The Things I’d Do Differently…


Despite his success, less than a decade later, he quit his six-figure salary and sold all of his possessions, including a 19th Century manor house in the Cotswolds, his collection of classic cars, antiques and artwork – including work by Damien Hirst – to raise money and start a new business.

That quotation comes from an article on the BBC business website. It’s about the recruitment entrepreneur David Spencer-Perceval, head of the specialist recruiter, Spencer Ogden.

For me, the article raised two really interesting questions:

  • What would I do differently if I were starting my business again?
  • And – six years on and six years older – would I still have the courage to leave the security of the corporate world and do it now?

Change Same Signpost Shows That We Should Do Things Differently

Everyone with a business has asked themselves the first question: if I were starting my business again, knowing what I know now, what would I do differently? For me, there are two very significant points.

First and foremost, I’d have put more working capital into the business. Not so that I could take more money out of the business in the early days, but to enable me to make better decisions.

Today, you can start a business with very little money. The old days when you needed high street premises, stock and six months’ advertising in the local paper are gone for good. But maybe the pendulum has swung too far the other way – towards the perception that you’re not a real man if you didn’t bootstrap your business.

The more I see of business, the more certain I am that not having enough capital in the early days is bad news. Yes, obviously it places a strain on cash flow and leads to sleepless nights and arguments with your spouse – but not having enough capital is bad for your decision making as well.

A shortage of capital forces you to make short term decisions for the benefit of your cash flow – not long term decisions for the good of your business. It forces you to adapt the worst possible definition of a client – ‘anyone with a pulse.’ A shortage of capital hampers you in the short term and in the long term – because it takes time to recover from the bad decisions you were forced to make for the good of the cash flow.

The other thing I’d do differently? As the saying goes, I’d ‘check my ego at the door.’ Let me hold my hand up and say that when I started TAB York I didn’t know as much as I thought I knew. When you’re running a division inside a major company you think it’s just like running your own business. It’s not. It’s not even remotely like it – as you very quickly find it. But you’ve come from the corporate world. The culture is ingrained. You can’t show weakness or admit you need help.

So very simply, I’d have asked the very talented people I was working with for more help – much more quickly.

And so to my second question: six years on, six years more secure, six years deeper into the corporate culture, would I still have the courage to start my own business?

I’m certain the answer to that is a resounding ‘yes.’

Starting – and running – a business is a lot like falling in love and starting a family. The parallels hold good all the way through. And just as you can’t choose when you fall in love, so you can’t choose the moment when you absolutely know you have to start your own business. Everyone reading this blog knows the story of my breakfast at Newport Pagnell: and everyone reading the blog has their own version of the story.

Yes, of course we’d all do things differently. But the key thing is that we did something. That we had faith in ourselves – and that we were brave enough to push our breakfast to one side and say, ‘No more. It has to change.’

That’s why I’m so proud to work with you all. Have a great weekend and I’ll see you next week – and let me know what you’d do differently if you were starting over…

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Learning from the big Apple


The numbers are quite simply staggering. $18bn profit for the last quarter of 2014 – that’s roughly £1bn a week. 74.4m iPhones sold – that’s 34,000 every hour – with sales up 70% in China. I’m obviously talking about Apple, the company that sits on a cash pile of $178bn – more than we spend every year on the NHS and education.

But there’s one more stat that I’m struggling to take in. According to the truly terrifying world population clock the number of people on Planet Earth is 7.3bn. Apple sold 74.4m iPhones. That means that in the last quarter of last year 1 in every 100 people on the planet bought an iPhone. Just one product – in the last three months of the year. I’m stunned.

Clearly Apple are doing plenty of things right: the key question is, what can we learn? Or is there simply too much difference between Apple – headquartered in Cupertino, California and dominating the world – and our businesses in North Yorkshire? So much difference that you can’t make worthwhile comparisons? I don’t think so: I think there are four very distinct lessons we can all learn from Apple.

