Category Archives: Running a business

Do Non-Executive Directors get paid?

Non Executive DirectorNon Executive Directors (NEDs) are a valuable asset to any growing company, but although they may be very experienced in their market area, for some it’s the first time that they have acted as a Non Executive Director of a business.

The business also may be new to taking on an NED, so between them there is a lot of uncertainty of how the time and efforts of a Non Exec should be rewarded.

In Company Partners we’ve put a resource page on Non Executive Directors that may be helpful. www.companypartners.com/content/resource/Non-execs

In that we give an example of a real business (approx £1M T/O), which gave a 1 or 2 percent share of the business to each of two non-execs (the full-time directors/founders owned the rest), based on this they paid the non-execs a share dividend equating to about £400 a month. This paid for the non-execs time and ensured they had a keen interest in the company.

For complete start-ups however, who may not even be paying the founders a wage, it can be difficult to get a Non Executive Director on-board, since there is no revenue yet to reimburse the NED for their time and expenses.

This is where the young company has to make what they are doing interesting and show that there will be rapid growth, after which the Non-Exec would be able to be compensated. In the mean-time a small percentage of shares could be made available.

It is best to first have a trial run of a couple months with each other to ensure a good fit. Also phase any share holding in over a period of time, making sure that the shares are recoverable should the NED leave. There are specialists who can help with drawing up share investing agreements.

For the Non-Exec, working with a young company can be a fantastic experience, seeing it grow and feeling that you have helped to create something of real value. Being flexible in how you are rewarded will enable the growing company to afford your time.

But to answer the original question, do Non Executive Directors get paid, yes mostly they do, how you arrange that can be agreed between you.

 

How to find more customers – the top 5

How to find customers1. Get free PR

If there was an unlimited amount of money to spend, advertising would be easy, but normally there isn’t. So what can you do? Well this is where free PR comes in. PR is of course short for Public Relations and was the remit of large corporations, but has now become a valuable tool for gaining public recognition of your business and products as well as building your image.

In many ways it’s the best form of advertising, because it doesn’t use sales techniques that customers are suspicious of, instead it promotes a positive message about your business that can develop customer loyalty and encourage new customers to find out more about your services or products.

You can hire a PR company to do all this for you, but that’s not cheap, so why not do it yourself. The media have to fill their papers and their broadcasts with content every day. The key is to make it interesting and have a human interest angle, not just the history of your company or latest product.

For our full members we have a comprehensive write-up on getting free PR (btw if you are a full member you also get access to business partners, mentors and business angels investors) – How to get free PR

2. Make marketing work

Marketing is the overall term for PR, advertising, branding, pricing and identifying the products that your customers want. It therefore looks at the big picture. Each business should have a marketing plan, which pulls all this together and makes sure that you have not missed an important step that will grow your business.

The main key though in making marketing work is to segment your market into bite size pieces. That way you can get your messages tailored exactly right for your potential customer. I wrote a blog on that which may help – How to market smarter

If you’re thinking of writing a marketing plan for your business, you may be interested in a deal we put together with Palo Alto to get a free copy of Marketing Plan Pro software with each copy of Business Plan Pro bought from them, you can see more here – Sales and marketing plan

3. Using a web site to generate new business

Nearly every business has a web site nowadays and if you haven’t you really must get one, it isn’t expensive and I can’t think of any business that can do without it. The first thing will be finding a domain name that meets your business needs.

Ideally the domain name would contain the key words that people will search to find your product or service, such as “bestsheds” or “berkshireaccountants”. It doesn’t have to be your company name.

Using your company name is also okay and allows you to keep your products and services unrestricted by the web site name, but the site will be harder to find on search engines for your products, so you will need to do more work on its visibility. If someone already knows your business name it will come up, but you want to be found by people who don’t know you and are searching for what you can provide.

There are plenty of very inexpensive web site packages around. Choose one that allows you to easily make changes to it, because the worst thing is seeing a site that hasn’t been updated for 2 years. Have several new items, testimonials or articles that show that it is up-to-date.

If possible get a local web designer to produce the site, again not too expensive an option. Pick one whose work is attractive to you. He can help you optimise it so it can be found on search engines like Google.

Don’t get sucked in though by all those emails from companies wanting to provide SEO (search engine optimisation). If you can afford it pick a well trusted digital marketing business, but it won’t be cheap. You can do it yourself, have a look at Perfecting a business web site .

