September 2012, Business Breakfast with Guy Rigby.

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From Vision to Exit – The Entrepreneurs Guide to Building & Selling a Business.

Guy Rigby, Partner & Head of Entrepreneurs at Smith & Williamson has kindly shared the transcript of his informative and incisive talk at our September Business Breakfast.

When Drew Ellis from Like Minds and Simon Jacot de Boinod from Forum asked me to speak, we discussed a range of topics. These included the government and what it should be doing to help promote enterprise and support Entrepreneur Britain, the general environment for entrepreneurs and, finally, my book, “From Vision to Exit – The Entrepreneur’s Guide to Building and Selling a Business”. So in the next few minutes, I’m going to touch briefly on all of these.

Let’s start with the government and their role in trying to stimulate growth in the economy. They’re having a pretty torrid time, what with all this slashing of expenditure to rein in the debt mountain they inherited from Gordon Brown. Do you agree? Well I don’t.

The reality is that this is a myth. Expenditure has barely been reduced and it’s taxation and a reduction in investment that have taken the strain so far. They have spectacularly failed to tackle the big issues such as our unaffordable public sector pay and pensions, which mean that, for the majority, working in the public sector is far more lucrative than working in the private sector. It was never supposed to be like this. Generous pensions were supposed to compensate for the generally lower levels of pay in the public sector. This has to be addressed.

Everyone outside the government is saying that what’s needed is meaningful supply side reform, encouraging enterprise and entrepreneurial activity through a smaller public sector, increased infrastructure spending, a reduction in red tape and reduced taxation. I’m sure this message is getting through, but not much is happening. Standing here in this bastion of Conservatism, one could be generous in thinking that a Conservative-led majority government might have actually done some of this. Instead we have been hamstrung by an ineffective coalition. What’s more, it’s unlikely that this week’s reshuffle and David Cameron’s promise to stop dithering is going to make any difference.

So what does all this mean for entrepreneurs? It’s a challenging environment, but it’s certainly not all bad news. Let’s look at some of the opportunities…

Consider this – every now and again circumstances come together which change everything and, to all intents and purposes, create a new beginning. For us, these are technology, globalisation and the worst recession since the 1930s. This means that everything needs reinventing – many of the old ways just don’t work any more. This is why we see so many legacy businesses struggling to compete – with out of date leaders and outdated business models.

My message to these leaders is that they need to adopt a new mindset – “If it isn’t broken, break it.” Anyone who knows me will know that this is my personal motto. I’m driven by the fact that the status-quo belongs in the past and that there’s always a better way. It’s a perfect stamping ground for entrepreneurs.

Consider this – support for and in the entrepreneurial business community has never been greater. There’s now a plethora of networks, clubs, mentors and events and an active online community which enables entrepreneurs to gain the knowledge and meet the people who can help them achieve their business goals. We’re part of that community today and you can gain access to a lot of it for free.

Consider this – having said that the government hasn’t done enough, tax policy is becoming increasingly supportive for start-ups and earlier stage growth businesses. Whilst Income Tax is still at an unacceptably high rate, Capital Gains Tax is favourable, with a 10% tax rate for entrepreneurs on the first £10 million of their lifetime gains. There are also some great breaks for investors under the EIS and SEIS schemes…

By way of example, an investor paying tax at 50% who has taxable capital gains in the current tax year can get 78% tax relief by investing up to £100,000 in a start-up. In the event that the money is lost, they can claim further tax relief. For a 50% taxpayer this means an almost unbelievable total of 103% tax relief, so it can actually pay you to lose your money by investing in a start-up!

Consider this – we are moving towards a world of Social Commerce. The internet and social networks are bringing people together in a way like never before. It’s no longer about broadcasting to an audience, but about engaging with it. It’s no longer about what we’re told by some faceless organisation or even our government, but about what we learn from our community. Communities and business models are adapting accordingly.

The new crowd-funding platforms are a good example of this. As the banks stopped lending, new, internet –enabled platforms have emerged. These allow businesses to access the community to satisfy their funding needs- companies like Kickstarter, Crowdcube, Funding Circle and MarketInvoice are already making a real difference, creating a welcome trickle of oil from an otherwise relatively dry well.

So opportunities abound, but how can you take advantage of these? The reality is that it’s pretty difficult to grow a successful business. The idea for my book, which attempts to remove some of the pain from the process, came from my cousin, Nigel Irens. Nigel is a well-known yacht designer who has specialised in designing racing multihulls- catamarans and trimarans, with Ellen Macarthur’s record breaking B&Q/ Castorama being amongst his many successes. When I asked him how to win a yacht race, he said “It’s easy, you just need to do a hundred things better than anybody else”.

