekly basis for a full quarter in a crisis, but sometimes on a daily basis in extreme cases.

You can buy cash flow software, but in practice a basic forecast can usually be prepared using a simple spreadsheet on which you set out in a logical structured way the expected timings of real cash:

- coming into the business from debtor receipts, loans raised or assets sold; and

- going out of the business as payments.

Together these will give you a net cash movement over the period which can be used to walk forward your expected cash position based on the assumptions you have made.

Controlling the cash you have and managing cash flow

You should then actively use your cash flow forecast to control the cash in your business by using it to make decisions on the timings of payments and what commitments you can make to creditors.

In preparing your forecast you should also be using it to examine your business. For example, can you spot places where cash is either leaking out or getting stuck? Is it a particular part of the business or its activities? If so, you should immediately target these areas for specific reviews and remedial action.

At the same time you should centralise and tighten up on your controls over purchasing and making payments by for example, increasing the level of authority required for purchasing or payments or cancel or restricting the use of credit/charge cards so that cash is not wasted or committed outside of your central cash management process.

A cash crisis can arise for a number of reasons from your business’s sales shrinking on one hand, to them growing too fast, and the type of problem will tend to suggest the long term changes that you will need to make in your business.

But whatever the underlying reason for the crisis, once you have taken the steps outlined above to control the cash you have, you should then focus on some or all of the following key areas:

- Get in more cash or credit from elsewhere – what surplus assets could be sold, what loans can be raised?

- Reduce and/or control the cash going out – what you don’t spend you get to keep, so can you agree deals with key suppliers or the Crown over PAYE/NI and/or VAT?

- Reduce the amount of cash you need in order to trade – don’t think of stock and debtors as assets. Instead think of them as cash that has been frozen in place and which you need to get flowing again. If money tied up in high stock or debtor levels are part of the cause of your cash problems consider bringing in a lean process expert to help free this up.

Steps to consider

In the longer term you are also likely to need to improve both profits and management but in the short term can you for example:

- Sell or rent out surplus land and buildings, plant and machinery, or motor vehicles?

- Free up assets that can then be sold by sub-contacting out manufacturing processes?

- Sell and lease back assets to provide cash, or use other asset based financing to borrow more than presently?

- Agree better payment terms with supportive creditors?

- Ask customers whether they would supply free issue materials?

- Seek injections of capital in cash or kind. Would a key supplier be willing to swap some of their debt for equity in the business?

- Improve debtor collection performance?

- Reduce raw material, work in progress or finished goods stock by introducing lean processes?

- Cancel discretionary or non-essential expenditure such as payments of dividends.

- Negotiate scheduled payments of arrears with key creditors (an ‘informal arrangement’) or a time to pay agreement with HM Revenue & Customs on arrears of PAYE/NI or VAT (although a condition of this will always be that future sums due are all paid on the due dates).

Remember, if you do negotiate payment terms with the Crown or suppliers, don’t make arrangements to pay that you cannot stick to.

The steps that will be appropriate will vary widely from business to business so this is by no means a full list and you should always keep in mind that you can also consider using one of the rescue procedures available under the Insolvency Act 1986.

Of course the information contained in an article like this can never be a full statement of the legal position as the relevant laws are complex and liable to change. This article can only therefore be a general guide as to the issues involved and as these can have serious implications you should always seek appropriate professional advice on your own particular circumstances before taking any steps.

This article was written by Mark Blayney an accredited business rescue expert and describes the key steps in dealing with a real cash crisis should it happen.

Chancellor Merkel was quick to point out that Spain could tap into the €750bn eurozone rescue package confirming “The mechanism can be activated at any time”. Traders also highlighted the fact that it is not just Spain that has been marginalised: short term debt markets are effectively closed to the banks in the peripheral economies of Ireland, Portugal and Greece too.

On the economic front, worries about the global economy resurfaced following weaker than expected data from the US, with the Economic Research Institute saying that its weekly leading index had fallen to a 45-week low of 122.5. Earlier in the week, data released showed US housing starts had dropped unexpectedly sharply in May, down 10%, as the homebuyer tax credit was withdrawn. This came alongside a rise in jobless claims and a fall in factory growth.

By the end of the week, leading indices had all gained, with Europe leading the way and enabling FTSE100 to close at 5,250 – helped by a rally in BP’s shares, who announced, under pressure from the Obama administration, that it would suspend its dividend to the end of the year and set aside an initial $20bn fund to cover the cost of the Gulf oil disaster.

Japan caused some consternation when its new government announced that it was going to renege on its election promises and impose an austerity discipline on its public finances. The country has as we’ve commented before, one of the most strained public balance sheets in the world – even surpassing Greece.

Its new Finance Minister is faced with defusing the country’s 200% ratio of debt to GDP. Previous Finance Ministers have not been known for being tough, so in describing Japan’s situation as “severe” Mr. Noda is setting the scene for unpopular measures.

The timing of Japan’s announcement coincided with a call from President Obama for governments not to cut back on stimulus spending – he said that the highest priority must be to “safeguard and strengthen the global economy”. He also said that “market-determined exchange rates are essential to global economic vitality”.

This was seen by observers as further criticism of China’s policy to refuse to allow the yuan to rise in value, which would most likely act as a demand stimulus for Chinese consumers as imports would be cheaper. However, in a surprise move over the weekend, China sent a signal that it may allow a more flexible exchange rate for its currency by ditching a two-year peg to the dollar.

In the UK public finances in May improved as data showed that the government borrowed less than expected, implying improved tax receipts on the back of a growing economy. Inflation was also down more sharply than expected last month – from 3.7% to 3.4% – prompting economists to suggest the peak in price pressures had passed.

The newly established Office for Budget Responsibility, headed by Sir Alan Budd, revised downwards its UK growth forecasts just ahead of the Budget, implying potentially greater cuts in spending by the government than those already planned. The OBR cut earlier Treasury estimates made under Alistair Darling from between 3%-3.5% to 2.6%.

According to the Nationwide’s index of consumer confidence, this slipped ten points to 65. However, there was room for cheer – house prices are still edging up and the demand for mortgages rose by 7% in May, according to the Council of Mortgage Lenders, although it described the market as subdued.

Not that there weren’t some surprises and concerns however. BP’s share price plunged to a 14-year low at one point as Obama launched a scathing attack on the company’s chief executive, Tony Hayward, leaving investors fearful that BP would bow to political pressure and cut its dividend.

Such a move would hurt many pension funds – both here in the UK and in the US – as the company accounts for around 12% of all dividend income from the UK market according to The FT. On top, as a major part of the UK index, its share price fall, has accounted for around 250 points off the FTSE100’s recent decline.

At these levels the company is on our radar screen and I will be thinking about whether to take a material position. In my view however there’s no rush. The possibility of BP not paying a dividend is high and this may lead to further selling by American investors and UK income fund managers and if you’re buying for the long term a one off Dividend pass isn’t material.

What of the world economy though? Well, Chinese exports soared by almost 50% as consumers in Europe, the US and the ten largest emerging economies rediscovered their appetite for cheap clothes and steel.

RBS chief China economist said there was anecdotal evidence that the country is capturing market share from increasingly cost-conscious consumers, which is supporting its exports.

Whilst imports also rose 49.3%, China still managed to produce a huge rise in its trade surplus compared to April – $19.5bn versus $1.68bn – a point which won’t go unnoticed in Washington where there is pressure for legislative action against China.

At the same time, India reported industrial production rising 17.6% year on year, up from 13.9% in March. According to the World Bank, developing economies will expand by 5.7% to 6.2% a year over the next three years – growth last year was 1.7%. The Bank also forecast that global growth would be 3.3% this year and next, rising to 3.5% in 2012. So we need to look East!

Positive economic forecasts from the Chairman of the US Federal Reserve helped the Dow Jones last week to climb over 2%. Ben Bernanke told the House Budget Committee that the US economy appeared to be on track to continue to grow for the rest of this year and next, as consumer and business spending made up for the government stimulus measures that were tailing off.

The Times reported that the Fed expects the American economy to grow 3.5% this year although there is likely to be only a “slow reduction” in unemployment which currently stands at 9.7%.

Following on from Hungary’s comments last week that the possibility of the country defaulting should not be dismissed, Ben Bernanke used Europe’s troubles to press for a reduction in the vast US budget deficit. Failing to rein-in the deficit (estimated at $1.6 trillion next year) – will damage growth prospects.

In the UK, by contrast retail sales bounced back last month with sunny weather giving a boost to sales of clothing and also helping sales of DIY goods. But there’s still uncertainty and unease, which is making customers nervous about buying more expensive items.

The National Institute for Economic and Social Research warned that the economy still faced difficulty as a spill over of Greece’s debt crisis, which has taken the edge off some of the competitiveness of British exports as the euro has weakened. The industrial sector showed prices of imported materials fell between March and April though (partly due to imported deflation), which will go some way to off-setting the weakening of the Euro.

The current problems probably started back in 2000 when everybody started buying more debt: banks, consumers and more recently, Government.

The consequences are that the global balance sheet collapsed, so then did the financial system, which led to an extreme policy response – low, effectively zero interest rates and massive fiscal easing.

So where are we today?

The stimulus package has had little real impact on the economy and has largely stopped. The Government can’t afford to spend more on it, even if they were politically minded to do so, it just isn’t the Conservatives way, so we need to think about what happens next.

If GDP is unlikely to return to trend for a while then low growth of around 1% is a probable outcome.

First though, we have to understand what is creating the current volatility – I call it dashboard management ~ with the dials represented by the likes of sovereign debt, Chinese growth, changes in Libor and so on. Everyone knows what the problems are, but with a herd mentality, as the ball is kicked one way, everyone rushes after it, only to turn around and dash back again when the ball is returned.

The key component here is access to capital.

In the first phase of recovery it will be the small and medium sized businesses that are most at risk because as they seek to roll-over existing debt, the banks are only likely to agree to part of the requirement and the cost of provision will go up.

Cash is still king then, in a capital constrained world where the strong companies keep getting stronger as their competitors fail or stumble. These businesses have pricing power and high margins, which underpin growth in their values.

So what does this mean for sme’s today?

As you expand out of recession, you will burn cash. Not necessarily because you are unprofitable, but because you will be expanding ahead of your sustainable growth curve. You can only expand at the same rate as your cash ROI unless you either alter payment terms or inject capital.

Where to find that elusive Capital?

We’ve all seen the headlines. In the current environment, many businesses have tried unsuccessfully to raise funding. Their experiences have varied with lots of “flat no”, some “protracted maybe” and very few “definite yes” responses from lenders. The financing prospect for many businesses looks bleak.

