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Can AI help business?

Robot-Entrepreneur No one can have missed the publicity and yes, concern, around ChatGPT. Whilst technology has been broadly welcomed in the past, the latest AI advances has seen leading Captains of Industry voice their fears of a world where AI could take over.

However, used creatively and in the right context could such AI generated content be helpful without destroying jobs? Is in fact ChatGPT over-hyped or could it replace this author in writing about entrepreneurship?

I asked ChatGPT to write an original article about “How to Start a Business”, here is it’s response, you can judge…

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Starting a Business: A Comprehensive Guide for Success

Starting a business can be a thrilling and rewarding endeavour, but it also requires careful planning and execution. If you’re looking to turn your entrepreneurial dreams into reality, this comprehensive guide will provide you with step-by-step instructions on how to start a successful business.

Step 1: Identify Your Business Idea

The first step in starting a business is to identify a viable business idea. Consider your interests, skills, and experience. What problem are you trying to solve? What product or service do you want to offer? Research the market to understand the demand and competition for your idea. It’s crucial to have a clear and compelling business idea that can differentiate you in the market.

Step 2: Conduct Market Research

Market research is vital in understanding your target audience, competition, and industry trends. Identify your target market, their needs, preferences, and behaviours. Analyse your competition, their strengths, weaknesses, and strategies. This information will help you shape your business strategy and make informed decisions.

Step 3: Develop a Business Plan

A business plan serves as a roadmap for your business. It outlines your business goals, target market, marketing strategy, financial projections, and other important details. A well-prepared business plan can help you secure funding, attract partners, and guide your business growth. Make sure to create a comprehensive and realistic business plan that aligns with your goals and market research.

Step 4: Choose a Business Structure

Selecting the right legal structure for your business is crucial. There are various options, such as sole proprietorship, partnership, corporation, or LLC, each with its own legal, financial, and tax implications. Consult with a legal or financial professional to determine the best option for your business based on your specific circumstances.

Step 5: Register Your Business

Register your business name with the appropriate government agencies and obtain any necessary licenses or permits. The registration process may vary depending on your location and industry. Make sure to follow all the legal requirements and obtain the necessary documentation to operate your business legally.

Step 6: Secure Funding

Consider how you will finance your business. You may use personal savings, apply for loans, seek grants, or attract investors. Research and explore funding options that are relevant to your business. Prepare a detailed financial plan that includes start-up costs, operating expenses, and revenue projections to demonstrate the viability of your business to potential investors or lenders.

Step 7: Develop Your Brand

Your brand is the identity of your business and plays a critical role in attracting customers. Create a strong brand identity, including your business name, logo, website, and marketing materials. Your brand should convey your business values, resonate with your target audience, and differentiate you from your competition.

Step 8: Set Up Your Finances

Establish a separate business bank account and set up a system for managing your finances. Consider using accounting software to track your business expenses and income. Keep thorough records of all financial transactions related to your business, as this will be essential for tax purposes and financial management.

Step 9: Create a Marketing Plan

A well-executed marketing plan is crucial for promoting your business and attracting customers. Develop a marketing plan that includes strategies such as social media marketing, content marketing, search engine optimization (SEO), paid advertising, and networking. Tailor your marketing efforts to your target audience and budget, and consistently evaluate and adjust your marketing strategies based on their effectiveness.

Step 10: Set Up Operations

Set up your physical or virtual office, purchase necessary equipment, and hire employees if needed. Establish operational processes and systems to manage your business efficiently. This may include inventory management, customer service protocols, and employee on-boarding. Make sure to comply with all relevant laws and regulations related to your business operations.
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There we have it, AI generated business advice. Any good?

Have an investment strategy when investing in opportunities

We all know that there is no such thing as a risk free but highly profitable investment. Although I do get emails telling me they exist, I just dump them immediately.

However with the right preparation you can identify and enjoy successful investments, that whilst not risk free are at least “risk understood” and ensure that they are balanced with a commensurate profitability.

The key to this is establishing your personal investment strategy. That will be your guiding principle when considering any investment and makes investment decisions much easier. Your strategy should include:

1. How much risk you are comfortable with? This will vary depending on your own attitude to risk, but also the amount of “spare” funds you have. You should never put at risk funds needed for living.