  • First off, Apple make brilliant products that simply work. I remember getting my first iPhone out of the box. ‘Where’s the instruction book?’ I thought. There wasn’t one – because you didn’t need one. It just worked. I always come back to Simon Sinek’s TED talk when I think about Apple: many companies understand what they do and how they do it. Very few understand why they do it. That’s what sets Apple apart and it’s what can set your business apart. Apple give a brilliant customer experience and make fantastic products: they just happen to be computers and mobile devices.
  • Secondly, attention to detail. As the old cliché goes, good enough isn’t good enough. Or as one of the Michelin-starred chefs put it on Masterchef, “the difference between a good dish and a great dish is a pinch of salt.” You can never pay too much attention to detail, whether it’s design, function or customer service. In the long run, it always pays off.
  • Offer a complete package – and don’t underestimate what you know. I’ve seen two or three articles suggesting that Apple make more money from their after sales service and their cut of the apps than they do from their basic product line. Don’t underestimate the value of support, maintenance, updates, training and consultancy. Your knowledge can be as valuable as your products.
  • Lastly, don’t be afraid to charge what you’re worth. An iPhone isn’t cheap – but people pay for the perceived value. There’s a tendency in the North to say, ‘the market won’t stand it. The price is too high.’ It will: the price isn’t too high if the customer perceives the value he’s getting. Don’t ever be afraid to charge what you’re worth – or to say, ‘I’m sorry, that’s the price. No, I won’t negotiate or ‘do you a deal.’’ Sometimes you’ll need to be brave and walk away – but trust me, it works.

Of course, the cynics will say that Apple’s success won’t last. They may be right. When I started in business there was a saying: ‘No-one ever got fired for buying an IBM.’ Does anyone know anyone who’s bought an IBM recently?

But as long as Apple stay committed to the ‘why’ and – as Simon Sinek says – working from the inside out, then they’ve a great chance of staying ahead of the game. And let me chance my arm and make one prediction. The potential health benefits from your smart phone and developments like the iWatch are simply astonishing. Ten years from now monitoring your health – especially things like glucose levels – using a smart device should be routine.

Whether the NHS will be brave enough to embrace these potential benefits I don’t know. But clearly that’s enough from me for this week: still three months to go and I’m straying dangerously close to politics.

Have a great weekend – and remember the lessons from Apple. You might not be sitting on a billion dollar cash pile by the end of the year: but you can definitely have made a difference.

Small Gains, Big Profits


OK, Friday morning, you’re all fit and alert, let’s do some maths…

Your total receipts in the year are £100,000. Your expenses are £50,000. Leaving you a nice, round £50,000 of profit.

Now let’s work a little bit harder on the top line – up by 5% to £105,000. Let’s work on the expenses as well – down 5% to £47,500. And this means your profits are up to £57,500 – an increase of 15%.

Hang on, is that right? Earning up 5%, expenses down 5% but profits up 15%?

Yes, it is right.

And having done maths, let’s move on to cycling – because what we’re talking about is Dave Brailsford’s ‘aggregation of marginal gains.’

When Brailsford became Performance Director for British Cycling in 2003 the sport and the team were at a low ebb. Brailsford was determined to change that, and everyone now knows the results. Two gold medals at the 2004 Olympics, followed by eight in 2008 and 2012 – and victories in the Tour de France for Bradley Wiggins and Chris Froome.

Brailsford’s philosophy was the aggregation of marginal gains: he reasoned that if he could find a 1% improvement in everything that his team did, the cumulative effect of all those one per cents would be enormous.

The whole principle came from the idea that if you broke down everything you could think of that went into riding a bike, and then improved it by 1%, you will get a significant increase when you put them all together.

There was plenty in the work of Brailsford and his team that you’d expect: nutrition, training, the weight of the tyres, and so on.

But there was plenty there you wouldn’t expect as well: which type of pillow gave the best night’s sleep; the most effective massage gels and – almost unbelievably – teaching the riders the best way to wash their hands to avoid infections.

The parallels with business are obvious – and as my remarkably simple maths demonstrates, small gains can make a big difference to your profits. You might, however, suggest to me that running an SME is slightly more difficult than sitting on a bike.

And you’d be right.

Much as I admire the achievements of Hoy, Wiggins, Froome and company their job description is simple: eat, sleep, train, sit on that thing and pedal.

The job of any professional sportsman is to perform in the moment: it’s not to see the bigger picture. If you’re running an SME you need to perform and see the bigger picture – all the time.

The Brailsford model is excellent – and I absolutely commend it to anyone running a business. If you can make a small difference in sales, in finding and retaining new customers, in the performance of your team, in cutting costs – the overall effect on your business will be little short of sensational. But you have to do that whilst consistently focusing on your big goals – the aggregation of marginal gains is a tool, it’s not a result.