4. Don’t use a free email address

Using gmail, hotmail or any of the free email addresses looks amateur if you are running a business. It’s okay for private use, but when you are trying to show that your business is worth buying from or investing in, then it looks shoddy.

If you already have a domain name, adding email on to it is cheap. If you haven’t a domain name for your business, get one. Then use that for email.

Put your name, contact details and a sentence saying what your business does at the bottom of your mails (as a “signature”).

5. Communicate and Network

If you have a website, offer a free incentive (such as a downloadable useful information sheet) and keep in touch with those people (make sure they have ticked a box to allow you to keep in touch).

Regularly contact existing and old customers, with special deals or just helpful information. It’s easier & cheaper than finding brand new customers.

Not everyone is comfortable with the concept of networking. It’s been over used as a term, but has been around for hundreds of years. It needn’t be hard or daunting. Just as computers talk to one another over a network and spread messages, so can us humans. The idea is that your message will pass from one person to another. A network should be more than just a list of people you talk to. It should work for you.

Thought of that way, find rememberable messages and sound-bites that you can give people you meet about your business that may cause them to mention it to someone else. On Company Partners for instance, I talk about it being like a “dating site”.

Depending on your industry and market, there will be opportunities to pass these messages on to either customers themselves, or to people who meet and influence your customers. There are thousands of organised events, choose one that best fits your market and give it a go.

Networking can also find you partners to collaborate with and ideas to try.

The old adage of invent a better mousetrap and the world will beat a path to your door, doesn’t work any more. You’ve got to tell the world about your mousetrap and show them how to get to your door.

 

Can Olympics inspire new start-ups?

Business revolutionI was lucky enough to go to the dress rehearsal of the Olympic Games opening ceremony and was hugely impressed by the hard work, energy and enthusiasm of the volunteer dancers and actors.

When the full version of the opening ceremony was shown on Friday the overall story became clearer. Much of the ceremony was celebrating the industry and innovation that Britain has displayed over the years. From the Industrial Revolution to Tim Berners-Lee and the world-wide web.

I was left wondering how many of the passionate volunteers and cheering audience would take up the mantle of our industrious and inventive predecessors?

There is no lack of enthusiasm for the use of social networking and technology, but the effort of developing the tools that make it work and starting the businesses that employ workers to drive the economy seems restricted to a few small pockets of activity.

There must be a way of capturing the vigour that was displayed on Friday night. It showed that if someone is enthused then they will put their soul into making what they are doing a success. Danny Boyle and the Olympics provided that inspiration, what can we do to inspire a generation to create products, services and businesses that generates wealth and full employment once again?

To a certain extent, youth is jaded by business, the banks and ever revealing scandals of top director’s greed. Yet there are thousands of small, well run and ethical companies out there, giving their founders a satisfying and decent living.

We need more publicity on these owner run businesses and the fulfilling life that can be had, than the continued bleak exposure of banks and big business wrongs.

 

Business Angel or Venture Capital – which to use

Venture Capital or Business AngelJust back from giving a business plan workshop to a group of MBA students, many of whom were keen to start their own business. So naturally the subject of how to fund a business came up.

One of the areas that regularly seems to cause confusion with the students is the difference between Private Equity, Business Angels and Venture Capital.

At first glance they may all look the same. But there are differences and which you use varies with situation.

Firstly let’s clear up the term Private Equity. Although it’s a generic name for having a company owned by a person or group of people where the shares are not in the public domain (ie not on the stock market). Private Equity in investment terms tends to mean those large investment companies that buy up the majority of shares in a significant sized established business.

Most entrepreneurs will be more interested in Business Angels and Venture Capital companies where they both invest in younger businesses and don’t generally take the majority of shares.

The main difference between these is that Venture Capital firms are investing money gathered from other people who have bought into a Venture Capital fund. Whereas Business Angels are investing their own money.

This is an important difference because it means that Venture Capital firms have to invest in less risky opportunities. Hardly ever do they invest in start-ups, preferring to be involved after the business has proved itself and is ready for high growth. To cover their overheads these also tend to be larger opportunities.

Since Business Angel investors are using their own money, they will be prepared to take slightly more risk, start-ups and early stage companies are more suited to these individual investors. Occasionally in order to share risk or to be involved in larger deals Business Angels will form a consortium, generally headed by a lead investor.