Minimum risk may lead you towards bank cash accounts, bonds or blue-chip companies within the stock market, but of course the potential returns will be lower.

Whereas if greater risk options are acceptable, such as new start-ups, younger, faster moving companies and peer-to-peer lending, much higher rewards can be gained.

A balanced portfolio of investments, varying the number of low and higher risk opportunities according to your own preferences, together with spreading the market areas invested into, will give better protection against unforeseen events.

2. What market areas do you enjoy and which do you have some knowledge about? Not only does it make working with those investments more interesting, but knowledge of the industry allows you to understand the risk elements and determine how successful the business is likely to be.

3. How hands-on do you want to be? The stock market has a wide choice of investments, where you can be relatively hands-free apart from watching trends and swapping stocks as required. There are entire books written on investing into the stock market, so do your research and avoid “too good to be true” investment schemes that may be offered.

However if a more active involvement can be considered then investing directly into young businesses that may now be ready for growth, or even start-ups with good potential can provide both greater enjoyment and returns. Company Partners provides this type of opportunity and importantly for an investor doesn’t take a percentage of your investment from the business as many others will do.

Will you want to be an day-today part of the team, or only adding value where appropriate?

4. Be clear about the management style of the team that you will want to work with. If investing directly in a business, certainly it must have a capable management team but also one that fits your own way of working. Both of these elements are important. It may be that you can add some personal expertise to the team or help it with finding a missing component, but if the founders are not “on your wavelength”, arrogant or most likely wouldn’t listen to advice – simply avoid.

Finally do due-diligence. Investment into a business must only be undertaken after you have ensured that the people, business and facts as stated are correct. Investors should also be prepared to give information about themselves in return, so both parties are informed and comfortable with the partnership.

Types of Business Funding

Seed money

Do you need funding?

Start-up businesses often think that they need to find an investor. We only have to read in the papers about the latest internet billionaire to know that big funding means big success.

Yet most businesses can get going, or even grow without external investment. It depends on the amount required to gain entry into your market and whether you have sufficient funds to make a start, perhaps growing organically through sales.

The injection of funds into a business can however jump-start a project, or allow a more rapid growth. So if funding is desired it’s useful to think about the options for doing so:

Investment cycle

There is a natural progression of how a business is funded. Initially it may be that the business is financed by the owner or by approaching family and friends. This may be sufficient by itself for your business.

Alternatively, or perhaps as a follow-on, a local bank might be approached. Although nowadays these have been less helpful for young businesses, so after proving the concept, many tend to seek business angels.

At the next stage beyond this, venture capital firms might be brought in. Few companies go straight out and raise multi-millions; those that do are often high-tech businesses with known entrepreneurs, or ground breaking technology.

Types of funding:

Self-funded
Traditionally the way that the majority of businesses get going. For further investment it also shows your commitment in that you have put your own money into the concept and is invaluable in gaining that first bit of traction that Investors look for.

If the start-up business is taking the form of a partnership it will need to be made clear in the partnership agreement exactly how much of the funding each partner is providing and whether this entitles them to a greater or lesser proportion of the partnership profits. See Partnership Agreements

Loans
Banks will normally only loan money against you having security to offer. These may be assets of the business or personal assets such as your house. They are not entrepreneurial and don’t take risks based on you having a good idea.

Many Business Angels will include a loan in addition to purchasing equity in the business as part of the way in which the funding deal is structured.

Private equity funding
This is the generic name for sources of funding, normally in exchange for equity in the business. It includes both Business Angels and Venture Capital companies. People sometimes confuse the two. The differences are:

Business Angels

Anything from £1000 to £1M (although that would require several banded together).
Will look at start-ups and young businesses
Since they are investing their own money they can take more risk.
Often want to contribute knowledge or contacts

Venture Capital

£1M plus (normally)
Not for start-ups or just at idea stage
They are investing a fund comprised of other people’s money, so have to take less risk than Business Angels.
May place own people on board and require strict reporting

When exchanging equity in a business for funds a legal document must be agreed that specifies the terms of the investment. Venture Capital companies will have a range of agreements to use from Investor Rights Agreements, Stock Purchase Agreements and Term Sheets. It can be expensive and time consuming to raise money.

Agreements with Business Angels can be quicker and much less costly to organise, but never be tempted to cut costs so much that a well thought out signed agreement is neglected. There has been much woe and falling out of parties when issues occur that haven’t been previously considered and placed in a legal document.