You also have to make sure that you don’t get lost in ‘the thick of thin things.’ Not only do you have to stay focused on your big goals, you have to be aware of what’s happening in the world outside your business.

It’s no use saving 5% on the cost of tallow and beeswax if someone has just invented electricity.

Fortunately, you have The Alternative Board. Rest assured that your colleagues around the table will see the big picture and they will keep you focused on your goals. Yes, they’ll cheer when you announce that sales are up 10% and they’ll ask you how you did it. They’ll be delighted that the aggregation of marginal gains is working for you – but one of them might also say, ‘By the way, have you heard about this Thomas Edison bloke…’

Sixteen Weeks and Counting…


As I mentioned last week, there were 17 weeks to go until the end of the year. Inevitably, that’s now 16 weeks and – as Rudyard Kipling would have said – we need to fill them with 90 days worth of distance run.

…And we all need to make sure we hit the ground running on Monday January 5th. You have two choices on that morning. You can go into your office knowing exactly what you need to do and what you’re aiming for in 2015. Or you can sit at your desk trying to remember what you do for a living. The choice you make will define – at the very least – the first three months of the year.

So as promised last week, here are five key strategies to follow between now and the end of the year that will help you finish 2014 in a blaze of glory and start 2015 in exactly the way you’d want to start the year.

As I’ve said many times on this blog, remember the mantra of Stephen Covey. ‘Keep the Main Thing the Main Thing.’ What’s the One Big Thing you really need to do before the end of the year? What’s the OBT that would make all the difference to your business? Keep that front and centre of your agenda in the next sixteen weeks: share it with your fellow Board members. Don’t worry: they’ll make sure you keep it front and centre…

And yes – if the One Big Thing is simply ‘get all the nasty stuff done’ so you can really start 2015 focusing on exactly what you want to focus on, that’s fine. But the key word there is all. If you’re going to clear the decks, do it thoroughly. Write down everything that needs to be done and out of the way by the end of the year – and sit down to your Christmas dinner with it all done.

Go Away. I absolutely mean it. The Northumberland coast is wonderful in the Autumn. Take yourself off for a couple of days, walk on the beach, come back to wherever you’re staying and sit and think. What do I really want from my business? What could we really achieve if we put our mind to it? And most importantly, is my work/life balance as balanced as I’d really like it to be?

Spend a morning with excel as well – and you need to prepare two cash flow forecasts: the best of times and the worst of times (sorry, I’m still hooked on my Dickens quotes…) Prepare a worst case scenario cash flow forecast: don’t gloss over expenses, assume you’ll lose a major client and assume you’ll hit 80% of your targets. And then dare to dream. What would your business, your bank balance and your life look like if you hit all your targets? Even the ones that you think are well out of reach.

Get your tech up to date. Do you have a social media plan? Can you edit word documents on your iPad? How out of date is your website, Facebook page and Twitter profile? Take the time to do a proper audit of the tech and digital changes you need to make to help you achieve your goals – and I guarantee you’ll be able to find a lot of the answers simply by asking Google and investing some time.

Lastly, find your perfect client. There’s a client or customer out there that you really want to work with in 2015. We’ve all got one, and I’m no exception. So what makes them tick? What do they really want from their business? And why are you the perfect person to supply it? Start the charm offensive now – and you may be pleasantly surprised. They may become a customer or client well before 2015.

Of course, if that happened the killjoys round the Alternative Board table would simply demand that you chose another perfect client, but that’s the price of progress!

Oh – there’s one more thing you need to do well before the end of the year. You know it and I know it. None of what we do or achieve would be possible without the support and understanding of our wives/husbands/partners and families. So don’t leave the Christmas shopping until December 24th. Get it done, cross it off your list and give them the Christmas they deserve…

The Black Dog


First of all thank you for all the comments on the blog last week. Of all the posts I’ve written ‘Risk’ probably attracted the most – and the most detailed – feedback, by the usual mix of direct comment, e-mails and Facebook. I really appreciate them all and if I haven’t replied yet – I’m getting round to it!

But now to matters darker.

The comparisons between being successful in sport and running your own business are often drawn. Will to win. Drive. Competitive instinct. Refusal to be beaten. Absolute focus on achieving your goals. And no self-respecting motivational speaker would even dream of getting to his feet without a word or ten from Vince Lombardi.