Business Angel Investor’s names and contacts are not in a “yellow pages” of investors, otherwise they would have people camping on their doorsteps, never mind the security issues, they tend to use intermediaries to act as gatekeepers and screens.

Some of these intermediaries are expensive to use, which is why Company Partners set itself up as a “members site”. For a small monthly membership you have access to a full database of Business Angels.

 

SEIS Seed Enterprise Investment Scheme

2012 Budget SEISAs promised the chancellor has confirmed in his March budget documents that there will be a Seed Enterprise Investment Scheme (SEIS) starting from 6th April 2012, although it didn’t get a mention in his actual speech.

Just to clarify for anyone confused by the similarity of SEIS with an existing scheme, there is already an Enterprise Investment Scheme (EIS) which targets larger businesses rather than start-ups.

This big brother to the SEIS also received good news in the budget, with the qualifying size of a company moving from a maximum gross asset size of £7 million with 50 employees, to £15 million with 250 employees. This means later stage investment prospects will now qualify for EIS (see EIS for more information).

The basic information that I covered on my last blog on the SEIS remains unchanged, so I won’t go over that again. Suffice to say it is worth ensuring that your new business qualifies (not all industries do – eg. Property development and financial services) and publicise to potential Investors that they can get tax relief by investing in your business.

Clearly for Investors it’s a no-brainer that you should utilise this new scheme for your investments.

So how do you make use of it?

Luckily those nice people at HMRC have put together a fairly comprehensive web-page that explains the SEIS and how to apply for it. See http://www.hmrc.gov.uk/seedeis/index.htm

They are careful to say that although the scheme starts on the 6th April, until the budget gets Royal Assent (around July) it isn’t set in stone, but it’s unlikely to alter in my view.

The HMRC web-pages have a section on how to get advance assurance that your business and the shares that you are going to issue to an Investor will qualify. It can be useful to do this in making your opportunity attractive.

 

SEIS Start-up Investment

Business InvestmentSEIS (Seed Enterprise Investment Scheme) is a new government incentive to help UK start-ups and young companies.

It starts in just a few weeks on April 6th, so now is a good time to start building this into your funding plan for your start-up. Or if you are an Investor, have a look to see if this will be applicable to the businesses into which you are investing.

There has been a similar incentive around for some time now (see EIS) but the SEIS is specifically targeting new companies.

The details will come out in the Chancellors budget speech next week (21st March), but these are the basic points:

  • The business must be new, or 2 years old or less, with fewer than 25 employees. It must have less than £200,000 of gross assets and not quoted on a stock market.
  • Directors or executives cannot use the scheme to invest in their own companies.
  • You can raise up to £150,000 of funding through the SEIS, but mustn’t have already raised any money under EIS or venture capital trust (VCT) schemes. This is in total not per year.

An Investor can have up to 30% of a share in the business under this scheme. The SEIS makes it attractive for an Investor to fund a start-up because of the number of tax reliefs that they would receive:

  1. Investors can claim back income-tax of 50% of the amount invested.
  2. An Investor can have a ‘capital gains tax holiday’. Capital gains tax (CGT) can be avoided on any asset sold during the financial year 2012-2013 as long as they reinvest the proceeds in a SEIS eligible start-up in the same year.
  3. The combined effect of the CGT holiday and the income tax break gives relief of up to 78% in the first year.

There is as you can imagine, a number of detail points that would need to be investigated but this should whet your appetite. It’s well worth while finding out more about the scheme either to make your new business attractive, or to maximise your investment returns.

After the chancellor has given final details next week, I’ll do a summary here and point you towards the required forms that the revenue will need to be completed.

 

Government Support for Small Business

Small Business supportAm I the only one that is getting confused by the increasing number of initiatives that the government is rolling out to encourage entrepreneurship? Or frustrated because they don’t actually seem to make a difference?

 

We had Business Link, then we didn’t, except it still exists as a “business advice and guidance service portal”.

The Small Firms Loan Guarantee scheme (SFLG) has been around for decades and continues to help companies that need a bank loan. Or it would if the banks fulfilled their part of the deal by releasing the funds.

To encourage them to do so the government set up Project Merlin last year whereby the banks agreed to lend £76B specifically to small firms. However it has been a failure and banks are still holding on to their money. Now Merlin looks like being dumped along with any credibility that the banks could have gained by making good on their promises.

For some time now we’ve had the Enterprise Investment Scheme (EIS) to encourage Investors, by giving them various tax breaks if they help to fund growing businesses.