Banks continue to strengthen their balance sheets recovering from the crisis and in preparation for Basle III, although the latter is likely to be watered down to allow the Banks to meet it without choking off growth.

Lending is available, but is tougher to achieve with higher rates, more security required and more ‘setup’ or ‘consultancy’ fees than ever before. This is where Ian is getting his extra 20%!

Government loan schemes have had a very low take-up, with demanding information requirements. And as the new Coalition seeking to rein in costs, you can be sure this is a source that will be hit.

Private Equity and Venture Capital firms have focused on recovering lost value in their existing portfolios, their focus is maintaining what they have, not looking for new investments. Indeed many funds have dried up.

According to a recent survey by the Institute of Directors, nearly 60% of UK businesses were refused credit by their banks last year, despite the government’s efforts to boost lending. The survey found that a rather frightening 20% used credit cards to finance their business.

On the 19th of February, the Bank of England confirmed bank lending to businesses fell by a record 8.1% last year. It also said lending to businesses ‘fell across all the main sectors’ for the third successive quarter’.

Behind the headlines, the reality is that all the banks are desperate to lend more money to increase profits, BUT their credit departments have raised the bar on criteria and concurrently have increased their prices.

Better-presented business cases are essential.

So what can you do to maximise your chances of raising finance in the new landscape?

The general views of those in finance is that businesses need to get smarter about where they look for finance and how they ask for it.

The days of simply relying on your local bank are gone – you need to be prepared to look at other banks, other options. And whatever options you look at, they all have one thing in common – they are looking for solid business cases, with good data to support your case and evidence of having the right talent in place to achieve your goals.

A good, strong Business Plan is no longer enough. It has to contain all the elements that funders will want to see in order to feel comfortable that the Business and its Managers have what it will take to succeed.

To raise finance and to operate businesses, you require the strongest possible plans. And I set out below the headings I believe are essential.

company purpose

•define your company / business
~ in a single declarative sentence
• your elevator speech – on a business card!

problem

•describe the pain of the customer
(or the customer’s customer).
• outline how the customer addresses the issue today.

solution

• demonstrate your company’s value proposition
- to make the customer’s life better
• show where your product physically sits
• provide use cases

history

• set up the historical evolution of your category.
• define recent trends that make your solution possible.

market size

• identify/profile the customer you cater for
• calculate the TAM (total addressable market)
• calculate SOM (share of market)

competition

• list competitors
• list competitive advantages
• market map both

product or service

• product line-up
-    form
-    functionality
-    features
-    architecture
-    intellectual property
• development road map ~ product or company

business model

• revenue model
• pricing
• average account size and/or lifetime value
• sales & distribution model
• customer/pipeline list

team

• founders & management / relationships
• board of directors / skill sets

financials

here data for a projected 5 years would be sensible,
3 years is a minimum:

• financial profile
• p&l
• balance sheet
•cash flow

exit

•how you’re going to get out
•when & to who – be specific
•utilising what resource
•WILL YOUR EXIT CHANGE YOUR OPS STRATEGY

But where to go for the money?

Family and Friend

Whatever the political rhetoric, at the coal face banks have less appetite for lending money to small and medium sized business and are looking for larger and larger contributions from shareholders to fund businesses. They also want you to provide security for debt financing. As a result businesses are looking to family or friends to provide funding.

The main problem with family and friend investments is that the decisions and responsibilities are not just financial. Frequently a failed business can destroy a family and friendship overnight.

The reason is that many family and friend deals are not properly documented and are based on trust. Failure is never discussed and there is rarely a mechanism to mitigate the loss if failure does occur. When things do not go according to plan, what was intended, becomes more important than what was agreed (expressly or otherwise).

Short Term

Where the requirement is short term, the “investment” should be documented as a loan agreement with clear rules relating to interest due and what happens if the loan is not repaid on time ie. conversion to Shares etc.

Longer Term

If the investment is long term then an investment in shares is probably appropriate. There is only one thing all businesses must do at that time – make sure you have a shareholder’s agreement.

There is very likely to be a dispute at some stage in the business’s growth cycle and unless you have a shareholders’ agreement, the resolution will be very painful and almost certainly terminal for the relationship that existed before the investment.

Enterprise Investment Scheme

Businesses that are considering raising long term finance from friends or family should be using the enterprise investment scheme (‘EIS’) to maximise tax efficiency in the investment and to minimise the financial risk for the investor.

EIS are “unconnected” individuals that invest in ordinary shares of a business and own less than 30% so as a result can receive 20% of that investment back as a deduction from their income tax liability.

Gains on investments will be tax free. If the business fails then the investor can deduct his or her investment amount, less relief already taken, from his or her taxable income. There are other tax benefits (eg capital gains tax deferral), but these are the main benefits.

If you dispose of your shares within three years of claiming EIS relief, then the relief will be withdrawn as will any capital gains tax deferral claimed. This can be a significant issue if the company is sold in a share for share transaction to a UK non qualifying company or to an overseas company.”

Consult a professional who is experienced in this area ~ its complex!

Factoring

Whilst facilities can be tailored to meet the needs of an individual business, there are two main options of Invoice Finance available to sme’s; these are Factoring and Invoice Discounting.

Factoring can include a dedicated sales management service. Whereas Invoice Discounting is more suitable for businesses with an established credit management function.

Such is the climate, that speed, knowledge and contacts dramatically increase the chances of securing finance where I’ve a number of contacts if required.

One cautionary note here – this is SHORT TERM DEBT for ebbs and flows in cashflow – don’t mistake it as an alternative for a shortage in CAPITAL in a business and use it in that context. It will result in tears when the Bank will appear to take it away, just when you seem to need it most!

Invoice finance is not like securing a fixed loan or having a fixed overdraft level ~ or an appropriate capital structure. Therefore, it is important to understand the main variables that determine the funding you can access:

Overall Facility Limit:

Whilst the funding provided through invoice finance grows in line with the business’ turnover, the funder will set a facility limit as a review mechanism. Usually the funder will look to build in sufficient headroom to enable growth.

Levels between 60% and 90% are typical though tightening of late. The amount advanced is linked with the overall performance of the ledger therefore factors such as debtor credit worthiness, the sector trading in, previous payment history, the level of credit notes and the overall strength of the sales ledger, as the prime source of security, play a role in determining the % advanced.

Prepayment Level:

This is the % of the gross invoice amount a funder will advance against the invoice. Levels between 60% and 90% are typical. The amount advanced is linked with the overall performance of the ledger therefore factors such as debtor credit worthiness, the sector the client is trading in, previous payment history, the level of credit notes and the overall strength of the sales ledger, as the prime source of security, play a major role in lending levels.

Concentration levels:

It is prudent for any business to spread its risk to minimise the impact of potential debtor failure. This is good business practice for long-term sustainability and provides confidence to funders when they see a good debtor spread.

That said, sometimes due to factors such as seasonality or new start businesses, it is inevitable that there will be a higher concentration of one debtor on the ledger. In these cases, funders will look at the funding limit and/or credit insurance to enable funding where possible.

Typically, no more than 20% of your business in extremis or more normally 10-12% should be housed with one Client. A number of you breach this guideline and it exposes your businesses to failure when a Client fails…..as well as hindering your ability to raise funding.

Charges:

Whilst there are standard costs associated with invoice finance, it is worth noting that each provider will structure the facility slightly differently, according to sector, size of the business, service levels and debtor quality, amongst other things.

In my view it’s advisable to look beyond the headline figures to ensure that the facility will enable access to the right level of funding and service. Agreeing to pay a little more for the right service will pay dividends in the long term and provide profits for lenders, which will make them pre-disposed to further lending.

As with all forms of funding, there are operational requirements. That said, the right funder can structure a solution to suit even the most challenging of businesses or sectors.

Contractual Debts;

Where stage payments or monthly valuations are used. These are common in construction, electrical and mechanical engineering, phased IT projects.

Non standard products;

Where the product or service is a little out of the ordinary, Invoice Financiers rely on the ledger, funding can be raised where traditional banking lending would not be available and would be based on the financial performance of the core business.

Invoice finance remains an excellent funding option for companies of all sizes ~ even BAe use it, but especially now as the sales ledger is typically the most significant asset.

People often consider this to be an expensive option but in assessing its use, weigh up the cost versus the potential opportunities the additional funding will enable the business to access.

Raising Finance through Bank Funding

Banks lend short term and on secured debt ~ this is their business model so don’t complain when they won’t lend what they consider to be Equity / Capital!!

To succeed in raising finance from banks you have to remember that the “desire” to lend is based on a relationship of mutual respect you can create with your bank manager so regular updates and information to him will help even if you don’t yet want to borrow. Keep him in the loop!

The “decision” to lend however, is based entirely on the data that is presented by the bank manager to the person that approves the credit ~ the credit co-ordination committee.

Bank managers are just like any other supplier and negotiating with banks is really no different from negotiations with other suppliers. The product being negotiated is money and both parties have a list of requirements. As long as the business takes the time to understand the banks list of requirements, the negotiations go more smoothly and success is more predictable.

Again, it’s back to those Plans and the quality of the information contained where you’re in competition for funds with all the other business cases going before the CCC, so if your Manager knows you well, knows the business well and you’ve a great plan giving him everything he needs to present, you’ll win the day.

Bank requires five key things:-

1. Good quality management that have a track record of success and can demonstrate they can weather the odd storm.

2. Good quality financial information including historic financials and rolling future forecasts – and they LOVE Dashboards as they feel the business is analysing not just reporting the data….

Quality is measured over time and reflects both the information itself and the credibility of the team preparing the information. For this reason it is always worth providing quality information to your bank in case you need financial support quickly ~ keep them in the information loop ongoing.

3. Income from facilities. Bank managers are no different from any other salesman; they need to secure the best price. After CCC has approved a facility (that’s about risk and capital utilisation for the Bank), the “pricing” decision usually sits with the your bank manager and his director.

During 2009, most of the banks trained their managers to improve pricing of risk in the current climate. If you have no alternative, the negotiating position of the business is weak so keep someone / another institution in reserve wherever feasible.

4. Repayment of the loans. The CCC will review the financial information provided and the bank managers assessment of the management team and the provider of the financial information.

The financial information needs to clearly show how the facilities will be repaid and the assumptions made that underpin the proposed repayment. Frequently, credit teams will apply a sensitivity to the repayment proposal (eg what if sales are 50% of the forecast, can the debt still be repaid).

If as provider of the financial information you have already scaled back your forecasts, then SHOW this in your presentation to avoid CCC halving a forecast that has already been halved! Seems obvious, but you shouldn’t be surprise that this happens time and again!!!

5. Security in case repayment does not happen. This goes back to my previous point ~ many entrepreneurs think banks provide business finance. Unfortunately business finance falls into 2 categories: equity and debt.