Private equity funding can come in stages as the business grows:

• Seed funding
• First round
• Second round
• Later stage
• Mezzanine
See Types of Private Equity funding

Grants
There are only a few government or institutional grants available to businesses. These tend to be market sector and geography specific. Whilst serving a useful purpose for those able to claim them, they are so few that they are not applicable to most businesses and so not covered here.

For young businesses, the more you can do in proving your concept works and gaining what is called “traction” the more offers of help you will get and be in a better place to negotiate terms.

Make your business scalable – the Investor holy grail

Investors look for business growth

Firstly let me say what I mean by scalable. That each new customer produces additional revenue for very little addition cost.

Think of software for example, once the costs of developing and producing the first copy are met, each additional sale of the software has minimal costs. Whereas a service orientated business such as consulting is limited by the number of consultants available and each one has a significant additional cost attached.

A scalable business can grow large and produce high profits, every Investors dream.

If you are starting from scratch and have a choice of the type of business to run, think about fixed cost Vs variable costs for that business. Fixed cost will be that which you need regardless of the number of orders you receive – office or factory rent, insurance and basic salaries for example.

The variable costs are those associated with each order, such as the cost of making that product or supplying the service. It can be materials that you have to buy in for each order, assembling or manufacturing the item, or the cost of hiring and paying the wages of an additional service person to fulfil the order.

There is of course going to be some additional (variable) costs associated even with a scalable business. You’ll need more marketing or sales staff if you are growing and other additional expenses, but it’s not the main cost of each new order.

Tips for a scalable business

Build it into your business model. Make being scalable an essential part of what you do and how you operate. Don’t undertake activity that can’t be scaled even if it seems like additional revenue, if you are not able to scale it, don’t do it.
Decide what your core expertise is and outsource the rest as much as possible, that way you are not restricted on growth. You can also form partnerships with others to allow faster growth.
Automate, automate, automate. Think through the whole sales/supply chain, cheap computing power now days can make business processes for each new order very little additional cost.
Being scalable by itself is not of use unless you can take advantage of it by getting lots of new business. You will need to market yourself as heavily as you can afford. This is where Investor funds can help (if you have a compelling business model and show you know the market). Use indirect marketing to give scalability to your marketing. PR, news items, Facebook/Twitter and brand recognition all have far reaching effects.
Use the web. The most obvious scalable companies are web based social media sites, but even if you are a product orientated business you can get very scalable using the internet. Amazon are a product company, but they outsource their products and sell and fulfil using the web.
If the business is not easily transferred to the web, perhaps because it is a very hands-on service, look at franchising or licensing your product or business model. There are all kinds of businesses successful this way from fast food to grass cutting companies. The example chart on this page is for a Mexican restaurant!

Not every business will want Investment, or to grow large and that is fine, but even those can benefit from looking at the way that scalable businesses make life easier for themselves by automating and using the scalability techniques now available.

What is due-diligence and how do I do it?

Due-diligence needs thinking about for Investors when they are about to embark on an investment. However it’s just as applicable for those who are seeking investment to check out a potential Investor. In both cases you should verify that the person, business and facts as stated are correct.

That’s not being mistrustful it’s just being business-like and expected by all parties to a potential funding agreement.

There are several types of due-diligence, not all will necessarily be relevant and this list is not exhaustive, but does illustrate the common areas to consider:

Legal

Are there IP (Intellectual Property) rights involved?
Any pending litigation or disputes?
Legal structure and ownership including share holdings and any restrictions
Regulation or licences that may be necessary for doing business

Financial

Verify financial information provided
Obtain bank accounts and statements
Examination of accounts and underlying performance of business
Details of any property owned by the business, including mortgages

Commercial

The market that the business operates within and its market share
Customers: list of major customers. Is the business dependant on just a few customers? Can you talk to some customers?
Suppliers: list of major suppliers. Is the business dependant on a few suppliers?
Competitors and the unique advantage that this business may have.
Assumptions that lie behind the business plan
Insurances held
Guarantees and terms & conditions of sale that the business gives

Human Resources

Management background check
Key personnel staying / losing
Pension commitments

IT / Systems

Hardware and important software used within the business
State of the systems, are they up-to-date, using appropriate technology
Compatibility to any existing systems if merging businesses

For Investors, where possible always use professional legal and accounting firms who will have a VERY detailed question check list for carrying out due-diligence. For smaller or even start-up businesses it may be that a simple management check and time taken to understand the market and the advantages of the business is enough. That is for you to decide, but you must make sure you do all necessary to verify people and facts.