In addition last year the Chancellor announced the Seed Enterprise Investment Scheme (SEIS) due to come into effect on the 6th April 2012. This is aimed at small start-ups and gives a 50% tax relief to Investors. I’ll do a write up of that shortly, but it looks promising in motivating Investors.

Enterprise Zones were introduced to mixed response and the jury is out on their long-term effectiveness.

The Government has pushed StartupBritain which they call “a national campaign by entrepreneurs for entrepreneurs, harnessing the expertise and passion of Britain’s leading businesspeople to celebrate, inspire and accelerate enterprise in the UK”. Fine words – but never-the-less just words.

Talking about fine words, recently the latest campaign is “There’s a business in you”, which provides inspiring stories and highlights support available. However most of the highlighted support simply takes you to the Business Link website.

Then there’s talk about cutting Red Tape. There is a “Red Tape Challenge”, where members of the public can suggest red tape to be cut and a “1 in, 1 out” idea that says if a department wants to bring in a piece of legislation, they must first remove one. Latest government news is that there have been 19 in and 33 out, saving small businesses £3.2 B a year. What shall we spend it on?

How about making tax simpler and easier to understand I hear you say. Well there’s a government office called “The office for Tax Simplification”. Yes there really is, let’s hope they are successful.

So is it all spin and gimmicks as some business experts have commented, or a well co-ordinated and ambitious campaign to release the entrepreneurial spirit in us all and make Britain great again?

 

Avoid Business Partner melt down

Business Partners TalkingI had a call from a director of a business that I occasionally provide with mentoring to ask me to come round asap. Over the Xmas break he had been having second thoughts about carrying the activity on, even though it was profitable.

There was too much stress and he wasn’t getting on with his business partner. I was a bit surprised because they both contributed well to the company and had good complimentary skills, both were also quite reasonable people.

Delving into the cause of this crisis, it looked a matter of miscommunication between them.   Or to be exact it was one sided communication. The director I was with sent emails explaining his activity, making suggestions for the business and never got any response from his business partner.

His partner just didn’t see the need to respond, he was busy getting on with the job.

Because they worked in different offices there was no day-to-day chats round the coffee machine and because they had distinct responsibilities they had felt it was only required to meet monthly.

This wasn’t enough interaction to run a business together. Businesses can take all of your time, fire-fighting, dealing with customers and suppliers, so that there doesn’t appear to be the time to “needlessly” be communicating with others in your own business.

But regular physical meetings and prompt electronic communication to each other is vital. It helps team spirit, reduces stress and avoids misunderstandings. The interaction can also generate new ideas that often pop out of the woodwork seemingly just by magic.

Some large companies learnt this early on. I remember going to HP’s office “beer-busts” and Cray’s picnics. IT companies seem to have latched on to ways of informal employee interaction, as well as creating regular occasions for directors to met up.

This can apply also to smaller companies where it may seem that there is no need to plan such activity, since their small size should mean that there are plenty of opportunities to talk. However as was seen, demands on an individual’s time can make that difficult.

Additionally, there can be differing attitudes to communication. One being too verbose, the other too cryptic.

What we did in this case was to meet and thrash out a common attitude and business culture for communication. All agreed that any emails sent should be answered by return if possible, to schedule weekly Skype video calls and fortnightly get-togethers. Some of which could just be an opportunity to brainstorm ideas and ensure all were going in the same direction.

Having an open and friendly approach to internal communication, sharing issues in a no-blame, constructive way has to start at the top.

In small companies there should be far less politics involved than in larger organisations and this good communication and teamwork is an advantage that smaller businesses should have over some of their larger competitors.

 

Get more customers – provide a better service than your competitors

customer serviceAfter writing the title of this piece I thought what more can I say? That’s it isn’t it? Provide a better service than your competitors and you will win business.

But maybe it’s worth thinking about this a bit deeper. No one actually sets out to deliberately provide a bad service and does it really matter that much?

Increasingly the difference between me choosing one supplier or another is their service. In today’s marketplace most prices are competitive. I can also easily compare prices on-line and I’m getting pretty good at negotiating discounts as well.

But you have to live with the product you buy a long time and if it’s a service you are buying, such as a telephone line, broadband ISP, or consultancy; the ease and quality of service can make your life pleasurable or absolute hell.