Debt providers expect to be paid back whatever happens and the price of that finance reflects that risk. After all, banks are lending individuals and businesses money that has been placed on deposit by individuals and businesses.

Side-stepping the current difficulties, a bank has a duty to protect that capital and as a result, banks need to ensure they have sufficient security in the deal. The more risk the bank feels there is over repayment, the more they will focus on security ~ answer the questions early and convincingly and the price will reflect it.

As you will see from the above, the quality of your relationship manager and his desire to work hard to secure you the funding you are looking for, is a crucial component in success. If you do not think the relationship is right you may need to do something about changing your relationship manager ~ it’s no different to changing another supplier or their account manager and don’t be afraid to consider or enact it.

Many sme’s are apprehensive to ask for new relationship managers, don’t be, they’d rather change one than lose the businesses, however they may present.

Venture Capital and Business Angels

You should not confuse private equity with venture capital.

Private equity firms tend to buy established businesses, invest in them and their management (adding their own prior expertise) with the objective of selling those businesses as fast as possible for the maximum return. This is changing, and increasingly PE’s are starting to become term investors but this is not their default position and you should plan accordingly!

Venture Capitalists on the other hand, invest in early stage and growth businesses to help them grow. There are few proper Venture Capitalists left in the market at present and as I say above, the lines between VC’s and PE’s is graying.

Business Angels work in a similar way to a proper venture capitalist and therefore I have grouped these together.

The most common complaints cited by entrepreneurs are:

• No investor is interested in my sector.

• The investor looked at the proposal and dismissed it out of hand without even explaining why.

• After an encouraging start, the meeting went badly and they lost interest.

• The deal proposed was so unattractive, it was not worth proceeding.

• The management team could not work with the VC/investor – they were on a different planet.

The underlying causes of these outcomes are often complex. However many entrepreneurs over-analyse the reasons and cite issues like:

• aligning the management team’s personal and business goals with those of the funder was not addressed during the discussions.

• the entrepreneur was unable to find the funder with investment criteria that matched the business.

• the entrepreneur failed to present the investment case to the funder concisely and in a manner that attracts their attention.

• the management team were worried about working with the investors team after the investment and this was plainly evident .

• there were fears that a hidden agenda existed.

• the documents sold the business content not the business.

Unfortunately entrepreneurs that are so good at selling their own products to their customers, lose their sales skills when it comes to raising equity finance where the process is really quite simple.

Angels and VC prefer to invest in businesses that fall into two broad categories:

Businesses with intellectual property / brands that can be exploited, thereby generating significant value with their help.

Businesses that have developed an offering and a business model that can be scaled quickly with their help.

Entrepreneurs have to be honest with themselves before they criticise funders:-

Firstly, you have to be committed to an exit within approximately 5 years. If this is not the case then it’s unlikely that a professional investor will be attracted to your plans however attractive they are ~ note the exit and its impact on your strategy in the content framework above and don’t under estimate it!

Also, does your business meet the criteria which attracts professional investors? i.e. does the  business have IP that can be commercially exploited or an offering with a business model that can scale quickly?

They will score you in just the same way as a Banks CCC but with marginally different criteria, get used to they process and don’t feel its personal or directed at your business. If they can see a way to help, to correct a business model then they will. But it takes time and they will want to get to know you as unlike a Bank, this will be a Partnership so don’t “give up too soon in the process”…..

Consider having someone work with you from a corporate finance environment, who understands your business and knows exactly which VCs and angels are interested in that sector and sponsors the introduction. Again though, don’t expect it to be a fast Bank style turn-around, typically VCs and PEs will know your business for 12 months before investing.

When you meet a potential investor, they are looking for opportunities to make connections to their contacts that can immediately deliver added value to your business. This is a key trigger to investment and in order to know how to do this, they need to know your business ~ and that takes time. They make good business partners but only if they are given time to know you and invest for the right reasons.

What Finance?

The new economy, if it means anything, suggests that if traditional debt funding sources are available they are so, only in very economical amounts if indeed at all!

Woe betide anyone who’s business has gone out of favour for the financial markets (eg retail, construction, or recruitment!) and if you are displaying even the slimmest of declines in your performance, then prepare yourself for a fight to keep what you have, never mind acquiring new cash.

All the high street lenders have rolled down their shutters to new lends, save for the historically conservative Co-Op and Clydesdale (Yorkshire) Banks, who are taking on some new business, albeit with tough covenants and high interest rates. Consider the long term and if this suits your corporate goals.

Where any lend is being considered protracted timescales are the norm right now, as credit committees cover their backs and more! Due Diligence is more thorough than ever with even seemingly robust deals being aborted at the last moment. The new economy therefore requires new thinking from the entrepreneur, to maximise available cash for growth.

Consider first what assets you have and how to exploit them better. Take your Debtor book; is it worth looking at early settlement discounts or pro-forma deals.

Have you looked at your stock levels? Can you sell some to release cash, would your suppliers provide consignment stock or “just in time” or even “paid when paid” which is gaining in popularity in the current climate.

What about the business creditors – not just trade, are there deals to be done on payment extensions? Don’t forget even if they charge higher than bank interest rates, this is unsecured lending and may provide additional working capital to fund expansion.

With all the businesses I’ve ever acquired, the first port of call has always been “how quickly do we pay vs how quickly do we get paid” – again, its back to the Dashboard and the balance between Debtors and Creditors.

Are there any assets you can sell and lease back from fixtures and fittings, to plant and equipment and of course, motor vehicles. There are specialist funders for all these deals .

Create cash by offering staff a pension holiday or even forsaking contribution payments for a period until business picks up. For most people this is far more attractive than salary cuts.

If you’ve milked your own assets and still need cash now what?

Watch the small print, negotiate hard on arrangement fees and the admin costs for facilities, these are much more onerous than the interest nowadays.

Also consider the exit provisions both in terms of costs and timings – take advice from your chosen Mentor.

There is a distinct likelihood that the less savvy entrepreneurs may be so thrilled to get funding, that they don’t consider these issues and then find they’re locked into an agreement that is ineffectual and expensive to exit.

From here to…?

2010 is going to be difficult for most businesses – those that survived the last 18 months have done so often due to the sacrifices made by their owners, their homes they have pledged, the salaries they have cut and the deals done with employees.

If this year requires you to take severe remedial action, many companies have no more resources to access and as such will fail not because they don’t have business but primarily because they have the trade and either too high a cost base or they can’t obtain or service their debt.

Raising Finance in The New Economy – Key Indicators:

Whatever your potential sources of business finance, the changes in our economy and business climate have forced several new common factors on all businesses:

You should explore several options in detail. The days of simply assuming that your current bank is the sensible source for your finance are gone.

Explore the short-term and long-term implications of your chosen finance route. Short-term cash gains might be very useful – sometimes essential, but do your homework on the longer term implications.

Shop around. Finance is like any other business service. The quality of service provided, the details and terms of the package offered and the full cost of the package do vary from lender to lender – don’t assume that all other offers will be the same.

Negotiate: Business finance is no different from other business services. Don’t accept terms immediately – negotiate. Look at the overall cost to your business and other factors such as seasonal cash flows. Demand better terms, payment holidays etc that suit your business. It’s your loan/finance – negotiate to get terms that favour your business.

Prepare your business case well. Have the group comment on it before going to your chosen lender. Include enough information in your plans, to give a lender everything they need to know to be able to make a decision.

If the lender comes back and requests further information, then you clearly have not enabled them to make the decision with the information you initially provided. Include information on risks and how you will mitigate these. Present your information clearly and back it up with key contracts/orders etc.

Provide regular, clear and complete updates to your bank/lender. Provide management accounts, trading updates ~ some good and some bad but always under promise and over deliver. Banks and other investors don’t like surprises. Keep them informed. If your information is clear and regular, the door will be open to finance discussions.

The last few years have created a new business landscape, with new challenges, new extremes and new business models that can change the rules of the game. Within this volatile environment, you may not be able to rely on the knowledge, experience and practices that got you here first time around. New, fresh thinking is needed.

eNABLE provides a trusted, confidential environment where the very latest business thinking can be applied to your business. In addition, your own answers and actions will be challenged in a way that is unique to eNABLE . So, you and your business will prosper in the new business landscape, supported by your group ~ use them!

An elevator speech is not about you; it’s about your prospect’s needs and the emotion behind them. If you fall into the common trap of telling someone about how you got into this business, why you care so much, blah, blah, blah, you will lose them. While you’re telling your story or (goodness forbid) educating them about what a virtual assistant, coach, SEO expert or physical therapist is, they will be thinking, “I wonder if this guy makes any real money,” or “I really don’t feel like a lecture right now, I just want a drink.” Take the ego out of it by making this time about them, not you, and drive your message home.

Here are some tips to help bring the wow-factor to your 30-second opportunity. If you wow them you’re more likely to create a connection with someone who may become a great resource, new client, mentor or friend.

Your 30-second message is not about educating, explaining, or boring your acquaintance; it’s about sparking enough interest to prompt them to do something; ask for your card, introduce you to someone you should know, or even make an appointment to learn more. If you give them a reason to want to know more, they will act on their instinct.
Here are some steps and examples.

Put action in your speech – Instead of “I am” use phrases like “I teach, create, develop.” People who do are just seen as doers; people who inspire, teach and create are seen as experts. Who’s the expert here?

Before: I am a virtual assistant who takes on technical tasks for my clients.

After: I teach business owners how to save time and aggravation so they are free to do what they love and increase their profits.

Use the step-process approach – Programs, Methods, and Processes sell. If your work can be marketed as a 5-step process (no less than 3 steps, no more than 10) to a powerful end result, people will pay attention. Look at the difference here:

Before: I help business owners organize their office space so they can be more productive.

After: I teach busy entrepreneurs my proven 5-step process to create an organized work environment and streamline their workflow. My clients have less stress and more profit.

Hit home – People buy with emotion; nearly all purchases are based on a need or desire that strikes an emotional chord. Find the emotion in your target market.  What is their deepest problem, concern or desire? People are almost always looking for more money, improved relationships, better health, weight loss or to somehow make life easier, happier and less stressful. Find the need and desire and speak about them directly, don’t beat around the bush. In the example below, working parents will naturally worry about qualifications and safety when looking for someone to care for their children. Which would you feel most comfortable with?

Before: My Company helps busy parents find the right nanny to care for their children.

After: Nannies For You is a licensed, bonded service whose family advocate matches loving parents with highly qualified, experienced Nannies. Our pre-screened candidates go through rigid background checks and provide care, guidance and fun for children so parents can go to work worry and guilt free.