Recently though, we’ve seen the other side of sport. For the first time, very successful sportspeople have been prepared to talk about depression – how for some of them the pressure to succeed has just been too much and it’s spilled over into mental illness.

One of the most high profile examples was the footballer-turned-Talksport-pundit Stan Collymore, and the reaction he initially received was not untypical. ‘My manager said I was too successful to get depression and only women living on the 15th floor in Peckham got depressed.’

Since Collymore there have been other high profile cases, most noticeably in cricket (the sport that unfortunately has the highest suicide rate among ex-players).

The question for this blog is an obvious one: if success in sport and success in business are so often linked, is there also a business parallel with a case like Stan Collymore? Can you be successful in business and suffer from depression? Could someone turn round to you and say, ‘You can’t possibly be depressed, you’re too successful. It’s only people who’ve failed who are depressed.’

But that’s far from the truth. ‘The better the company did the more depressed I became’ isn’t as uncommon as you’d think. Despite it at first seeming like a ridiculous contradiction, the simple fact is that success can make you feel trapped, lonely and – ultimately – depressed.

As we’ve discussed many times, running your own business is a lonely place – and the trouble is that it’s only other business owners who understand how you feel. You can have the best husband/wife/partner in the world but if they’ve never had to sack someone, never worried about how they’re going to pay the wages and never seen the order they’ve been counting on suddenly evaporate, they simply cannot empathise with you.

For me, that’s where the TAB boardroom table comes in: seven or eight people who absolutely understand how you’re feeling and who absolutely understand your problems, frustrations and worries. In some ways it’s a sanctuary: somewhere you don’t need your body armour and protective persona – and somewhere you won’t be judged.

I’ve seen some raw emotion round a TAB table. An entrepreneur who doesn’t know which way to turn? Many times. Tears? Yes, several times. But I’ve also seen the other type of tears: when the advice of the other Board members has worked and when the weight has finally been lifted off someone’s shoulders.

Stan Collymore set up a charity – Friends in Need – to help people with depression. If you think you need help, get help now. But if you think you need the help of other entrepreneurs – the only people who can really share your feelings – then think about The Alternative Board.

One last point on depression: it can hit anyone. The list of famous people who have battled the illness is long and impressive – Winston Churchill referred to the ‘black dog’ that haunted him in even his most successful moments. If it’s haunting you, just remember – you don’t have to face it alone.

The Time to Take a Risk


There he is – at the high stakes poker table. The four, six and eight of hearts are face up on the baize. He’s all in. Surely he can’t have the five and seven? Can he? You’ll have to pay to find out…

There he is again. York races. The horses flash past the post. Was that the slightest of smiles? That’s between him and his bookmaker…

Seven o’clock the next morning. As always, the first one into the office. A bank of computer screens. Stock market prices, foreign currency exchange – and the production figures from his factories; the sales figures from his shops. He finishes his black coffee, takes his tablets and settles into another high-risk, high-pressure day. Another typical day for an entrepreneur…

That’s the popular perception of the entrepreneur – someone who loves risk, who needs the adrenalin rush from risk, who even goes out of his way to create risk where none exists.

That’s the popular perception – and in my experience it couldn’t be more wrong.

How can I possibly say that? After all, I run my own business. Most people reading this blog run their own business – or at least have a significant portion of their future prosperity tied up in the success of the business they’re managing.

We’ve all taken risks. We’ve given up the security of the corporate world for the doubtful joy of working until ten o’clock at night and wondering why the person you thought you’d developed a relationship with hasn’t paid his invoice. Maybe some of us have had to tell our families that Christmas won’t be quite so spectacular this year – and spend January explaining to the building society that they’ll need to be patient…

There’s nothing more stressful than running your own business. You put your wealth, your health and your psychological well-being at risk.

But that doesn’t mean that entrepreneurs enjoy risk – and it certainly doesn’t mean that they go out of their way to create risk.

In my experience, the vast majority of entrepreneurs I work with would class themselves as being ‘risk averse.’ And as I wrote last week, that’s one of the key strengths of The Alternative Board – the collective wisdom round a Board table goes a long way to reducing risk, to making sure that you’re aware of all the possible downsides before you press ‘go.’

