Phil Birch

Phil Birch - BirchBusinessIQ

Each month we will take a key issue affecting business and look at it in more detail.

Most appropriately for our own launch issue we look at ENTREPRENEURSHIP.
It’s nine o’clock in the morning. It’s raining. I’ve been pacing and deliberating over which business topic to present in our first issue. I want it to be motivational and inspiring, and to represent the principles of our journal, namely independent and informative, with hopefully, a small amount of intuition thrown in for good measure.

So where do I go for this inspiration?
I decide to focus on a subject close to my own heart; entrepreneurship. I start to rattle away on my laptop to find a definition of entrepreneur; I like this one the best.

1. a person who organizes and manages any enterprise, esp. a business, usually with considerable initiative and risk.

The words “considerable initiative and risk” jump out from the definition. I realize that I myself am such an entrepreneur. Interspersed between spells within corporate world, my coaching and consultancy business has certainly required considerable initiative and risk, and indeed no small amount of personal finance, into starting and running my own business. The next thing that strikes me is one of familiarity. Déjà vu even. My first venture had just taken off as the recession hit in the early 90s. Was it different then? If so, why? Has our evolution through Thatcher’s Britain, Gulf Wars, and Tony’s new Labour significantly affected the culture and motivation of the UK entrepreneur?

So feeling appropriately inspired and more than a little curious I seek out RSS feeds, articles and reports to try and understand whether, in these times of global recession, the spark of the entrepreneur still glows dimly within the British spirit. And if so, if the will is still there, can the British entrepreneur find a way.
My attention is immediately grabbed by a glossy retro-picture promoting an article in one of the UK’s business magazine’s stating that against all odds, entrepreneurship is making a comeback. I read on. Apparently, the government’s business secretary, Peter Mandelson has recognized the need to support British entrepreneurs by providing a support system that is “consistent, easy to access and of high quality.” Evidently, according to the Doing Business 2009 report, Britain lies eighth in the rankings of starting a business and even more surprising possibly, second in the rankings for getting credit. This ranking is of particular poignancy to me as apparently my local banks appear to have run out of both the ability and the inclination to lend.

Many of the small, local businesses that I encounter, from personal services to construction, from antiques to health, all reply, in agreement and harmony that “we’ve never had it so bad.” These are people that have committed their savings and investments into themselves. These people are not necessarily contenders for the Dragon’s Den, but in their own way, they are as enterprising, creative and industrious as any folk that I have met in my business travels. The story remains the same; increasing numbers of clients that are unable or unwilling to pay, damaging exchange rates, banks unable or unwilling to extend credit and who appear committed only to themselves, credit agencies that seem to want to recover their own investment mistakes and losses from excess and excessive charges and fees.

I continue my research and my eye gets caught by an article in the business section of a well-known, traditionally Tory-biased broadsheet; “hopes of recovery in the UK are unrealistic” it states. Apparently, Ernst & Young have revised down their predictions for growth in 2009 on the basis that there has been no real evidence that banks are lending more to businesses and consumers. It goes on to say that lending is unlikely to grow substantially until the banks have repaid the government. It even suggests a further shrink in the economy by 4.5% in 2009. Oh, woe is me ! And, as if to confirm these dramatic statistics, the BBC reported that closures of small and medium-sized enterprises is likely to more than double from last year’s 16000 to up to 36000!
So, how, where and why are entrepreneurs making a comeback. If times are so bad for the entrepreneur, then how come around 1600 people start a new business in the UK every day?

I read on about the Enterprise Finance Guarantee scheme, the Small Business Finance Forum, Business Link, the Regional Development Agencies and the Government’s attempt to simplify the process via their www.hmrc.gov.uk. I come across a particularly exciting scheme between Santander Bank and Essex County Council, whereby the bank is supporting cheaper loans with the Essex County Council for local business start-up and development. This reminds me of the halcyon days when I could walk into my high Street branch, and actually see a competent qualified, sympathetic bank manager. When the high street banks weren’t controlled by faceless, centralised bankers dictating terms to small businesses through local business advisers, with little or no actual experience other than being able to press several keys on their branch terminal and calmly decline any request for funding and support. “We’re sorry Sir. I really understand and your idea looks fantastic, but it’s the computer, you see, it just says no.”
It would appear that Santander and Essex County Council are making genuine attempts to support their local economy while the other high street banks appear to be withdrawing funds and activities from their local environment. Many are closing more branches by the week, Lloyds TSB have seen fit to close a local branch in my area despite it being the 2nd most efficient branch in the UK – they are re-structuring to a regional plan from a town-based plan and this branch did not make the cut. The Santander scheme, on the face of it, bucks the trend. Santander has agreed lending rates that are lower than the market comparison and allows businesses in the county to directly approach the bank (or via the Regional Development Agency and Business Link.) It is their intention, they say, that’s no business shall be automatically ruled out of their considerations, irrespective of their sector, their size or previous trading record. Impressive statement that! The proof will very much be in the pudding but it does seem to be yielding early success. The green shoots . . . . ?