Do you have more tips? What’s worked for you? What’s NOT worked for you? Share your insights with us here!

By Marla Tabaka

At EnABLE, we value that group learning experience very highly and turn it into competitive advantage for your business and those of your peers in our programme. We hope you enjoy this article and take away learning from it, but as you read it, consider this: How would I benefit from meeting with a group of up to 16 of my peers on a regular basis, to gain insight and understanding from specialist guest presenters plus the added benefit of afternoon working sessions, focused on working on, not in, my business, taking the shared learning experience away for future deployment in my enterprise.

In business school, we teach that all the aspects of an organisation are connected. This includes, among other things, the structure, rewards, socialisation, selection, culture and leadership. Change to one aspect, results in change to the whole. Of these, rewards are often the most important.

In fact, most organisational psychologists will analyse rewards first when diagnosing organisational problems. But very often, it is hard to see the mistakes we are making with rewards until after their effect has been felt through the rest of the organisation, when things have started to break down. It’s like replacing the water hose on an old car and then finding that you have to replace the water pump.

One morning, I arrived at work to find the Colorado guys waiting for me. (This was a group of five very experienced, migrant carpenters from Colorado; out of my crew of 15, these guys lived together and acted as a group). One of them, Riley, approached with a request. “Andy, the guys have been talking. We’ve been working here for over a year and we’re making good money. But, our weekends are wasted. We don’t want to go out and find other jobs, so we’d like to know if we can work weekends.”

I wanted to help if it would raise morale and keep productivity and commitment up. But I explained that by asking for approval for this, I’d be sticking my neck out for them. Jack (my boss) was predictably resistant to the idea. But after I pressed, he agreed with the following stipulation: “They’re your responsibility, Andy. You’ll need to keep an eye on them.” I was prepared for that, but didn’t like it. I looked forward to my weekends off, and I didn’t want to have to worry about the job when I wasn’t looking. But I wanted to trust the Colorado guys and give this new arrangement a try.

The guys were pleased. Riley thanked me for talking to Jack and we worked out a plan under which we would meet on Friday to discuss specific projects for the weekend and results that I could expect to see on Monday. These quickly became negotiation sessions with me laying out what I wanted, and the crew either agreeing, or more often, trying to scale back my expectations.

And not long into this, Monday morning began to reveal unmet results. There would always be excuses. We ran into complications. We got a late start. We ran out of materials. We underestimated how hard the job would be. It was frustrating, and began to drive a wedge between us.

Weeks after I agreed to the weekend work, I arrived on the site to find the crew waiting for me again. “We want Jack to pay us on a contract basis,” Riley announced. Under contract, they felt that they could have more control over their hours and schedule, and possibly make more money.

“I know how Jack’s going to respond,” I said. “You remember how he reacted when you first brought this idea up six months ago? He didn’t trust you and was dead set against it.” Deep inside, I wanted to help them. I wanted to increase their motivation and commitment to the job, and thought some form of partnership arrangement might do it.

Which is what I told Jack. But he was adamant, “No way! They’re employees, not subcontractors and not partners. If we get into this, everything will change. They will compete with us, trying to make more money with little concern for the job.”

“Don’t you think I can work with them? Maybe with a contractual relationship, they’ll work harder,” I said.

“Bullshit! No way!” he said. “Once money comes into the picture, people change. These guys don’t have any allegiance to you or to me. They just want to make money. Think about it. If this is so good for us, why do they want it? I’ll tell you why, because they smell an opportunity.”

This was a fundamental tension between Jack and me. He was a hardnosed builder, having worked in the trades for decades. He was hesitant to trust anyone. I, on the other hand, had a strong desire to trust people and build a culture of inclusiveness and camaraderie. This tension represents two positions on managing people, what is referred to as “theory x” and “theory y” or “process” and “content” theory. In the former case, you tell people what they want, laying out the contract in specific terms. In the latter case, you give people what they want, seeking to appeal to their intrinsic motivations. When do you use one versus the other? It depends on the context in which you are working, the specific types of employees you have, and your own personal management style.

In this case, I had to learn that among carpenters (particularly with these migrant carpenters), it was going to be a challenge to develop a theory y type of work environment. And, in fact, my attempts failed. With a change in the rewards, the terms of the relationship had been changed and that meant that everything had changed.

The distance between us grew. We had now become, in a small way, adversaries. I was “management” and they were “labour.” I wanted more production and they wanted less. I lamented a loss in the camaraderie that I thought we had. I felt that I was on an unavoidable path toward a clash with the crew. Or more accurately, this part of the crew, as the job was increasingly dividing the Colorado guys who worked continuously from everyone else who worked only during the week.

We were soon on an unavoidable path toward a clash that eventually resulted in more firings.

Then I began to seek people who were driven by the intrinsic pleasures of building as much as the necessary pay for that work. I cancelled weekend work, which brought the crew back into a cohesive whole. The camaraderie returned and, with it, a stronger sense of community and work ethic. Structure, rewards, selection, culture and leadership were once again aligned.

Which theory do you use with those you manage? Is it working?

Written by Andrew J. Hoffman, Stephen M. Ross School of Business, University of Michigan, Author of Builder’s Apprentice.

Facebook, MySpace and the like are hugely popular with millions of people around the world using them to communicate with friends. But do these services offer real opportunities for entrepreneurs looking to grow a successful company?

It can’t be denied that social networking is huge. If you’re not a member yourself, the chances are that you’ll know at least one of the 31 million people who spend time poking and turning friends into zombies on the phenomenon that is Facebook.

According to data from Comscore, 78% of the UK residents who use the internet regularly use social networks. The average visitor spends 5.8 hours a month on at least one network with the top 20% dedicating at least 22 hours to the activity.

The networks were originally designed for students seeking a bit of fun online but with such massive user figures, the websites are now seen as sources business owners can utilise to boost sales.

Most people don’t respond well to in-your-face selling and that’s particularly true on social networks. Entrepreneurs who blatantly promote their products or services will not be well received.

Trust is key if company owners want to reap the rewards of social networks. If you’re thinking about buying a new car and ask people which model they recommend you buy, you give a lot more credence to what the people you know very well and trust tell you. The same is true for social networking.

There is a three-step process to developing trust. Firstly, entrepreneurs should spend time on forums and in groups looking for questions about issues in which they are expert.

Responding to the problem with free advice will demonstrate you are worth doing business with. Many entrepreneurs feel that by doing that they are giving away their crown jewels but in reality, if people see you have the knowledge they will want to know more. You then get into a deeper conversation – the second stage.

These conversations will generally be one-to-one and allow entrepreneurs to approach the third and final part of the process when business can be done. You enter sales mode. But it’s the sales mode in a conversation rather than an up-front, in-your-face kind of way which tends to turn people off.

Moving to LinkedIn, I discovered LinkedIn after someone contacted a friend with a particular requirement who told them to talk to me. When I asked them how they found me they said they had been speaking to my friend via LinkedIn.

After four years using the site, 20% of my business is now generated using the website which is a primary source of marketing activity.

One interesting benefit of LinkedIn is that it allows users to view people who have been looking at their profile and work out whether they are a competitor or a potential business opportunity.

Facebook fans in particular can’t fail to have noticed the plethora of downloadable applications. These widgets allow users to do all sorts of things – from throwing a sheep at a friend to working out the day you’re likely to get married. A year ago Facebook invited external programmers to get involved and now “useful” business apps are starting to appear.

Social networking can also be used as a cost effective staff recruitment tool. With such a vast amount of individuals it’s highly likely most entrepreneurs will be able to track down someone who could benefit their company.

Placing job advertisements can be an expensive process but finding potential candidates on social networking sites generally costs nothing but time.

Facebook, LinkedIn and others give small business owners the ability to find candidates who may not have even heard of their business but possess the just the right skills and experience required.

Employers should look at the groups or profiles that match a set of criteria, interests, qualifications, geography or industry. Searching for competitor names on sites such as LinkedIn may find suitable candidates quickly. Once a talent pool has been identified, engagement through online dialogue should be started to find out more and create a relationship.

It’s perfect for small business owners looking for temporary employees too. And useful when sourcing freelancers, consultants and the like, but less useful for sourcing in-house staff.

Entrepreneurs should post a short ad in relevant specialist groups. You can expect quick responses as many people check their Facebook accounts religiously. This is handy if you have an urgent requirement.

The plethora of social networking portals means businesses are open to an increased chance of being criticised. Dismissed staff, unhappy customers or devious competitors can post negative comments about your business all over the internet. But the experts agree that it is not necessarily a bad thing. It can actually be turned into a business benefit.

Attitudes towards negative comments need to change. We need to move away from the old ways where businesses are pushing a message to an audience that is supposedly passive to the new way, where you get live feedback from your potential or existing clients. If that feedback is negative, it’s an opportunity for you to improve.

How you respond is the important issue. It’s how you react to the negative publicity which demonstrates your skills, experience and professionalism more than the fact the negativity’s there. If I see something which looks a bit negative about me or my business I engage in a conversation and approach it in a professional manner.

It is clear that social networking provides businesses with a vast range of opportunities but entrepreneurs shouldn’t believe the benefits will start flowing in overnight. Security issues also need to be borne in mind but using the privacy controls provided by most sites means you should remain protected.

Ultimately however (and like most things in business), persistence is key. There are no shortcuts; it’s a long term strategy.

1. Prevent problems

Business culture focuses on problem-solving, but true leaders need to figure out how to avoid problems in the first place.

2. Keep two lists

One list is what motivates you and the other is what worries you. Know yourself before you tackle your business and you will be a more effective leader.

3. Focus on the “so what?”

Leaders need to know what the point of their work is. To create stakeholder value? Keep customers? Make the world a better place? Post-recession, what should the ultimate goal of your organisation’s work be?

This “elevator pitch” can be a critical tool in securing backing for your organisation, forging a productive new partnership or winning a new customer.

Start by explaining the problem your company aims to solve. Follow with a brief overview of what your company offers to your customers and why it is helpful to them.

Share any successes or traction in the market you’ve had to date. Don’t forget to express what you find personally compelling about your company’s mission before the elevator reaches your floor!

To attract, retain, and get the most from Gen Y’s, create the right kind of work environment. Start by emphasising your company’s values, reputation, and community involvement to Gen Y job candidates. They often prefer to work on their own schedules, so be flexible about asynchronous work. Where possible, performance management should focus on task completion, not time spent.

This one is different, some of the fundamental economic drivers are broken in a way they simply haven’t been before, some of the methodologies for forecasting will no longer be trustworthy and the way we forecast our economic future is changing forever. We as Business Leaders need to change our approaches with it.

Business Leaders will continue to need to drive revenue, increase efficiency, and resolve conflicts, but financial mandates (I win/you lose) will no longer be enough.

