FOCUS FEATURE


FINANCE AND THE ECONOMY In many ways, business angels are similar to venture


capitalists but the latter tend to offer larger investments in exchange for equity in the company. They tend to be motivated by quick gains so are looking


for a return on investment in a short time frame. Those expecting high growth and who don’t mind giving


up equity may consider this a sound route because it offers both secure funding and the possibility of expert mentoring. In common with business angels, venture capitalists can


open doors because they tend to have extensive business networks. However, the drawback is the same in that a large chunk of a business will have to be handed over to an outsider. Accelerators and incubators aim to support young firms


through the early and fragile stages of growth - helping them avoid mistakes, saving time and money and increasing survival rates. These programmes provide mentoring and a small seed investment in return for equity. The biggest downside to this type of funding is that the


application and selection process can be very long-winded. Some financial companies specialise in short-term loans


(sometimes called payday loans) to improve working capital, boost cash flow or kick off a project. This method may work if a company is bridging a gap and is confident it will have the funds to make repayments on time. The advantage is that its funding process is relatively


quick if the business qualifies but the rate of interest can be extremely high and costs can quickly mount up. Guarantee Loan Schemes such as the Enterprise Finance


Guarantee can be available to smaller businesses which are viable but unable to obtain finance because they cannot put up security or don’t have a trading history. The lender is provided with a Government-backed 75%


guarantee against the outstanding facility balance, potentially enabling negative credit decisions to be reversed. Since its launch in 2009, the scheme has supported the provision of over 29,000 business loans to a value of more than £3.2bn. There are strict conditions to meet in order to qualify. Finally, the Enterprise Investment Scheme and Seed


Enterprise Investment Scheme are tax-efficient ways to secure funds backed by HMRC. They give investors who subscribe for shares a chance to get tax back and further income tax relief if they make a loss on the investment. However, there are a high number of conditions for both the company and the investor to meet. Such funding options make financing SMEs look easy


doesn’t it? Of course, most Chamber members will know that is not the case and, in any event, is only one strand to the development of a company One of the most difficult things about building the


foundation for a successful business is simply knowing what areas, time, energy and funds should be invested to ensure the highest rate of return. Without a support network of trusted, experienced business advisers, making these investment decisions can be risky business. Often, a “best guess” decision is needed and that can be evaluated down the road. At The Alternative Board, we conduct quarterly surveys


to gain insights from other business owners to share with the greater business community. Perhaps not surprisingly, 60% of business owners surveyed said that they would have invested more money in the early stages of building their business. Meanwhile, 40% said they would have invested more


time. It’s also important to note that respondents were evenly split between the importance of focusing on the big picture (52%) and focusing on the details (48%), reflecting the importance of both skills. Many business owners agree that, if they could go back in time, they would spend more time on planning for their


‘We recommend all business owners write a company and personal vision – two separate statements of where they want to see themselves and their company in the future’


52 business network November 2018


Guarantee Loan Schemes, such as The Enterprise Finance Guarantee, are available to small businesses


business. They also agree that the most important personal skill for business owners is the ability to think strategically; with time management skills coming in second and communication third. It’s never too late to begin. Whether in the


earliest stages of starting up or in business for a long time, developing a written strategic plan will help companies become successful in achieving their goals. We recommend all business owners write a


company and personal vision – two separate statements of where they want to see themselves and their company in the future. They should also examine the strengths, weaknesses, opportunities, and threats of their business. Having a written marketing plan is going to help immensely. People often forget that marketing is more than just advertising and promotion — there are five Ps in marketing. Firstly, how is their product or service different from


others in the market? Seventy-eight per cent of business owners in our survey found that solving a problem for a known market is significantly more important than developing a product or service for a new market. It should also be considered which people will benefit


from and be most willing and able to purchase the product or service. What price will the target market be willing and able to pay for the product or service? Is the price point high enough to make the required profit margin? In which place will the product or service be available? Online? In a brick-and-mortar location? In a luxury boutique or a big box store? Will it be shipped domestically or internationally? Finally, the promotion of the product is key and the


message surrounding it could define its success or failure. Once these elements have been determined, businesses


are better equipped to develop a company brand and establish a lead generation system, which are both incredibly important to long-term success. Consequently, such a well-defined proposition is much


more likely to attract the funding which will fulfil company ambitions.


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