Both Investors and Business Owners should be aware that due-diligence takes time and can be detrimental for the business when the owner is distracted from normal operating duties by needing to find all the due-diligence documentation required and in answering the questions raised, but it is an essential part of selling or getting investment.

Why ideas don’t get investment.

Investment for a good idea

“I’ve got a great idea; it will make millions, guaranteed. I haven’t got the time myself to pursue it, so I’m looking for someone to take it on. Maybe I could licence the idea, or sell it. I don’t actually want much, I just want to see it made.

“No, I haven’t got round to doing a business plan, not sure where to start on that anyway, I’m more of an ideas person and of course I am a bit careful about telling anyone about it in case they steal the idea.”

Sound familiar to Investors? Any entrepreneur thinking “what’s wrong with wanting to sell an idea?”

Let me give 5 reasons why ideas don’t get investment:

Good ideas are 10 a penny. Everyone you meet in the street or bar, has a good idea.
By themselves ideas have no value. They are not rare, they are very common.
They gain value as you do work proving that an idea will practically and commercially succeed.
You should be able to contribute more to a venture than just the idea, your expertise, skills, background, experience and effort will give an Investor more confidence that the concept will work.
Ideas by themselves are high risk, the highest of risk in fact. Investors have plenty of choice where they can invest their money; they don’t need to take that high risk.

Right, so you’ve got a fantastic idea for a new product or service, it will take some investment to turn the idea into a business, what do you do?

Even with no funds you can do market research. Don’t ask your family or friends, talk to real potential customers, think through your target market (see How to market smarter ), construct a marketing plan. This all shows an Investor that the concept is likely to be viable.

Do work to move your idea forward. Build a prototype product or start a basic service, to prove the idea works in reality.

Get some sales. Even if just a few, or obtain some advance orders, or letters of intent to buy. This more than anything is the big difference between securing funding or not. Not every good idea is a commercial good idea. Showing that customers will hand over their hard earned cash moves the idea from fantasy into an investable business.

Big push to increase the number of Entrepreneurs

This is Global Entrepreneurship Week and there is a host of fresh initiatives to get new businesses started and growing businesses to fulfil their potential.

It’s easy to see why the government is keen to do so, with cut backs in the public sector and big businesses stalling, getting people to start their own companies will not only provide employment for the founders but also for many more that get hired as these start-ups grow.

The Government’s economic policy objective is to achieve ‘strong, sustainable and balanced growth that is more evenly shared across the country and between industries’. What this means is less reliance on the financial sector and to spread jobs beyond the South East.

Company Partners is playing its part in this by providing a “dating site” for people who want to start a business find a business partner with complementary skills to join with them. It’s less daunting with a partner.

Of course we also provide access to Mentors and Business Angels that help with their contacts, expertise and investment. This combination of access to Business Partners, Mentors and sources of investment is unique to Company Partners, so if you haven’t already, register and have a look around.

What we do is a practical and successful way of encouraging businesses to grow. There is some criticism that many of the government initiatives are difficult to access and sometimes look better on paper than in reality. This is what’s been announced this week:

Two entrepreneurs in residence will be recruited at BIS. They will help advise Government on small business issues, making sure that the needs of entrepreneurs are properly considered by policy makers
Warwick and Aston Business Schools have been chosen to host a new £2.9 million enterprise research centre. Its work will help improve understanding of the drivers and barriers to growth that affect our small and medium sized enterprises (SMEs)
The launch of a new £1.1 million Entrepreneurs and Education Programme that will work with academics, researchers and students to promote enterprise, self-employment and help commercialise innovations
A push to encourage businesses to make better use of the Seed Enterprise Investment Scheme (SEIS) that provides generous tax benefits to SME investors
New access to a secure web-based portal for adult prisoners that will provide opportunities for them to learn about how they can start a business when they are released.

Whether these individually make a difference can be debated, but the overall intention is right and the government’s efforts to grow small businesses creates an encouraging climate of enterprise.

