I’ve just been doing a competitor analysis for a client and I’ve been struck by just how absolutely rubbish most of his competitors are.  Which is good news for him, but I thought there might be some learning for the rest of us.

In a slightly random order, here are some tips on what not to do

• Don’t make me guess what it is you do.  I want to know as soon as I go to your home page
• Don’t puzzle me with gobbledygook.  If you can’t explain what you do in plain English, I’m not going to stay around to figure it out
• Don’t make me peer at the screen to read the tiny writing.  I’ll either not bother and go somewhere else, or I’ll get fed up really quickly and go somewhere else
• Don’t give me a section called “Thought Leadership” and then put up two white papers.  It makes you look like a bandwagon jumping, self-aggrandising idiot.  Which is probably not the brand values you were looking for.
• Don’t rely on diagrams or videos to get your message across – give me some easily digestible words first, and then back it up with a diagram or video

Any other suggestions for bad practice you’ve seen?

This is the next instalment of a series of blog posts I’m writing about how and why you need to get some extra cash into your business, so that it can grow and flourish as a grown up business.

Image by bubbo.etsy.com

Today, I’m going to look at how to bring angel investment into the business. This is an equity investment, where you give shares to someone else in return for a wedge of cash which you then to use to grow the business. The central idea is the same – although you own a smaller share of the business, that share of the grown up business is worth much more than if you still owned 100% of a little business.

Often you’ll find that someone you know already is happy to put in 10-50k, maybe more, in return for a share of your business. This might be someone in your family, a friend, a customer, or another business person you know through networking. It’s worth asking around, even putting it on your website so that people know that you’re interested. 40% of angel investments come from people who already know the business owner.

If you don’t have any luck that way, you might try one of the organisations which broker angel investment. I’ve worked with clients who have had success through Angel’s Den and Finance South East, both of whom have courted groups of angels, and will sell the idea of investing in your business for you. Be aware though, that this is only really worth doing if you need more than 50k, as by the time that you’ve paid the broker fee, and the lawyers, you’ll have probably spent about 10k.

These are some of the areas I look at when I’m working with clients on bringing in angel investment:

• A clear business plan which shows how the investor will get back at least 3 times their initial investment.
• The recent growth of the business – don’t allow the process of seeking investment to slow down your organic expansion, as you can make a much stronger case to an investor if your business is already growing.
• Suggesting a mix of angel investment and bank finance – an investor will be much happier to invest if a bank has said they’ll lend half the money. Everyone likes to share the risk and back a horse which other people are betting on
• I’ve also been able to introduce clients directly to investors, because I’m constantly networking to find opportunities for my clients, so I have my nose to the ground with right people.

I’ve also looked at how you can persuade the banks to lend you money next time, so make sure you don’t miss out by subscribing. If your business wants to grow and you know that you need some money to develop, do feel free to get in touch for a chat about how I might be able to help.

Other articles of interest about shares and equity in your business are:

How Can I Make My Company Eligible For EIS?

How to give away shares in your business

Getting someone to invest in your business

Giving shares and equity away

One of the major doom and gloom statistics reported in the news is that banks are lending less and, in particular, are lending less to smaller businesses.

Photo by Lucy Hill

I checked some of the figures out at the Bank of England’s website, and they say that banks have lent 4% less money this year than they did last year. But then I thought, hold on a minute, that’s 4% less than last year – 4% isn’t that much, is it? And then I delved a little deeper into the Bank of England figures, to find that they think that banks are lending, albeit less than a few years ago, and that although they say the availability of credit for small businesses is “variable”, the banks are lending to some small businesses.

Which fits with what I’m seeing with the companies I’m working with – there is money available, but the banks are being very choosy about who they lend to.

So much for the doom and gloom: how do we get some of that bank finance into your business?

You have two options here. You can either borrow personally and put that into the business, or you can get the business to borrow the money directly.

When and why is personal borrowing a good idea?

You might want to borrow the money yourself if you can get a better interest rate through remortgaging your house. Mortgage rates are 2-4%, whereas business loans are 9-12.5%. However, remortgaging is a hassle, so this is only worthwhile if you need upwards of 10k. Even a personal loan (rather than a mortgage) will often be less time consuming and at a better interest rate than a commercial loan to the business.

If you need less than 10k, say to pay for some business advice, a rebrand and a new website, you’d probably be better off getting a 0% credit card, and making sure that you pay it off before the 0% bit turns into 26%.

Remember that if you borrow personally, you’ll have to pay it back yourself if anything goes wrong, so you’re taking the liability yourself, not the business.

Getting the company to borrow the money

If you want to limit the potential liability to yourself, or if you don’t have enough equity in your house to remortgage, and you need more than 10k for the business, you’ll probably want to get the business to borrow the money. I’m assuming that you’re a limited company here, by the way – if you’re a sole trader or a partnership and you borrow the money, it’s exactly the same as borrowing the money yourself.