So I returned to the article on support for small business; apparently a scheme supported by Barclays has delivered around £300 million to over 3000 companies. Mmmm – may be all is not gloom and doom but I am left wondering who and where these companies are. I am reminded of the “Solutions for Business Programme” and my recent attempts to secure funding for an extremely promising local start-up company. I recall spending hours and hours searching around the Internet, Asking and Googling my way through the net to the government website, and, despite my valiant efforts, always returning to the same point, frustrated and fund-less!
Business Link is the government’s attempt to simplify business support to small businesses and is in fact, the sole provider for over 30 services. My experience of Business Link is quite positive. I received e-mails and phone calls from keen and willing agents and a visit from their regional advisers. Unfortunately, it appeared that they are far more able to assist me in creating an environmental policy, than they were in supporting or assisting in any request for funding but this may be the result of my region and not a UK-wide problem.

I remember an encounter with a small business owner in the early 90s. It was the time between the death of the mining industry and the “loads of money” mentality that grew out of the subsequent economic growth. He said to me “the problem with people these days is they think that because they have an idea, they can be a businessman. They think that’s just because things are booming it easy to run a business. But they have no real idea of what business means. It’s a shame, but most of them will fail.” At the time it seemed more than a little pessimistic. He had been the proprietor of a successful family business for over 15 years and was wise and experienced enough to realise that short term booms, easy lending and a positive economic environment were not sufficient to sustain long-term viability. The truth came home to roost. Only those within the inner sanctum of the banking sector will truly understand exactly how and why they have brought about such a recession but we are all suffering from their “mis-assessments and errors of judgment”.

Many of those businesses that sprouted from the 90’s boom did in fact not survive. Many budding entrepreneurs were caught when the good feeling and the credit ran out; have we learned from this? The fact that this week the Government is having a “crisis” meeting with the leading banks regarding why they have not passed on interest rates cuts on to mortgages and business lending, further confirms that if there are any green shoots of recovery sprouting into the scorched earth of the business economy then it is more likely to be despite the banks rather than because of them.
“We need them to lend money” Mr. Darling said yesterday. “They’ve got to live up to the promises they made.” He added: “The public will not understand it if they [the banks] don’t seem to be doing their part.” Small and medium-sized businesses employ more than 13m people, according to the Federation of Small Businesses (FSB). A survey by the FSB of small businesses found that 60pc of them had seen little change in the way banks dealt with overdrafts and loans despite the UK suffering its worst recession in decades.

Entrepreneurs, by their very nature, are willing to invest in their own energy and ideas, and indeed willing to invest their own savings, not just that of the banks or some remote 3rd party investor, but in these times can they really afford to do so? Are 21st century businesses better equipped to ride the storm?
If there is the will of the government to provide funds and schemes to support the budding entrepreneur, then it has, as yet not created the way. Despite the obvious credit and cash flow issues that burden the UK economy it would appear that red tape is still as big an obstacle to funding is finding an appropriate finance partner. My experience has at least proven that much to me. I am certain that some of these government schemes and funds do filter down to support these burgeoning captains of industry and our true bulldog spirit will ensure that somehow the principle “small is beautiful” continues to flourish.

But to date, how successful have these schemes been? Who has truly benefitted and, more importantly, will they still be around in 5 years, 10 years, having paid back the loans and grants? The recent statistics on business closure lead one to suspect not. There is little doubt that more people are seeking alternative and supplementary income. Home-businesses, online businesses, business networking sites, franchises and the like are growing in numbers and are reputably part of the few growing sectors in our economy. Many small businesses are forming network groups and trade associations to enhance their profile and support structure. So, if the routes to additional funding remain essentially the same now as they were then, private investors, business angels, government support and your friendly local high street branch, where best to go?