Business Leaders must expand their views of self and embrace shared assets and opportunities around them — not just the individual takeaways that will reward them alone.

Business Leaders must learn to give ideas away, trusting that they will get even more back in return at some point in the future. Fortunately, new web-based tools and the emergence of cloud computing are making new leadership styles possible right at a time when they are becoming urgently necessary.

The more connected we are, the safer, freer, and more powerful we become. We learn what is happening around us sooner and can act on that information in a timely and informed way.

Business Leaders will need to make the links and organise people for action whilst also protecting against dysfunctional connectivity. Volatility, uncertainty, complexity, and ambiguity will get worse in the future as things move faster and old solutions fail to sustain new problem resolution.

Solvable problems will abound, but Business Leaders will more often have to make decisions and try to win when it comes to dilemmas, with no obvious solution or visibility to one. Fear of the unknown or un-experienced will increase and Business Leadership will start to falter as a result.

Peer Group experience will become increasingly important in assisting Business Leaders through difficult issues. At EnABLE, we help leaders make sense of the present, by asking them to learn from their peer group and listen for the future, take on board experiences of those around us and implement them as solutions for new scenarios as they arrive. We offer specialist workshops for learning and visiting experts to enable knowledge transfer.

NOW is a time for EnABLE like no other before. Leaders will have to learn new skills, in order to forge their future. There are emerging skill sets for tomorrow’s business leaders including: “maker” instincts, clarity, immersive learning ability, constructive depolarisation, quiet transparency, smart organising, and common creating. Leaders will need to learn these and take on board new methodologies.

Leaders must strike a delicate balance between make decisions quickly, but not so quickly so as to endanger their enterprises, yet too slowly such that opportunities have passed them by, or their competition have stolen a march.

Here there is a third and “new” risk – that someone reinvents their business model, materially undermining their structure or process in a new and fundamental way, with new technology, new thinking or no legacy costs / operations.

Tomorrow’s leaders must embrace the space between judging too soon and deciding too late. These skill sets will be amplified by connectivity and the cloud.

I’m hoping new skills will contribute to a conversation about leadership and the future, for organisations and for Business Leaders. What future leadership skills do you suggest will grow in importance? Maybe we can incorporate these into our future programmes?

The trends study shows a significant majority of SMEs (80 percent) are looking for technology solutions that “deliver immediate payback in terms of minimum disruption of business continuity and seamless integration with existing solutions.”

Additionally, 71 percent of SMEs – businesses with 10 to 499 employees – say they are willing to pay a premium for new solutions with a proven return on investment.

“The underlying take-away is that SMEs want IT that works right the first time and will look to solutions that do,” said Tim Herbert, vice president, research for the study. “Thanks to innovation, the steady decrease of the cost of computing power and storage and new business models, technology has never been more accessible to companies of all sizes.”

IT solutions SMEs are considering include:

• Virtualisation – Interest is strongest in the area of server virtualisation where 37% of SMEs plan to adopt over the next 12 months.

• Unified communications – 25 percent of SMEs expect to adopt voice-over-IP solutions this year.

• Managed services – Compared to 2009 intent to adopt data, 2010 may result in a two to three fold increase in the use of managed services.

• Open source applications – Nearly 20 percent plan to begin using open source software in the next 12 months.

• Mobility upgrades – Within the next 12 months, nearly half (45 percent) need to address the priority of enabling off-site employees to remotely access company networks.

The study also shows that while IT innovation is leveling the competitive landscape for businesses of all sizes, even the smallest companies face daunting technology challenges. Top IT priorities for SMEs include:

• Keeping up with storage demands (cited by 55 percent of responding companies)

• Managing ever-increasing numbers of devices and networks to accommodate mobile and telecommuting workers (54 percent). The great majority of SMEs have employees who telecommute (72 percent) or are mobile (87 percent).

• Providing richer customer experience through the web (53 percent)

©CompTIA

Internet technologies and “specialist services” that the modern world delivers up every day are obvious examples – visiting a travel agent to buy Airline Tickets for example, is now almost completely transacted on line, but this has been going on for years;

The ice harvesting industry, cutting ice from lakes in New York and New England, was once the biggest industry in America.

Ice was cut and stored in the winter and shipped all over the world during the hot months.

By 1915, the industry was gone. The problem was the invention, in 1850, of artificial ice-makers, what we call today the fridge.

No one in the ice harvesting business ended up making fridges because they thought they harvested ice, when what they actually did was provide cooling services.

They could have adapted, but were wiped out by the new technology.

So here are 5 clues to help you determine whether you need to revisit your business model.

1. Are you frustrated by customers demanding lower pricing

2. Are Customers choosing an alternative solution to satisfy the same need

3. Are margins becoming slimmer due to the rising cost of doing business

4. Is your industry experiencing a burst of innovation and new companies are entering your market – in different ways!

5. Are you finding yourself resisting a new industry shift or technology, even when customers are asking for it.

These are some of the early warning signs of a shift in business model, but there are more. A regular review of how you transact is critical in today’s business environment.

At least once a year – perhaps more often in known, fast paced environments – you should reflect:

“if I were starting this business today, would I do it the same way”

Mark, over to you:

The absurdity of confusing Capital Gains Tax (CGT) with Income Tax

Here is a rough working for a company that has been built from scratch by an entrepreneur over 15 years. These numbers are simple and based on some basic (and unrealistic) assumptions for the sake of simplicity.

Assumptions:

* An entrepreneur founds a business and grows it organically (without external investment) over 15 years at a steady rate of 20% a year.

* In year one her turnover is £500,000.

* She has one employee for every £100,000 of revenue.

* Employees are paid on average £30,000 which means that about £7,300 is taken as Tax and National Insurance.

* She pays Corporation Tax on her profits which are 20% of revenue but ploughs any profit over a £ 100,000 back into the business.

* When she sells the business, she sells it for 5x profits in year of sale.

In this relatively simple scenario, the business would be sold for £6,419,592.

Is it right that this payment should be taxed at 50%?

Consider this.

* Over this time the entrepreneur has paid over £10,805,000 in wages.

* She has provided employment for 64 people. Jobs that were not there before.

* She has paid over £1,500,000 in Corporation Tax.

* She has paid over £2,629,000 in PAYE and National Insurance. (Plus another £1,383,000 in employer contribution that I forgot to include in original post. Thanks Tim at BDO).

* She has taken £1,500,000 out of the business during this time. (Although this is likely to be far less as in the early years she would not have taken out the full £100,000 as she would have been likely to reinvest this into the business).

So, having created 64 jobs, paid over £15,000,000 £16,400,000 to the state and to employees, having taken an enormous risk and probably worked 100 hour weeks to get to the point she has, she then pays another £3,200,000 to the state leaving her with the same amount. The scenario could be so different. She could have gone bust after 10 years and been left with nothing, (she will still have paid her taxes). Entrepreneurs have to take big risks – they mortgage their properties, they survive on as little as possible, they do what they need to do to make things happen in their business.

If politicians decide to penalise entrepreneurs for making the sacrifices they do then they are not going to get my vote.

Give entrepreneurs a break. They work hard, take risks and create wealth and employment. The least they deserve is a break when it comes to an exit. (And, when they exit they are FAR more likely to use that money to do something else that creates wealth than any other section of the community).

You can download the spreadsheet that I put together to produce these numbers [http://thebln.com/blog]. It is not completely accurate – it is a rule of thumb and if anyone wants to refine it, please feel free to do so. Capital Gains Tax calculation.

You can see [http://thebln.com/blog] how the two things have been treated historically by Labour and Conservative governments.

Make your own mind up about who you vote for.

(to read this blog in its original form and download the associated spreadsheets visit http://thebln.com/blog)

Footnote from EnABLE:

Mark raises a range of interesting issues in his blog piece above.

Whilst we accept the calculations may not stand up to close accounting scrutiny, they are a sensible attempt to make a real point.

They demonstrate a genuine problem in this Country. We NEED a strong and motivated Entrepreneurial Eco-System and it has to be able to complete on an international stage.

Who is likely to be incentivised to become an Entrepreneur in the UK when the Government join forces with Banks to hold Entrepreneurs to ransom, as they seek to create employment, pay their way, work hours most would consider to be totally unacceptable, put their matrimonial home on the line, pay plenty of tax along the way…….yet still be admonished for seeking to be adequately rewarded and fairly taxed for the risks, work and contribution to UK plc. Then, as if they haven’t had enough, they usually re-invest for more…..

If we are to develop and sustain an internationally competitive Entrepreneurial Eco-System and a thriving band of Entrepreneurs motivated to “have a go” attitudes have to change – and that needs to start within Government, whatever the party!

Politicians please…..take note, take this on-board, make the necessary changes and encourage our Entrepreneurs to put UK plc back on the map for the benefit of all. Give them the scope and support to take the risks, create plenty of employment, take on the world…..and win!

Many entrepreneurs work hard on their “proof of concept”, but skip any proof of their “business model”. In other words, once they are convinced that the product works, they assume their price, sales channel, and marketing will bring customers in.

So how do you go about proving a business model? As a marketer I’m bound to argue that it starts with a customer problem or need, and includes proving the technical concept, but starts earlier and goes much further. What do I mean?

Quantify what marketers call the “problem cost-of-pain”. Before you design your new solution idea, gather evidence and estimates on how much money a customer is willing to pay (if any) to solve their problem. Factor in a margin, and you have an upper region for your solution cost. You won’t succeed with a product that is too expensive at fixing the identified problem.

If the product doesn’t satisfy the need, or it doesn’t work, no business model can work. So prove the technical or product concept. Start by testing the requirements on real customers, and providing “beta” or “trial” versions and get real feedback. Improve the “fit for purpose” until your test customers are delighted, not just tolerant.

Use focus groups. Gather some representative customer contacts, and give them your best sales pitch, including price, channel, and support. Listen carefully to the feedback. Don’t be discouraged if you don’t get it right the first time. Changes at this stage cost little and gain lots. Gather unbiased feedback. Listen to potential angel investors, who have expertise, and aren’t afraid to ask the hard questions on pricing and channels.

Test market by limiting rollout or launch. If you have a physical product, try it in a couple of locations first. If you are on the Internet, try a single city. This can be tricky, since you have to do realistic marketing to see realistic results, but don’t roll out the big viral campaign. Look at product costs, margins, commissions, and other expenses to make sure you still have a bottom line profit.

Gather a reference customer. You should descend on that big best customer candidate with everything you have. Don’t give the product away, but make sure he has every bit of service you can provide. That Customer needs to be so pleased that he’s willing to provide a testimonial for your real marketing campaign.