In this case, you’ll want a commercial loan. Here are some tips to help you get the bank to lend you money:

• Banks like you if you’ve been going for a few years, and you have been producing profits for a while. Their rule of thumb is that they’ll lend you 3 times your net profit, plus the director’s drawings.
• Banks will want to see a good (but brief) business plan, with a clear focus on how you’ll be able to pay back the money you want to borrow. Remember that the banks want to lend you money, as long as they are confident that they’ll get it back, because that’s how they make their giant profits.
• Do be prepared to offer a personal guarantee. They’ll definitely ask for it, and if they don’t ask at the beginning, they’ll sneak it in later.
• Banks will also ask you for security. Remember, they want to be absolutely certain that they’ll get their money back, so they’ll ask you to back it with a second charge on your house. Providing security makes it more likely that you’ll get the loan, but you have to think carefully about the increased risk to you.
• If you can get someone else to put some money in, or you can put some in yourself, this will make the bank more likely to lend to you.
• Banks prefer it if you’re buying things. They would prefer you to borrow to buy a new truck than a website, even if the website is going to generate lots of new business for you. Old fashioned and ludicrous, but that’s the way it works.
• Go to lots of banks, not just the one you have your current account with.

If you don’t have any assets for security, consider the Enterprise Finance Guarantee, where the government will guarantee 75% of the loan, which makes the banks more likely to lend to you. They’ll still ask for a personal guarantee, and EFG loans are more expensive, but it’s definitely an option.

This article is one of a series on how to get money into your business so before you run off and borrow money, check out my guide to the organic cashflow model (which I always prefer to borrowing) and subscribe to the series to make sure you get all the instalments.  And of course, if you need some help with getting money into your business, do get in touch for a chat to see how I can help you.

Lots of businesses grow very slowly. Or don’t grow at all. They do the same as they did last year, maybe producing a nice little income that they’ve got used to. I’m not really interested in those businesses, even though they’re probably doing lovely things.

Photo by S Falkow

I’m interested in the businesses who want to expand and grow. The people who are ambitious, who want to do new things, the business owners who want to see a real difference in their company, and the people who want to make some real money for a change.

These are the people I work with at the Joy of Business. They’re not power mad, money grabbing uber-capitalists; they’re business owners just like you, and they have taken a decision to have a “grown up” business and want to create something bigger and better than they have at the moment.

Often, but not always, you need some extra cash to grow your business. You might need to employ someone else to do some or all of the work while you concentrate on a new area of the business or spend your time on sales and marketing. So you need some extra money to make sure you can pay that person.

Maybe you need to rebrand the business, and start taking your marketing seriously. You need to commission a new look, a website which attracts customers, and some copy which explains why someone should buy from you.

Sometimes you can see a very profitable potential area of your business which you’re not currently making the most of. You need to spend some cash to develop something new, which is going to be your killer app – the one that will revolutionise your business. I see lots of businesses where the business owners have seen an opportunity, but haven’t had the time to develop this.

All of these situations boil down to the fact that you don’t have any surplus in the business. Either you don’t have the cash to commission a new website, or you’re so busy chasing the jobs which are going to pay the bills right now that you don’t have time to do the things which are going to pay off your mortgage in 3 years time.

How to lose half a million quid

I had a service business client 5 years ago. They’d identified a software product they could make which I guessed would sell about 100k per year, if not more. It was hot. They’d done about 80% of the coding, but it needed finishing off. At every meeting, I asked them how the product development was coming along. Every time, the reply was that they hadn’t had time to work on it, because their software developer was doing client work.

I bumped into the director a few weeks ago and he told me that they were finally almost ready to launch the product. I was happy for him, but thought of the money they’d lost in the meantime. 5 years at 100k pa, they’d lost half a million, most of which would have been pure profit. And then I Googled the type of product, and saw at least 10 different competitors, none of whom had been there when they had first thought of this product. So now they’re competing with all these other companies, and they’ve sacrificed about .5m of income. They probably made about 30k on the client work their developer was doing.

Don’t let this happen to you

Don’t let this happen to you. If you have a plan, or even just the desire to grow your business, and the lack of cash is holding you back, you can find the cash. Over the next couple of weeks I’ll be looking at different options for getting money into your business, whether it’s 3k for a website revamp, 10k for a temporary software developer or 100k to develop a new business area.

It’s possible – and it’s up to you. Of course, if you’d like some help with it, or a reality check to see if it is possible – get in touch for a chat

I keep talking about this idea of a grown up business, and it’s one which seems to resonate with a lot of the business advice clients I work with. But what do I mean by a grown up business, and why would you want to be one?

Photo by M.C.P.

The features of a grown up business

A grown up business is one where the owners have decided that they’re going to do things properly. They’re going to have proper systems which can cope with more customers and more work. A grown up business will probably have employment contracts for the staff and freelancer agreements for the associates. They’ll probably be using a proper accounts package, and maybe getting a bookkeeper to do all the numbers for them.

A grown up business is focussed on making decent money

They’re going to make some serious money, whatever that means to them. For some of the businesses I work with this means building a business worth a few million, and for others it can mean getting to an income of 50-60k pa.

Not doing all the work yourself

The owners in a grown up business will be delegating some, or all, of the work to other people, so that they can concentrate on growing the business. They’ll be focussing on supporting the other people in the business so they can do their job well, co-ordinating all the activities, and taking responsibility for the sales and marketing.

Do you want to be a grown up business? Meet me for a coffee and a chat, and let’s see how we can get you there.