But there’s something else I notice as the discussion on risk goes round the table. Entrepreneurs define risk differently to other people. The entrepreneurs I work with see a different type of risk. Let me explain by taking you back to Newport Pagnell service station…

I’d finished another identikit motorway breakfast in another identikit service station – and I’d decided to leave the security of the corporate world and start my own business. Doing what? I didn’t know at that time. But come hell or high water, I was going to be my own boss. That meant saying goodbye to security, to my company pension, company car and all the other trappings of being a few rungs up the executive ladder.

And conventional wisdom dictates that I was taking a huge risk in giving all that up.

But if I didn’t start my own business there were far greater risks. Risks I simply couldn’t accept any longer.

The risk that I’d never know if I could have succeeded on my own.

The risk that I’d never really fulfil my potential.

And above all, the risk that someone else could dictate my schedule – and that I might miss seeing my boys grow up.

Almost everyone reading this blog will be able to identify with that. It isn’t conventional risk that the entrepreneur fears. ‘No money? Fine. I had no money when I started. I’ll start again.’ It’s the risk that can’t be quantified. It’s the risk of not fulfilling your potential, the risk of missing your children growing up and, above all, the risk of never knowing if you could have done it or not…

Are you paid too much? Or are your staff paid too little?


A nice, non-controversial title for this week…

…Sparked by reading a review of Thomas Piketty’s book, Capital in the Twenty-First Century. I’m sure plenty of you have read it – only 700 pages and a bargain at thirty quid or thereabouts.

Just in case you haven’t, let me summarise. Piketty spends a lot of the book talking about inequality – specifically that the US is evolving into an oligarchy in which wealthy elites exercise far more power than they should. And he defintely has it in for overpaid CEO’s. I can see his point…

Henrique de Castro collected a $60m severance package when he was fired from Yahoo – on top of a $40m annual pay cheque. JC Penney paid its former CEO, Ron Johnson a salary 1,795 times that of an average department store worker.

In 2012 the average CEO in the US was paid 273 times the salary of the average worker. The growth rate of the CEO’s pay has been more than a hundred times faster than the growth of his average employee’s.

Even in a country as fervently capitalist as the US, this has started a few murmurings of discontent – and a few op ed pieces in the newspapers suggesting the previously-unthinkable. Should the US have a maximum wage as well as a minimum wage?

What about the UK? In the week when Barclays paid fat bonuses to bankers who’d overseen a slump in profits – and with a General Election on the horizon – expect to see the same questions asked here.

But all that’s a long way from North Yorkshire – and I can emphatically state (or I’m pretty sure I can) that none of the members of TAB York are paying themselves a thousand times more than the people they employ. But pay in small businesses is crucial – get it wrong and it can destabilise the whole team. Read this blog from Castle Employment in Scarborough: there are some really pertinent points, especially if you’re thinking of hiring a ‘superstar.’

The good news though is that confidence is improving and for the first time in a long time several of my clients have the words ‘pay rise’ on their to-do list. But even giving someone a bit more on their bottom line can be fraught with difficulties. Specifically, how do you keep the payroll fair?

However hard employers try, all too often people are paid different amounts for doing what’s basically the same job. The main reason is simple: ‘Bill’s been with us for ten years. It’s only right that we should reward his loyalty.’ Or maybe Bill joined before the business was as rigorously run as it is now, maybe – dare I suggest – before you joined TAB.

The problem is, that causes resentment with the new member of staff who’s doing the same job – and who may well feel that she’s doing it rather better than that stick-in-the-mud who’s been here for a hundred years.

So what do you do? Give Bill a smaller pay rise than everyone else? It’s a really tough decision, and one that you need to get right because there are two irrefutable rules about pay. First, nothing de-motivates someone faster than feeling that they’re not being paid fairly – and secondly, however much you try to keep it quiet details of pay packets always seem to leak out.

It’s a thorny issue, and one that’s going to get thornier as – touch wood – the economy improves and pay rises (maybe even bonuses!) move back up the agenda. If you’ve any thoughts, ideas or tips on how you tackled the problem then as always I’d be delighted to hear them…

…Because it would appear I have some ‘pay’ negotiations of my own to conduct. Dan and Rory have held a union meeting. The word ‘allowance’ has been mentioned. Several times…

The Road Less Grizzled


Like a lot of you, I like business quotes. They’re inspirational, helpful, supportive and, just occasionally, there to remind you that however busy you are there are still more important things in life.