Sample trade shows or user groups. Make sure they’re real customers, and that they get the whole story (not just a technical demo), including price and distribution channel models in your explanations. Otherwise their feedback has no value in proving your business model.

All this assumes you have done the right job first in assessing competition, establishing the sales and marketing channels, and optimising costs. I see business plans with a great analysis of competitor’s product features, but competitor’s business models rarely get a mention.

Over the last few years, the right business model has become increasingly key to converting a good idea, into a winning start-up. Your business model can be your competitive edge, or it can be your soft underbelly.

CSR advocates seem to expect firms to act proactively out of a social, moral, or ethical duty. Yet often, there are no meaningful consequences for firms that do not. On the contrary, firms are often rewarded economically for not acting responsibly. Moreover, firms in general are not built to be pro-active, they are built to be reactive. They take their cues from the marketplace and from shifts in their competitive environments. When it turns out that the products and services they provide are not in demand, they adapt quickly or else they fail.

If you accept that business entities are mainly geared to respond to change, does it make sense to expect them to behave proactively?

Perhaps the CSR community expects too much of firms. If society decides it wants greater social responsibility from firms, then perhaps it is up to a firm’s stakeholders (and its consumers, in particular) to demand and reward such behavior. Stakeholders, even more than firms, have the obligation to help design the society in which they want to live and work.

Corporate stakeholder responsibility would shift the onus of responsibility from corporations alone to corporations and their stakeholders combined. If a society did not want its jobs outsourced to low-cost economies, for example, then its consumers should demonstrate their willingness to pay the higher prices that go along with domestic job protection, and to punish those firms that continue to source abroad by shopping elsewhere. (Consistently, surveys show consumers want firms to invest in social improvements, but still base their purchase decisions mainly on price.) By the same token, shouldn’t regulators and the media provide more effective oversight of the finance industry? Shouldn’t individual house buyers exercise greater self-restraint? If society decides that housing bubbles and financial crises should be avoided, then it is fair to acknowledge that these stakeholders have a role in realizing these outcomes.

With CSR, as with most aspects of business, the market has a habit of punishing firms who are too far ahead of the curve. What I’m proposing, therefore, is more attention to the economic argument for CSR. Let us begin by assuming that…

• firms act most effectively when they are incentivised to do so.
• firms are conservative — they are more responsive to external stimuli and less willing to initiate change proactively when there is little evidence that their actions will be rewarded in the marketplace.
• CSR maximises both economic and social value when the firm’s goals and society’s expectations are aligned.
• stakeholders play an important role in holding firms to account for their actions

And by all means, let’s get beyond the idea that firms are inherently evil.

Such a perspective does not absolve firms of responsibility, but recognises that for-profit organisations add considerable social value in producing products and services that are in demand. It also recognises that the relationship between firms and society is symbiotic and, as a result, the responsibility to ensure socially responsible outcomes is shared.

In the same way that we will deserve the politicians we vote for on 6th May, we also deserve the companies we purchase from.

It was not just to fight off threats from PayPal and mobile carriers cutting significantly into Visa’s share of current and future ecommerce and mobile payments.  It is also likely being done to acquire assets that will enable it to fend off future Apple payments efforts, that will surely cut into its lucrative payment stream.

As reported in the American Banker, Apples has filed several patent applications indicating a grand payments vision based on incorporating NFC chips into its iPhones. The patents describe in part a payment system linked to Apple’s proprietary iTunes service where users already buy music using a proprietary Apple payments system, albeit typically funded by the user’s credit card.   Apple aggregates the 99 cent iTune payments before passing them on to the credit card networks in order to lower the interchange fees Apple has to pay the banks.

Surely an iPhone mobile payment system will similarly cut banks out of the loop – except where they are needed – i.e. to fund the user’s iTunes account.   It appears from news reports that NFC-payments-enabled iPhones are not coming out at least for a year.

Visa’s acquisition of Cybersource will make it easier for Visa to compete with Apple, PayPal and mobile carriers’ foray into ecommerce and mobile payments. But it will still be VERY difficult for Visa and the banks to innovate as quickly and as deftly as Apple and PayPal have.

Interesting trends emerging are:

• Deal size is significantly down to an average £2.4M per deal, which is the lowest in 9 years

• Syndication has dropped below 60% to 54% for the first time in 10 years

So, smaller deals done by single investors.

This reflects increased market share from the VCT and regional investment funds who typically do smaller deals – some pushed by Governments.

As we are seeing a thinning of active “larger” funds and concentration of European venture capital rounds the “platforms” (Accel, Balderton, Index, Wellington…), plus alternatives like VCTs (and FCPI’s in France) are taking market share.

• Capital efficiency has come of age and companies require generally less capital

• The market is tough and investors negotiated a harder bargain for less money invested

Everyone is singing the same tune of high ownership and low capital intensity and the deal evolution reflects that.  Until exuberance returns, I suppose…..

Some further data:

• In the first quarter of 2009, 82 investors placed £153m in 65 companies.

• The busiest investors were YFM (as a Group), Octopus Ventures, Amadeus and Finance Wales

• Levels of syndication dropped significantly to 54% (66%) of deals.

• The 10 biggest deals included:
- Oxford Nanopore (£17m)
- Mimecast (£13m)
- Sterecycle (£10m)
- Openet Telecom (£7m)
- Greenroad (£6m)
- Autoquake (£6m)
- Control Circle (£6m)
- Image Metrics (£5m)
- Rainstor (£5m)
- Intela Global (£4m)

Representing mostly tech-enabled services and cleantech
Interestingly, London based companies received around 45% of the funds invested in the UK & Ireland.

(with thanks to Stuart McKnight & Fred Destin for their input©)

More than a quarter of small business owners feel optimistic for the future, while a further 10% said they had actually benefited from the recession.

Figures published this morning by the Office for National Statistics (ONS) also showed that UK GDP grew by 0.2% in the first quarter of 2010.

However, while almost half (47%) of business owners believe the economy is beginning to stabilise, a quarter (26%) feel trading conditions have worsened.

Furthermore, the majority of the small businesses questioned did not anticipate any significant economic improvement for at least another year.

Edward Rimmer, UK chief executive at Bibby Financial Services, said: “Looking forward, the Index does highlight a general feeling towards a tentative recovery, irrespective of whether or not trading conditions have improved.”

Small business owners believe that a change in government or the relaxation of lending criteria would be most likely to bring about a faster recovery.

“The fact that loosening of lending criteria has again been cited as a key issue indicates that mainstream lenders are still not providing the support needed by UK businesses as they look to move out of the recession, an issue which has plagued small and medium-sized businesses throughout the downturn,” added Rimmer.

According to Bibby, the construction industry recorded significant growth in March (128.1 points on the index) the highest reading since the survey began in July 2007.

The manufacturing sector also saw its highest reading to date with 122.5. This compares to a figure of 81.8 for the same period in 2009, suggesting a significant increase in output over the year, Bibby said.

© Crimson Business Ltd. 2010

Saving money and being tight, mean and cheap beyond the dreams of parsimony? Good, glad to hear it. Time then, to bust a myth about business start ups.

Myth: “Hey all entrepreneurs are zany risk takers, living in the fast lane, addicted to the adrenalin of the deal” Well, that’s what they say in the papers, on all those programmes on TV and in every profile of the latest 23 year old billionaire.

However, like most of TV and quite a bit of what you read in the papers, it is not reality, it isn’t true. Real entrepreneurs (who by and large have between 10 and 30 years experience of a particular industry and deep specialist knowledge) absolutely hate risk. You should hate risk too.

Do everything you can to de-risk your business, everything you can to nudge up your chances of success by 0.01%, because it all adds up.

Free money? No! Surely not, it can’t exist! Can it?

The economy is in a hole, big firms are laying off people, and the government is about to as well. If you set up a business, then you employ yourself. That’s one off the dole figures.  You pay tax and you might well employ other people – even more off the dole figures.

As a result Her Majesty’s Government is very keen on supporting entrepreneurs and giving them money. Don’t believe me? Just Google “grants, small business” and see what you get.  Stunning isn’t it. Grants for expansion, grants for training, grants for modernisation, grants for new boilers (grants for old boilers!).

There are schemes for all sorts of business, in all sorts of places. Don’t take my word, spend a couple of hours online and check – look at your local Regional Development Agency, Local Authority, Enterprise Agency. Think laterally. The government wants to give you money. Even the taxman does – take a look at R&D tax relief as an example.

And then, at a later date, been confronted with the feeling of disappointment or failure because you have not achieved the goals you originally set for yourself?

If you are like me (and most other people) the answer is probably yes.

Here is a four-stage process that you may choose to use the next time you think about setting a goal.

1) Know your purpose.

Load of folk have good ideas, but many fewer are willing to put themselves on the line for them. Passion separates “good intentions and opportunism” from “real accomplishments”.

A friend of mine from way back, Don Berwick has been nominated by President Obama to head Medicare and Medicaid. Originally a pediatrician, Don passionately wanted to improve healthcare for patients.

His VISION was to apply TQM (Total Quality Management) tools from manufacturing to the health care environment.

Through the Institute for Healthcare Improvement, a small organisation he founded, he has reached thousands of hospitals, hundreds of thousands of doctors, and millions of patients over the last two decades or so.

Now, if his nomination is confirmed, he can guide an entire and huge system — a material proportion of the U.S. economy — toward better health at lower cost, “zero defects”, and more lives saved. He exudes not just vision but passion for his cause.

To determine whether your passion matches your aspirations, try these 12 questions.

1. Do I feel strongly about the need for this?

2. Does the idea fit my long-held beliefs, values, and convictions?

3. Have I dreamt about something like this for a long time?

4. Do I think this is vital for the future of people I care about?

5. Do I get excited when I think about it, and convey that excitement when I talk
about it?

6. Am I convinced that this can be accomplished?

7. Am I willing to put my credibility on the line to promise action on it?

8. Am I willing to spend time to sell it to others who might not understand or support it?

9. Can I make this the major focus of my activities?

10. Am I willing to devote personal time, above and beyond organisational time, to see that this happens?

11. Do I feel strongly enough to ignore negativity and fight for this?

12. Am I committed to seeing this through, over the long haul?

Passing the passion test doesn’t guarantee success, but without it, the journey can’t even begin……..before you go for that big idea, consider if you’ll have the passion to make it!

There are some caveats. My kids use Facebook as their primary inbox (they also use gmail). So some of what they do on Facebook is actually email.

But even so, it looks like email’s reign as the king of communication is ending and social networking is now supreme.

When we landed back in the states recently after a long flight and got in a car to drive into the city, The Gotham Gal looked at me and said “why are you checking twitter and not email?” (as she was doing). I told her that email required a reply and twitter did not. And that I preferred twitter to email and always checked it first.

