What do businesses do when seeking business advice?

That was the question asked in a survey by the University of Nottingham – Barometer Project.

Following the demise of face-to-face business advice that used to be offered by Business Link, the survey asked a panel of business owners where they now sought business advice.

The results showed that just over one-quarter (28 per cent) of respondents use an accountant, one-fifth go to colleagues (21 per cent), smaller proportions use business advisers/consultants (15 per cent) and trade organizations (8 per cent). Just over one-tenth reported that they used nobody in particular (12 per cent).

Now according to my maths that’s a total of 84% and the report doesn’t tell us what happened with the remaining 16%.

Based on more than 10 years of providing business advice to owners of small and medium businesses I’m amazed that 72% of owners claim they actually ask for advice! And at the risk of upsetting accountants I’m even more surprised that more than a quarter of people surveyed say they see their accountant as the primary source of business advice.

There are some very good accountants but relatively few have the knowledge or experience of running a business that’s needed to advise on anything other than the financial aspects of a business. And anyone who has run a business knows that, important as good financial control is, there’s a whole lot more to growing a successful business.

The advice I give is based on practical, hands-on experience of running successful small businesses, and I deal with issues outside my own knowledge by referring to associates I know and trust.

As a former Development Manager, and having spent the last 8 years helping owners to sell their businesses, I get a buzz from helping younger owners to grow their businesses and helping the more mature owners to prepare their businesses for sale.

For more about the University of Nottingham – Barometer Project, please see www.ukbb.ac

Business Loans

In a move to make business loans more readily available to small busineses the Chancellor George Osborne has today launched the National Loan Guarantee Scheme saying it is good for the economy. Four of the UK's biggest banks have signed up to a scheme to encourage them to offer business loans more cheaply

Under the Scheme loans from Barclays, Royal Bank of Scotland, Lloyds and Santander, and banking minnow Aldermore, will be guaranteed by the Government.The theory is that they then pass on this cheaper funding in the form of lower interest rates on business loans. Skeptics wait to see if this will lead to them relaxing their loan criteria.

The launch of the scheme comes at a time when alternative forms of borrowing are generating more and more interest. In particular there is growing acceptance of peer-to-peer lending, and in the UK this is led by Zopa for private borrowers and Funding Circle for the provision of business loans

Whilst these companies are not FSA regulated they use exactly the same credit rating resources as the banks, and many commentators predict long term growth for these companies, perhaps at the expense on traditional banks whose reputations have justifiably suffered since the start of the credit crunch

What’s important for peer-to-peer lenders to recognise is that Zopa and Funding Circle are acting as brokers and it is they the lenders who take the risk in the case of any defaults. 

What’s important for companies seeking loans to understand is that lenders, whether banks or peers, or indeed equity investors, will judge them on their creditworthiness and on the justification for borrowing. In other words the strength of their business plan.

Business Plans

As someone with experience of writing business plans for owners seeking business finance I was interested to see a comment from Maria Lyle, assistant director of the Department for Business Innovation & Skills in the East Midlands. Commenting on applications for Regional Growth Funding she said that the bids most likely to succeed were those that presented short strong business plans, broken down into simple language and without jargon.
 
"The Treasury doesn't like phrases such as 'transformational step change' when assessing bids," she added. " And those of who work with High Growth businesses and others seeking business finance are only too well aware that Business Angels, Venture Capitalists and Banks don’t like to see such “management speak” in the business plans they receive either.
 
So where do such phrases come from and how do they find their way into the business plans of small and medium size businesses? I suspect that in most cases they’re put there by consultants who have spent their whole working lives in corporate life where it’s essential to be up to speed with the latest “in” phrases; especially the ones your boss uses.
 
Those of us who have spent our lives running and advising small and medium size businesses don’t talk like that, and nor do the high net worth individuals who act as Business Angels and Venture Capitalists.
 
The business plan that is most likely to attract funding starts with an Executive Summary that sets out the business case briefly and in a way that enthuses the reader to reading on. The body of the plan should set out in more detail the well researched business case, with realistic and achievable targets, a clear statement of why the finance is needed, and how the investor will be repaid. All the supporting evidence for the business case should be contained in Appendices.
 
There’s no point in owners bleating that their bank won’t lend them any money. Many banks and other sources of business finance are sitting on pots of money waiting for strong businesses with well defined plans for their future to state their case.
 
And I’m always looking for owners who need, and more importantly are prepared to accept, guidance on developing their businesses, whether they need additional business finance or not.