But by the time you get to my age – and thirty is not that far away now – you’ve heard them all before.

So this article was a breath of fresh air. Some really pertinent, worthwhile comments that I hadn’t come across before – still inspirational, helpful etc. etc. – but not the same old grizzled faces that pop up all the time.

You’ll all have your favourites – let me pick just four.

I’ll begin with this one, from Jason Cohen, the founder at WPEngine. You spend 99.9% of your working life on the path and 0.1% experiencing the euphoria of an exit or the disappointment of a final failure. If you’re not fulfilled by the journey, you’re wasting your life.

That for me goes right to the heart of TAB in general and TAB York in particular. 99.9% might be a slight exaggeration, but we’re all going to spend the vast majority of our working lives ‘on the journey.’ If you don’t enjoy the journey – if it doesn’t fire you with enthusiasm – then sooner or later one or more wheels will fall off the business.

But the journey can’t rule your life and that is hopefully where TAB comes in – making sure you’re successful without being consumed by your business: helping you keep your work and your life balanced.

On to number two, from Fred Perrotta at Tortuga Backpacks. You can’t figure out everything beforehand by reading about it. Just do it and make your own mistakes. Get back up, dust yourself off and do better next time.

Again, this is exactly what modern business is about. As I’ve said many times in this blog, Ready, Fire, Aim. For many businesses these days the price of starting – and the price of failure – is low. Don’t spend months (or years!) analysing the market and writing endless business plans: the best information is the information your customers give you. Get out there, give them a product, listen to what they say, revise your product and go again.

Next up, Francine Hardaway, founder of Stealthmode Partners. And this is very much a back-to-basics reminder, but a basic none of us running a business can ever ignore. Watch your cash. Running out of money can happen when your business is at its most successful.

Of all the KPIs you monitor, the ones dealing with cash flow are the ones which need watching the most closely – and as Francine says, running out of cash isn’t necessarily a sign that your business is failing. Running out of cash is just that: running out of cash. It’s easy to put off doing the cash flow forecast and chasing up the bills, but it simply has to be done – and it has to be done consistently.

I’ve saved my favourite for the end. It’s from Scott Meyer of 9 Clouds. Show up and give your best effort every time. You never know who’s listening.

Absolutely right. You never know who’s listening, who’s in the audience, who you’re going to meet. But show up and give it 100%, whether you’re delivering a once-in-a-lifetime speech or whether you’re at yet-another-networking-breakfast. I am prepared to wager that every person reading this blog owes one of their major clients or one of their biggest opportunities (or maybe even their wife!) to a time when they very nearly didn’t go – but finally decided to make the effort.

Let me leave the rest of the quotations and advice from the article with you. You’re bound to disagree with my choices and you’re bound to have your own old and new favourites. As always I’d be delighted if you’d share them.

Have a great weekend and I’ll be back next week. That’s April – the first quarter of 2014 gone already. But I’m absolutely confident you’re all on target for a great year…

Many Hands Make Light Work – Thanks to Crowdfunding


Last week I looked at the growth in social lending, particularly through sites such as Zopa and Funding Circle.

This week, another possible way of funding your business: another idea whose time has come and which will play an increasingly important part in business – especially for start-ups – in the coming years. Welcome to crowdfunding.

The idea behind crowdfunding is simple – lots of people come together to fund a project, which might be a book, a film, travel… Or a business.

However, there’s one crucial difference between social lending and crowdfunding: with social lending, you’re borrowing money and you’re going to have to pay it back. With crowdfunding the money isn’t quite a gift, but you’re definitely not going to be asked to pay it back.

The best way to explain the concept of crowdfunding is with a real life example. So let me ask you a simple question: Would you Marry a Farmer?

Lorna Sixsmith is a wife, mum, ex-teacher and social media consultant. Crucially, she’s married to an Irish farmer – and she wanted to write a book about it. As you’ll see from her site, she estimated that the total cost of the book would be in the region of €9-12,000. She wanted to raise around half of this money through crowdfunding, and used an Irish funding site – www.fundit.ie

Well, congratulations to Lorna, because she’s raised the €6,000 she wanted, from a total of 191 people. (I’ll save you the trouble – it’s an average of €31 each – around £26 at the current exchange rate.)