Whether it’s Twitter, Facebook, or some other social networking service, I believe the lighter weight communication paradigm (say less, reach more) is superior to email for many things and I’m certainly moving more of my communications away from email.

Ideally, that would leave the more important heavier weight communications in email. If it were only so. Email’s biggest problem is the inability to control other’s power to email you. That is also its greatest strength.
If email can solve the inbound overload problem, it can become a sustainable compliment to social networking and remain a powerful mode of communication for a long time to come. It’s a truly private channel and is more suitable for long-form serious private conversations.

And email’s usage is still growing (125bn minutes per month in the chart above). So don’t take this post as anti-email. We’ve got one email related investment that is doing great, and we are certainly open to doing more there.

But social networking is the king of communications now. Long live the king.

VC Fred Wilson saw this chart in Morgan Stanley’s latest Internet trends report, we share his blog (©)



• Smartphones and intimate relationships tied at 40% for the number one thing respondents can’t live without

• 79% of respondents use their smartphones to conduct most business calls, versus an office phone or home phone

• 34% use a smartphone more than a computer for business. 7% even said they don’t take their laptops with them when they travel for business if they have a smartphone

• 48% of respondents said that at least two-thirds of their phone communication is via smartphone

Today, these “colds” come in the form of sponsoring partner departures (no champion remaining in the partnership) to a shortage of capital reserves for follow-on investing and/or a combination of the two.

For the entrepreneur, a single investor failure in a syndicate can quickly become a financing crisis or “pneumonia.” In many cases, the remaining investors – facing their own reserve limitations – may not be able to cover the pro-rata capital expected from their under reserved compatriot. And if the sponsoring partner leaves, who will be at the table, when the tough decisions are being made to speak on the entrepreneur’s behalf? If the entrepreneur is not represented in this critical discussion, chances are he/she will end up at the bottom of the allocation priority list.

In today’s environment, it’s best for CEOs to take nothing for granted when it comes to their syndicates. While challenging, a broken syndicate can be successfully managed, if the entrepreneur plans ahead and makes the time to focus on it. How do you manage for this potential challenge?

1. Try to build a broader base of support inside your investor partnerships – look for an opportunity to present to all the Partners on a regular basis

2. Always cultivate a small group of potential investors who like your story and might be interested in “stepping in” when there is an opportunity

3. Don’t wait until the last minute to find out if you have a syndication problem.

How do you know you have a syndication problem? Force the discussion of potential financing as early as possible – a year in advance in today’s environment is reasonable.

Finding one of your stronger investors to support you in this process will make it harder for a weak investor to try and kick the can down the road.

In many cases, an investor will not want to make the tough call until the last possible minute. Unfortunately, that will leave you without time to fix the problem, With 6 months notice and proper preparation, you can work through the broken syndicate challenge. Without enough time, it’s very difficult to pull this off – particularly when new investment commitments are harder to come by in today’s economic environment.

While syndicate problems are not that common, they are more common in today’s environment than an entrepreneur would expect and an increasing problem. Of course, the situation can be materially worse if you have a single investor and he/she catches a “cold”. That cold can turn into pneumonia really quickly.

]]> http://www.enable-business.com/avoiding-pneumonia-when-an-investor-catches-a-cold/feed 0 http://www.enable-business.com/how-to-impress-a-venture-capitalist-2 http://www.enable-business.com/how-to-impress-a-venture-capitalist-2#comments Sat, 10 Apr 2010 09:49:00 +0000 martin http://www.enable-business.com/wordpress/how-to-impress-a-venture-capitalist-2

David Hornik is a venture capitalist with August Capital, and he sees more than 1,000 business plans a year. He is on the board of Six Apart, StumbleUpon, and VideoEgg.

In an interview with Jennifer Jones of Marketing Voices, he explains how to stand out in the eyes of venture capitalists.

First, get introduced by someone he trusts.

Influence the people who influence him. Make your idea compelling. But realise you won’t get more than an hour of time in the first meeting.

Second, “be compelling.” What does that mean?

It means be passionate, persuasive, assertive and concise.

Then expect to be rejected.

But if you are NOT rejected then ensure you know that in the second meeting you have to influence his partnership.

It’s a team of individuals who want to be impressed.

The bottom line is that entrepreneurs are always selling so you have to get good at it.

Bear in mind however that Venture Capitalists are by their very nature ruthless and totally focused on the shortest term highest returning exit strategy.

Don’t expect them to share your passion for your product or service and don’t for a moment think that they are interested in anything other than maximising the return on their investment.

This is actually a very good thing from a business point of view but I have spoken to many people who were never ready for the “cold bloodedness” they experienced when they got a venture capitalist to invest in their business.

Finding it hard to raise business finance?

We’ve all seen the headlines.

In the current economy, many businesses have tried unsuccessfully to raise finance. Their experiences have varied with lots of “flat no”, some “protracted maybe” and very few “definite yes” responses from lenders.

The financing prospect for many businesses looks very bleak:

* Banks continue to strengthen their balance sheets. Lending is available, but is much tougher to achieve with higher rates, more security needed and more ‘setup’ or ‘consultancy’ fees than ever before.

* Government loan schemes have had a very low take-up, with demanding information requirements.

* Reduced trade credit insurance limits have increased debt requirements just to maintain existing trade.

* Venture Capital firms have focused on recovering lost value in their existing portfolios. Many funds have dried up.

According to a recent survey by the Institute of Directors, nearly 60% of UK businesses were refused credit by their banks last year, despite the government’s efforts to boost lending. The survey found that 57% of businesses were denied money, and 20% used credit cards to finance their business.

The report contradicts recent claims by banks that they are lending to companies that need finance.

Recent editorial in The Daily Mail took a blunt view with headlines such as ‘SMALL FIRMS LEFT TO STARVE’ and ‘IN PROFIT BUT BANK SAID NO’ and ‘WE’VE HAD ZERO HELP’.

On the 19th of February, the Bank of England revealed that bank lending to businesses fell by a record 8.1% last year. It also said that lending to businesses ‘fell across all the main sectors’ for the third successive quarter’.

John Wright, national chairman of the federation of small businesses said that many firms faced huge problems in raising capital.

Economists, business associations and some high-profile business leaders seem to agree that 2010 will be no different, and businesses should not expect a return to 2007: businesses need to get used to the new economic environment.

Behind the headlines, the reality is that all of the banks are desperate to lend more money to increase their profits, BUT their credit departments have raised the bar in terms of criteria and commercially they have increased their prices. So, better-presented business cases are essential.

Another perhaps surprising aspect of the current situation is that entrepreneurs and business leaders with good business cases often don’t trust the banks, and so hold back on their true business growth plans.

So, despite their thirst for more business, banks are making it harder for entrepreneurs to borrow, and entrepreneurs are being more cautious about expansion and investment, especially when this is on borrowed money.

So what can you do to maximise your chances of raising finance in the new economy?

Well, the general views of those in the finance business seem to be saying that businesses need to get much smarter about where they look for finance and how they ask for finance.

The days of simply relying solely on your local bank have gone – you need to be prepared to look at other banks, other options. And whatever options you look at, they all have one thing in common – they are looking for solid business cases, with good data to support your case and evidence of having the right talent in place to achieve your goals.

It seems that many business owners are woefully ill-prepared when asking for financial support – from their bank or from any other source.

Simply relying on your trading history just doesn’t cut it any more – lenders need to see a good business case and have confidence that you’ll achieve your goals despite the current economic situation. It’s never been more important for your business to stand out from the crowd – so you need to have your case more prepared than ever before.

At EnABLE we’ve expertise and history in raising finance, from Angel Investors, Private Equity Houses, Venture Capitalists and Merchant Banks………why not discuss your issues with us and see how we can help?

One of marketing’s five timeless fundamentals is: customers knows best. In the online world, the smartest marketers embrace the mantra, “it’s all about the customer.”

It’s much like when you ask someone who’s adept at building relationships, “What’s the secret?” And she replies, “I listen.” Many of us must start listening instead of telling our customers what they want and why they should listen to your promotions and e-mail campaigns.

I wonder how many marketers will embrace the message of listening — and won’t head back to the office to repeat their patterns of telling. Here are three reasons to start listening.

Your Web Site is Your Core

I’m passionate about Web site usability — the practice of making a product easier to use for its intended use. Making your Web site easier to use is a simple equation that includes:

* Understanding what your customers use your Web site for

* Uncovering why customers do what they do on your Web site

* Taking action to make the Web site for them instead of your marketing efforts

One good Web site will lift the ROI of every marketing campaign and improve customer satisfaction, brand loyalty, and overall revenue for your company and reduce customer service expenses.

Even in the offline world, your direct mailer or print advertisement references your Web site (if not, it should!). Does anyone call a free-phone number to talk to a sales rep if they have the option of looking at a Web site with the information they want in a fraction of the time while avoiding the sales pitch?

If your Web site and landing page gives customers what they’re looking for, then conversions and related sales revenue go up.

If you instruct your customers to “Sign Up Now” to get the info they want or “look at our loyalty program here and here” and the actual offering or need of the customer isn’t apparent, then the abandonment rate will be greater than any other metric you have.

So many marketers and even award-winning agencies, get so focused around the campaign, the creative for that campaign, and all the cool things that can be done that they totally miss the point of giving customers what they want.

And because the Web is a two-way medium (unlike print/TV), the user is in complete control with little patience. So if a visitor’s first experience with your brand is a bad one, because you’re trying to be too creative or over selling your product, then all your effort is for nothing.

What should you do?

Have a “usability expert” conduct a diagnostic on your Web site, to learn where it’s breaking the rules of human behavior in expectations.

From there, get a small group of people (even if it’s 10 people from your office), and ask them to look at a page or your site.

Ask them to find what they’d want to buy and ask them to think out loud – so they can express their decision making along the way.

Lastly, do what all Web leaders do: conduct a remote online usability study where you watch your consumers use your site from their office or home and gather qualitative and quantitative information as they perform a task or two.

This last concept is new to many but is a cornerstone of consumer marketing and has been for decades, so email me if you’d like to learn more (hello@enable-business.com).

Your Social Media efforts are the differentiator

The world of social media marketing would be better if marketers realised that social media isn’t a marketing vehicle of itself.

It’s an addition that accentuates the customer experience on your Web site and offers a way to connect with customers and (in some cases) drive them to your site.

Oh, and without a doubt, if done correctly and ethically, it can be the single biggest factor in your SEO efforts.

Think about your blog, forum, and efforts to encourage user-generated content, such as ratings/reviews/comments. These are ways to engage your customers and provide them with the opportunity to express themselves.