When considering private investment, take care. It may all seem wonderful when the adrenalin is flowing and optimism is at a maximum, but there is no guarantee that your plans will develop in line with the required returns on that investment, and even the closest family and friends may require their investment returning both the capital sum and a reasonable profit. Be realistic, be honest, and be careful.
I have met many business angels in my professional career. In fact, I have on many occasions been advised that I should become such an “angel”. Business angels are not new; they simply require a portion of your equity in return for their providing cash in the short term. Shylock could be considered one of the early examples of this! They may, additionally, be able to provide you with particular or specialist skills to get your new business venture off the ground. Once again, I offer a note of caution. These people, however accessible and willing, are entrepreneurs themselves. They utilise their previous success and income to invest into new ventures and all power to them, but in these times where, more than ever, cash is king, ensure you seek full financial, commercial and legal advice prior to sacrificing a portion of your inspiration, hard work and your future in return for short term funding.

I am based between the Cheshire plain and Manchester. In this area, the regional development agency has precious little to offer. It focuses attention on the “hard to reach” areas within urban and city centres – understandably. It may well not be the case for you and investigating regional development loans is an ideal place to start. Loans are available on a sliding scale, subject to the level of investment provided by the entrepreneur. Loans continue to be provided from the initiation of the concept, through research and development and into market launch.

As mentioned earlier, The Santander Group have established a funding scheme with Essex county council for local business investment, I recommend you investigate this or similar schemes to see if there is anything like this within your area, and approach your local branch. My view is that the more local the funding, then, the more realistic and flexible the expectations of the lender. Why not insist that your bank provide a similar scheme – we will support any such plans should you need a vehicle and supportive minds. Global banks, local funding? – let me know.
A fairly brief “Google” will provide hundreds if not thousands of links and advertisements offering services for new and start-up businesses. I am certain that many of these provide valuable advice and support. But remember, these are entrepreneurs looking for entrepreneurs. Everything has a price, and it is generally better to complete as much background research on your product, your market, your customers, your operations and you’re funding yourself before you approach or commit to another agency. Not only will this ensure that you yourself have a more complete picture of how and where you want your business to go, but will inevitably save time and money by not committing to these agencies to do this work for you. Indeed, many of these companies simply apply their own model onto your business, irrespective of the uniqueness of your business and the appropriateness of the model. My advice is shop around. (Or contact me directly at phil@the3rdi.co.uk )

Below are some of the government sponsored links provided to assist you in accessing the support infrastructure;

Business Link
Self-help portal of action-focused information for small and medium businesses, linking to all relevant ministries and departments.

The Regional Development Agencies are helping to create prosperity across England.

Small business finance, government grants

A new Small Business Finance Forum will bring lenders and the business community together.

Federation of Small Businesses Annual Forum.
Baroness Shriti Vadera, Minister for Economic Competitiveness, Small Business and Enterprise.

To me, there is little doubt of the significance of the entrepreneur to the UK economy. From Babbage to Brunel, from Rowling to Roddick, we have consistently produced innovative and dynamic businessmen and women. Our nature and culture encourages us to forge ever onwards and back ourselves through whatever adversity we have to face. 1600 entrepreneurs per day reflect our independence, optimism and vitality. If you are indeed considering becoming, or in fact are already, one of the UK is growing band of entrepreneurs then you deserve recognition, support and rewards for your endeavours.

We are here at the3rdi to provide information and inspiration to all women in business, whether private or public sector, blue-chip corporation, sole trader or SME manager. I can confirm that the spirit of entrepreneurship still does burn within the UK economy. It is a sign of the times, however, that most of these inspirational start-up enterprises are having to provide more of their personal savings and equity just to secure an equivalent investment from government agencies and the financial institutions. We are here to help.

We may not be able to provide funds, but we can provide support and assistance, kindred spirits, and hopefully be the source of inspiration that allows you to become the UK’s next leading entrepreneur.
If you have any comments to this article or any experiences that may assist your fellow entrepreneurs, please contact us and let us know how the economy, the government and the banks are treating you.

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