Two companies I enjoy dealing with are Amazon and John Lewis. I’ve never had any trouble returning goods with these companies and they have speedy delivery, so I continue to go back to them – even if sometimes their price is higher.

On the other hand who hasn’t been kept waiting ages on a telephone line while trying to get technical support from your Internet Service Provider?

Or had to deal with a call centre where you get passed from one automated menu to another, before talking to someone who clearly didn’t want to be there talking to you.

Large businesses can fall into this trap, because someone has done an efficiency study and calculated that the odd drop-out of customer is compensated by the lower cost of delivering service. Many large faceless organisations, such as Utility companies, and big corporations, just see such service as normal. The stock answer is “there are always complaining customers, but when you think that we deal with millions of people a year the number of complaints are very small”. Does that reassure you?

Smaller businesses may just have lost sight of the importance of service. Running around fire-fighting issues, having to do everything yourself, it can be hard to provide the level of service that you would like to. Whist understandable, it’s a road to disaster. Reputation is hard won and easily lost.

So what should you do?

  • Build ease of doing business, friendliness and going beyond the call of duty into your sales strategy and branding.
  • Design your systems for ease of customer interaction; IT systems, telephone handling, paperwork, bills, quotes – anything the customer has to deal with.
  • Own the problem. If a customer contacts someone at your company with an issue, that person should own the problem – even if the customer has rung the wrong department.
  • Make speedy delivery, speedy response, speedy interaction with your company an important factor in how your company operates. Customers are all busy people, the issue that they contacted you about is important to them and so they are impressed when you reply to an email or query within an hour, but not after days of waiting.
  • Forget the clichés “the customer is king”, “the customer is always right”, these are meaningless and are a fob to the whole concept, your staff will not respond to such trite. Instead make sure that your staff knows that how the customer perceives you is key to their success and the company’s business.
  • Get an attitude in place that one of the things which your company and the staff are proud of is the way they are viewed by customers, suppliers and others as being friendly and efficient.
  • Give staff the respect and trust to make judgement calls on what is needed to “do the right thing” for the customer, rather than “more than my jobs worth” to do anything out of the ordinary.
  • Once you have the right procedures in place and have built excellence of service into the core of the business, capitalise on it by using good testimonials in your literature and web site.

One of the reasons I like using Amazon is that apart from their service, I can read reviews of products and companies before buying. Checking reviews on-line is now an important shopping behaviour, so encourage your customers to leave good reviews anywhere they can. There are many opportunities to do so on-line, look for these and build your reputation.

I’ve worked in many corporations that have put measurements in place for customer satisfaction and even made that as part of the pay mechanism, but such measurements can always be massaged. None have worked as well as in companies where the ethos and self-image is all about quality.

Start with your own and your staffs perception of your brand as being one of excellence, ensure the systems allow you to deliver that quality and then customers will go out of their way to choose you rather than your competitors.

Make IT compulsory – get more start-ups.

Young high-tech start-up businessesI must admit this blog sounds a bit as though I’m standing on a soap-box, but a recent comment by Google’s chairman, Eric Schmidt, rang true with me. He said:

“I was flabbergasted to learn that today computer science isn’t even taught as standard in UK schools,” he said. “Your IT curriculum focuses on teaching how to use software, but gives no insight into how it’s made.”

Yes I thought, he’s right. We teach how to use software, not how to make it.

This made me think, would teaching Information Technology as standard make a difference to our ability to innovate in a high-tech world?

Innovation has always driven the economy. Just look back to the Industrial Revolution and the inventions that abounded, they were that time’s high-tech.

Today’s innovation tends to centre on software, electronics and biotech, all of which require not just a grasp, but actually a fairly good understanding of the principals behind these technologies. The sort of understanding that can then be used to develop new innovative businesses.

However, schools have increasingly concentrated on “soft” subjects and reduced the time spent on what is thought to be more difficult areas such as science, maths & technology.

I know that we are short of science and maths teachers and the need to meet higher and higher pass rates every year means that schools concentrate on courses that are not as exacting.

It doesn’t have to be this way; though it will require government willpower to change.

We’ve seen an enthusiasm for entrepreneurial activity, with programmes like Dragon’s Den and The Apprentice. Nearly all young people have a passion for the uses of technology, with Facebook and iPhone Apps.

So why not put a fresh emphasis on learning why an iPhone works and how to programme an application like Facebook, not just how to use them. Then we may be producing the future innovative entrepreneurs that the economy demands.