These channels also afford marketers an opportunity to add a personal touch and personality to what many of marketers fight every day – the doldrums of a confined corporate message.

E-mail and Analytics: Beyond Click-Through

E-mail is the ultimate connector. After someone comes to your site or sees your ad, ensure any e-mail you send them gives them something of value or things they’re interested in.

E-mail campaigns, e-newsletters, and such are the bane of most people’s inboxes.

Think like your customers – do they really need or want the e-newsletter you send the second Tuesday of each month?

Unless you’re a publisher, stop sending out routine e-mails unless you have a very cool product that has high customer loyalty, or you’re doing something particularly interesting or special – a new product offering or service maybe.

We all only have so many hours in a day, so use those wisely and build campaigns around preference centres, based on what customers want and at the frequency they want it.

Ask your customers what they want, listen, and give it to them.

Too many of us look at open-and-click-through rates as benchmarks to success. You won’t be able to equate that to sales, let alone correlate that information to what the customer actually wants.

Let’s get on with what’s important, not what’s easy…..

Conclusion

I’ll leave you with this thought: When was the last time you sat in your meeting or conference room when planning for marketing efforts and someone said, “Hey why don’t we go and ask our customers what they want (surveys don’t count) and why they want it”?

The last time I heard someone say that in a room, that person went from marketing manager to Online Marketing Director for a FTSE 50 company in a matter of months.



The recession seems to have brought out a vast range of new cliches, platitudes and jargon from our benighted politicians and journalists. Never a day goes by (how about that one for a start) without us hearing “we will do whatever is needed” or “we will do everything necessary” when what they really mean is “we don’t really have clue but it sounds good”.

Then from the media there is the “disaster scenario” or “things will get worse next year” or “negative equity” and so many more, all linked to the media’s need for doom and gloom.

Cynical?

You’re damn right I am! We are locked into an economic situation brought on by reckless and buccaneering forays into an investment market which was essentially a house of cards and which fell dramatically from the final quarter of 2008 onwards.

No-one, much less politicians, have had the courtesy to apologise for their errors. Then again, like producers at the BBC, they don’t make mistakes – it’s just that we don’t understand.

At long last and after a great deal of anger from ordinary folk, we hear that some executives at AIG are giving back their unearned bonuses, without, as far as we can see, an apology.

How far we have come from the days when most companies had values and an ethos which, would never have allowed this attitude to prevail. Let’s hope that the “New Normality” will bring with it a new approach to integrity in business.

Top executives “risk being treated as aliens” by politicians and the public because their pay is so out of step with that of the population at large, the head of the UK’s largest business organisation warned on Tuesday night.

Richard Lambert, director-general of the CBI, said increasing levels of boardroom remuneration risked damaging public support for wealth creation.

“It is difficult to persuade the public that profits are no more than the necessary lifeblood of a successful business if they see a small cohort at the top reaping such large rewards,” Mr Lambert said in a speech discussing “business as a force for good”.

The chief executives of the UK’s 100 largest companies earned 81 times the average  pay for full-time workers in 2009, compared with 47 times in 2000, Mr Lambert told his audience.

“For the first time in history, it has become possible for a manager – as opposed to an owner – of a large public company to become seriously rich.”

The stark disparity in pay between executives and employees risked exacerbating the “reputation loss” suffered in the wake of the banking crisis, fuelling calls for tougher regulation, the CBI chief suggested.

“If leaders of big companies seem to occupy a different galaxy from the rest of the community, they risk being treated as aliens,” he said.

Political proposals for action on remuneration following the banking crisis have been largely confined to bank bonuses. The government has resisted calls from unions and Labour’s leftwing for a high-pay commission that could curb excessive rewards.

Mr Lambert did not prescribe pay reforms, but said one option was to base rewards on factors other than just shareholder value. He cited as an example the decision by Marriott Hotels to link executive rewards in part to how the business is rated by customers.

The surge in executive pay was just one element in an “unsettling” decade for capitalism, which had seen a greater focus on short-term shareholder value, Mr Lambert said. He cited Kraft’s hostile takeover of Cadbury, the confectioner that was less than a third owned by long-term UK institutions, as an example of the increasing influence of overseas investors on the biggest UK companies.

Kraft’s Irene Rosenfeld saw her reward package increase 41 per cent to $26.3m last year from $18.7m in 2008, boosted by a  performance-related bonus determined in part by leadership in the Cadbury takeover.

In a coded rebuke to Lord Mandelson, the business secretary, over his rhetorical attacks on the Kraft bid, Mr Lambert said there was “not much point in government ministers lecturing [overseas shareholders] on how to behave”.

• Experiment with keyword advertising on social media sites. or the Content Network. Facebook and YouTube both allow for keyword targeted advertising, but the way that these ads work is vastly different from how advertising works on Google

• Facebook ads allow you to target users based on preferences they list on their profile. For example, a retailer selling DVDs would create ads that target interests such as “action movies,” “horror,” or “funny movies.” YouTube’s advertising system allows you to target specific user queries. However, remember the queries that occur on YouTube are different than those on Google, because users on YouTube are searching for content, not products. For example, people may be trying to find “Avatar trailer” or “car scene from Modern Family,” rather than searching for a particular DVD, so make sure to target your ads to these more specific types of search queries.

• Create social media-influenced paid search campaigns. Closely analyse the topics and discussions taking place around your social media campaigns, and then mine these discussions for new keywords you can use in paid search campaigns on Google, Yahoo, and Bing.

• Whatever people are talking about, bid on keywords that reflect these conversations. As always, you should measure the performance of these campaigns to cut non-performing ads and increase investment on terms that are more likely to capture downstream conversions. In addition, consider running controlled experiments with social media advertising turned off and on, so you can measure the impact these campaigns have on your paid search programs by observing changes in your paid search click-through and conversion rates.

It’s also fair to say that unless you are indeed Steve Jobs or Larry Page (in which case, do give me a call – I’ve got some great ideas to run by you!), there will be ample room for you to improve innovation in your company. The key is how you can set this in motion.

“Benchmarking against peers and competitors is the best way to kick-start stagnant or under-performing innovation programs,” says Per Nilsson, global head of the technology and innovation management practice at Arthur D Little, which commissioned the report.

He adds that although 87 per cent of companies do already measure their innovation performance, by benchmarking against others, you can see precisely where and why your current efforts are failing to deliver.

So what can you do to improve things? Here are a few top tips condensed from Arthur D Little’s report, “Pathways to Innovation Excellence”:

* stop focusing solely on changing how you serve existing customers – that’s not innovating, it will just make your existing product portfolios more complex.

* look at how Google and Apple get the edge over their competitors, and replicate – the iPhone was a game changer that blasted all other smart phones out of the water. You could do the same.

* try to expand the reach of your existing products – customers love new products and new ideas. Win them over with new propositions.

* take an open approach to innovation – although it’s an overused expression, you should “think outside of the box”. Partnerships and outsourcing your R&D should be avenues that you explore.

* be bold and don’t be afraid to investigate new business ideas – give yourself a chance, and give your ideas a chance. Success won’t come on its own, you have to nurture it.

And if you think innovation is just a buzz-word that doesn’t mean anything concrete, you’re wrong. VERY WRONG!

Research shows that, compared to the average company, the most innovative companies achieve up to twice as many sales, as much as double the EBIT, and take half the time to break even when they introduce new products.

So what are you waiting for?

Innovation won’t wait for you to get your act together. Now’s the time to get your business back on the wagon.

One day, you’re working at a big company with tens of thousands of people and benefits, and then the next day it’s just you, maybe a co-founder, and a lack of steady income.

Yet you’re really not alone.

There are thousands of others making similar journeys around the world, and even more who have not only gone down the entrepreneurial path, but succeeded. These people are more than happy to share their advice, insight, and stories — if you know how to find them.

Forging new connections has never been easier due to the increasing accessibility of people, ideas, and information. Web communities based around business, entrepreneurship, and programming are thriving all over the place. Twitter, Facebook, and other social networks have become an amazing way to learn new lessons and keep in touch with other entrepreneurs.

If you’re looking to enrich your entrepreneurial journey by sharing with others, I have a few social media suggestions that will help; email me hello@enable-business.com and I’ll tell you how….

It’s also fair to say that unless you are indeed Steve Jobs or Larry Page (in which case, do give me a call – I’ve got some great ideas to run by you!), there will be ample room for you to improve innovation in your company. The key is how you can set this in motion.

“Benchmarking against peers and competitors is the best way to kick-start stagnant or under-performing innovation programs,” says Per Nilsson, global head of the technology and innovation management practice at Arthur D Little, which commissioned the report.

He adds that although 87 per cent of companies do already measure their innovation performance, by benchmarking against others, you can see precisely where and why your current efforts are failing to deliver.

So what can you do to improve things? Here are a few top tips condensed from Arthur D Little’s report, “Pathways to Innovation Excellence”:

* stop focusing solely on changing how you serve existing customers – that’s not innovating, it will just make your existing product portfolios more complex.

* look at how Google and Apple get the edge over their competitors, and replicate – the iPhone was a game changer that blasted all other smart phones out of the water. You could do the same.

* try to expand the reach of your existing products – customers love new products and new ideas. Win them over with new propositions.

* take an open approach to innovation – although it’s an overused expression, you should “think outside of the box”. Partnerships and outsourcing your R&D should be avenues that you explore

* be bold and don’t be afraid to investigate new business ideas – give yourself a chance, and give your ideas a chance. Success won’t come on its own, you have to nurture it.

And if you think innovation is just a buzz-word that doesn’t mean anything concrete, you’re wrong. VERY WRONG!

Research shows that, compared to the average company, the most innovative companies achieve up to twice as many sales, as much as double the EBIT, and take half the time to break even when they introduce new products.

So what are you waiting for?

Innovation won’t wait for you to get your act together. Now’s the time to get your business back on the wagon.

One day, you’re working at a big company with tens of thousands of people and benefits, and then the next day it’s just you, maybe a co-founder, and a lack of steady income.

Yet you’re really not alone.

There are thousands of others making similar journeys around the world, and even more who have not only gone down the entrepreneurial path, but succeeded. These people are more than happy to share their advice, insight, and stories — if you know how to find them.

That’s where social media tools and CEO MENTORING GROUPS come into play.

Forging new connections has never been easier due to the increasing accessibility of people, ideas, and information. Web communities based around business, entrepreneurship, and programming are thriving all over the place. Twitter, Facebook, and other social networks have become an amazing way to learn new lessons and keep in touch with other entrepreneurs.

If you’re looking to enrich your entrepreneurial journey by sharing with others, I have a few social media suggestions that will help; email me hello@enable-business.com and I’ll tell you how….

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