And so it is in business. So for the last few minutes, I’m going to leave you with a few sound bites from my top ten – the key areas that I believe businesses need to focus on in order to get to the top. Needless to say, these are all covered in detail in my book, which you will never buy more cheaply than here!

1. Vision Vision is the key driver of business success. Great leaders think big and imagine the real and the ideal side by side. Eg Henry Ford, Bill Gates, Jeff Bezos. If you don’t have a vision and the passion to pursue it, you’ll probably spend years pushing water uphill.

2. Strategy Only a clearly defined strategy will deliver the means for a business to achieve its vision over time. What’s your strategy to get your business to the top and why will it succeed when many others fail? Darren Shirlaw, Founder of Shirlaws the coaching company, says that you should start by working out your market positioning – will you have a product focus (Apple), a service focus (Amazon), a market focus (SAGA) or a price focus (Easy Jet). Only then can you decide on the strategy required to deliver the vision.

3. Business Planning Apparently Richard Branson doesn’t do business plans, but I’ll bet he gets someone to do them for him. There are differing views on this. Mine is that I don’t care how long or short it is but you’ve got to have a plan. The plan is the roadmap and it’s the only way you’ll reach your destination.

4. Leadership Many of today’s leaders are ill-equipped to enable their businesses to succeed. They are living in the past. Enlightened leaders will be doing the right thing by hiring and listening to young talent and embracing the inexorable move towards social commerce. It’s worth remembering the difference between Leadership and Management – Leadership is about doing the right things, whereas management is about doing things right.

5. The Board & Management Team You’ve got to have the right people on the bus. Recruiting and retaining a capable and committed management team is still the biggest entrepreneurial challenge. In my view, you need a mix of characters and in my book I suggest that the perfectly balanced board is made up of a dreamer, a doer and a cynic.

6. Money Entrepreneurs need money, generally more than they think. They also need good financial management. I’ve seen as many businesses go bust as a result of poor financial management as I have for any other reason. I can tell you about a bullying CEO who understaffed his financial team. His bullying led to the loss of the only guy who had a clue what was going on. He went bust. I can tell you about a merchandising company that believed it was doing really well, until its auditors discovered that it was failing to provide for royalty costs. It went bust. These things are happening every day, so it’s worth watching out for.

7. Culture Purpose and values lie at the heart of every great business. Alex Cheatle, the founder of Ten Group, the Concierge company, says business leaders should value ‘meaning’ as well as ‘money’. He points out that meaning is unifying, whilst money is divisive. He says that meaning creates commitment to the cause, whereas money creates paper thin commitment.

8. Marketing Marketing is the art and science of making customers want to do business with you. It’s about engagement, rather than broadcast. David Frey, a marketing specialist and author says that the problem is that most businesses broadcast on WWD, whereas clients want to listen to WIIFM. WWD is What we do, whereas clients want to hear WIIFM- What’s in it for me? Professor Theodore Levett, an Emeritus Professor at Harvard, now deceased, famously said “people don’t want a quarter inch drill, they want a quarter inch hole”.

9. Collaboration In my view, the road to growth in today’s internet enabled and transparent world, is paved with partnerships. Businesses need to find partners who can benefit from and add to their activities. Thomas & Penny Power, the founders of a social network for small businesses, talk about the old world being dominated by ‘Institutional Thinking’, which is ‘closed selective and controlling’ whilst the new world is about ‘Network Thinking’, which is ‘open random and supportive’. In the future, businesses need to collaborate to accumulate.

10. International What businesses need to think about as much as anything in this country is the international opportunity. A friend of mine, Neal Gandhi, has written a book called ‘Born Global’. He was recently in my office speaking to a group of entrepreneurs. He had one slide and all it said was ‘I’m fed up’. What he meant was that he was fed up of telling people to get on planes to go and find new business opportunities, only to find that they didn’t. His words are borne out by the statistics. In 2011, the UK exported around £14 billion to Ireland, which has a GDP of about £200 billion. In the same period, we exported around £15 billion, £ 1 billion more, to Russia, India and China, which have a combined GDP of approaching £10 trillion, approximately 50 times the size. The point is that exports are no longer the preserve of the big companies- everyone can play. There’s plenty of help available. People can start by talking to UKTI.

This Business Breakfast was held in association with Private Members Network Forum.