To grow a business employ a “great one”.

Whenever I hear advice from successful entrepreneurs the most consistent mantra is “always hire the best people you can afford”.

But how good is “the best”, how do you measure that? Also, if you are in a young company, with very limited resources, how much can you really afford?

Let’s step back for a moment though and examine that advice. Is it really the most important thing that a growing business should do? What about offices, buying equipment and developing the product or service, then there’s marketing, the best product is going nowhere unless people know that it exists.

The answer may be that if you have good people aboard, they will help you get the operating essentials cheaper, faster, and of better quality. When you look at product design the difference between good and average has even more staggering claims.

Mark Zuckerberg, of Facebook, suggests that some programmers and programming teams are 100 times more productive than their more typically talented peers.

This isn’t because they can programme 100 times the number of lines of code, but because they write smarter code. These truly great programmers grasp what is needed quickly and transform that into efficient, supportable, clever instructions that enhance the original concept.

What does this mean for the non IT side of businesses? Well the theory is still valid, if the multiplication factor may be less. Consider the likely results of an inspirational, highly respected and well networked senior figure in any sector of business, such as marketing, PR, raising finance, compared to an industrious but junior practitioner.

Can you measure the impact of the great person against the average worker? The difference may be that you get funding, or not. That you become well known, or not. What is the measure and worth of these?

I think we can all accept that the great person is going to do more for your company than an average worker, the question is what do you give up to be able to afford them?

Do you take out loans, sell your house or divert funds from infrastructure to hire a great employee?

It’s a balancing act, between all the calls upon your limited cash. The advice that successful entrepreneurs have given implies that you do all you can to get these few great people.

If the immensely talented ones can ramp up your business fast, then you can start to readjust the balance so that other areas have cash made available.

It is natural though to hope that even by using a less expensive resource you will still manage to make the break through. The lessons from very successful businesses however seem to speak against that.

Entrepreneur Quotes – Just do it!

Entrepreneur - Just do it! I was putting together a business plan workshop for some MBA students the other day and looked for a couple of quotes to illustrate points. There are, as you can imagine, quotes for everything, sometimes contradictory.

There is one area though that no one disagrees with and it happens to be a pet issue with me. That of “just do it”. When I talk to potential entrepreneurs, far too many are waiting for “the right time” or someone to do it for them. Honestly, you just need to take a deep breath and then get on with it.

Anyway here are some thoughts from quite successful people – but less thinking, more doing…

“Talk to your customers – provide what they want, not what you want”
Jacqueline Gold – Anne Summers

“Make sure your business goals are measurable – if it’s measurable it’s manageable”
Steve Mills – MRI Network

“Be detailed, be persistent”
Sahar Hashemi – Coffee Republic

“Don’t be afraid of failure, we worry about that too much”
Tim Smit – Eden Project

“The important thing is not being afraid to take a chance. Remember, the greatest failure is to not try” Debbie Fields – Mrs. Fields Cookies

“If you think about things too long and too hard you won’t do them”
Simon Woodruffe – Yo! Sushi

“Never leave that to tomorrow that you can do today”
Benjamin Franklin

“The critical ingredient is getting off your butt and doing something”
Nolan Bushnell – Atari

“Twenty years from now you will be more disappointed by the things that you didn’t do than by the ones you did do”
Mark Twain

“Your time is limited, so don’t waste it living someone else’s life”
Steve Jobs – Apple

“Whatever you are going to do, if you don’t enjoy it, don’t do it”
Philip Green – Arcadia

“Choose a job that you like and you’ll never have to work a day in your life”
Confucius

Company Partners blog goes live

I have succumbed to the inevitable and started a blog for Company Partners. The key and dare I say the challenge is to have informative and interesting content and not just my personal ramblings, although there will be a fair quantity of those, no doubt thrown in to the mix.

The blog will however keep to what we know:

Elements of starting a business
Growing existing businesses
Anything about Business Partners, Mentors and Business Angels
Raising business angel investment
Finding rewarding business investment opportunities

While I may be commenting on what is being said or done elsewhere, I really don’t want to just duplicate content or opinion that is already out there, that’s of no value to anyone.

If you are one of the early readers of this blog, you have a chance to shape it by letting me know if there are particular areas that you would like us to cover, just hit the “comment” button.

Company Partners Blog

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