But as you’ll see from her site, these people haven’t just given Lorna the money – they’ll be getting something back in return, ranging from an e-book (for €8) right up to €1,000 which allows the donor to name a calf on Lorna’s farm, have a blog about the calf and, as you’d expect, receive plenty of books. €1,000 might sound a lot of money to fund someone else’s project, but used properly – especially by a company that supplied farmers, for example – I could see it as a quirky and very effective piece of advertising.

So far so good – and haven’t we all got a project at the back of our mind that would cost around five grand and we’d love to do. Especially if someone else will pay for it…

But it’s not that easy. As Lorna says in an excellent article on what she’s learned about crowdfunding, it’s like a full time job. You’ve got to promote yourself, and you have to be prepared for rejection.

But with the banks continuing to be cautious in lending to small businesses – especially start-ups – I can see crowdfunding as a viable way for embryonic SMEs to generate capital. But your project needs to be worthwhile in the eyes of other people – and like Lorna, you need to give something back to your funders.

So what can you give back – especially if you don’t have a book or a massively photogenic pedigree calf? There are three things which spring immediately to mind: your expertise; the experience of crowdfunding and one very simple commodity – your time. I was really impressed reading through the range of offers Lorna made – which you couldn’t get anywhere else. That’s the key question to answer: what can my business give someone that they can’t get from anyone else?

So that’s social lending and crowdfunding: two sources of business finance whose time appears to have come and that you need to be aware of. I’m not suggesting you immediately abandon all forms of conventional funding – but I am saying that the next few years are going to see different and imaginative ways of funding your business. And that when the bank manager says, “I’m very sorry, the risk assessment unit have had a look…” it may be the beginning, rather than the end.

Always a Borrower or a Lender Be…


As you’ll know if you paid attention in English, Polonius didn’t mince words when he was giving some fatherly advice to Laertes:

Neither a borrower nor a lender be
For loan oft loses both itself and friend
And borrowing dulls the edge of husbandry
This above all things
To thine own self be true

Sound advice – so why is it that so many sober, respectable people are ignoring Polonius and finding common ground with one of Will’s less savoury characters, Shylock?

Over the next two weeks I’m going to look at alternative forms of borrowing and raising money for your business. Traditionally, lending to businesses in the UK has almost exclusively been the preserve of the high street banks. I have a feeling that ten years down the road the picture will look very different, and hopefully this post and next week’s will highlight the potential changes and opportunities for you.

Let me say straightaway that I have plenty of friends working in banking – and they’re working hard and trying to do their best for clients in what has been a very difficult economic climate. But I also have plenty of Board members and clients running businesses – and I’ve lost count of the number of times I’ve heard, ‘they wanted so much paperwork; they wanted so much security; and then at the last minute some damn risk assessment unit turned me down for no reason at all…’

No doubt the risk assessment unit did have a reason, but there are hundreds of good, well-run businesses who can afford the repayments getting turned down by the banks. The market for alternative forms of finance and capital is only going to grow.

So this week I’m looking at social lending, and next week I’ll be examining the growing popularity of crowdfunding.

First things first: what is social lending? Simple, it’s one person – or a group of people – lending to another via an intermediary. Probably the most well known intermediary in this country is Zopa – www.zopa.com – and for lenders their pitch is simple. You’ll get a better rate of interest than you will by putting your money on deposit – very attractive now that the new Governor of the Bank of England has committed himself to low interest rates for some time to come.

For borrowers, a lender like Zopa is equally attractive: it’s simple and, very often, it’s cheaper than borrowing from the banks.

The vast majority of social lending so far has been to individual customers, not to businesses. But with Zopa now set to receive £10m of Government money to lend to sole traders, the move towards lending to businesses is beginning to gather pace, especially as Zopa has been joined in the social lending marketplace by other lenders including the SME specialist Funding Circle. (Have a look at their website. Interesting isn’t the word – and you’ll see examples of businesses being funded by hundreds of different lenders.)

Right now the amount of money available for funding through social lending is minuscule compared to the banks – but the pendulum is only swinging one way. Nearly all our businesses are going to need funding at some stage in their development. You’d be well advised to keep an eye on lenders like Zopa and Funding Circle – social lenders look set to become a serious funding alternative for the well managed SME.