H: Lis Speight, host

A: Julie Meyer, entrepreneur

H: Hello I’m Lis Speight and welcome to the Business Show. Developing a business can be a daunting prospect and as an entrepreneur it’s likely that you’re working towards your goals without always knowing where to go to get sufficient guidance and support. Well there is optimism that Britain’s small businesses will grow the economy significantly over the next 12 months so it’s critical that you’re armed and prepared. Whether it’s keeping on top of your costs or keeping up with a rise in demand, then stay watching because I’m joined today by a leading entrepreneur who is passionate about backing new business. Julie Meyer welcome to the show. Lovely to see you today Julie

A: Good to be here

H: Now Julie’s going to be taking your questions on business, so if you’re starting up a business or you have a small business and you want some advice on how to grow your business then do get your questions in to us. All you have to do is to type your name and your question in the box that’s on the screen, press submit, it will come through to us here in the studio and we’ll try to get through as many as we can during the course of the show. Now Julie, there’s been a lot of talk about the recession coming to an end. How true is this for small businesses? How are they finding it out there in the UK?

A: Well it’s interesting you know, small businesses almost don’t have the luxury of whining about the recession because they just have to frankly get on with it by necessity they’re very close to the call face. If they you know don’t work hard, if they take holiday, and so forth, their business suffers, so they have to really stay very focused and – but the positive side of that is that the closer you are to being in control of your own destiny, the more empowered you are. If you can take decisions quickly and see the impact, see the boat shifting and the waters very quickly, if you can feel accountable and feel good about that then even if the businesses are not taking off hugely but they’re just staying afloat and growing slightly, you feel good. And so we have a lot to learn from the SME or the local business sector, because these are people that are making a difference, the UK has always had very strong SME sector, and indeed I think the SMEs are going global. We have increasing evidence that because of whether it’s through the commonwealth, Europe, North America, the UK SMEs are really punching above their weight and really taking off internationally as well

H: So they’ve actually weathered better do you think during the recession than some of the bigger companies?

A: Absolutely, absolutely, because they can see that if they can take that on a new product line or a new direction in the company – first of all if it doesn’t work out they just pull it back and there’s not so much of a cost expenditure,

H: Yes

A: So they can try new things and adjust more quickly to market conditions, but when they do – when they do – when an idea takes off they can push it out and really allow a good idea the full fruition and the fulfilment of itself, so they’re more nimble and they can just –

H: Nimble, that’s a good word

A: And they can adjust to the market conditions much more quickly

H: Yes. And how important are SMEs to Britain’s economy then?

A: Well you know research shows that this going to be what’s going to pull us out of the economic recession. The recovery is going to be built on the back of SMEs. NESTA, the innovations agency here in the UK categorises 6% of all UK businesses as high growth. High growth and SME businesses, and yet they create 54% of all the new jobs

H: Wow

A: So if we ask ourselves where are the new jobs going to come from, it’s going to be from the high growth SME sector

H: Right, ok. So if you are starting up a small business though is it really a very good time to do it at the moment?

A: Well yes absolutely, I mean the – again and again we see that the people who are building in the downturn, just before everybody can see that the markets are coming back, those are the people who benefit then, that are ahead of the game when we’re in kind of full-blown recovery mode. So the smart money knows you’ve got to be building, you’ve got to be working contrarian to the market, build now, keep costs very low

H: Right. Which is easier said than done to be honest

A: But again you’re in a much better position to do that if you are a local business owner, an SME, a small business owner as opposed to a corporate. Keep business costs low, think big, plan for the future, and when the recovery comes it will pull you out and you’ll be ahead of other people who are just starting up then

H: Ok. We’ve got a question in on that line actually. James Johnson says “what do you think are the biggest challenges facing SMEs at the moment?”

A: I think everything is a game of confidence, and sometimes when your back is up against the wall and you don’t quite know how you’re going to make payroll and it’s the 15th of the month, and so forth, you’ve got to exude confidence and you may not feel it in your gut right?

H: Yes

A: So I think that’s one of the biggest things, and I would argue that’s where we really need to be ensuring that the business environment that we’re creating here in the UK gives investors also, because pride investors are an important source of financing for the SME sector

H: Right

A: And they have to believe that investing in high growth businesses is a good place for their money, so you’ve got confidence needing confidence needing confidence. How do we create that virtuous circle of confidence building? And I would argue that you know really keeping a very business-friendly overall environment, and to make a bet on the entrepreneurs of this country that they are going to find the new companies, revenue streams and products to pull us out, right, if we reduce costs we will get the revenue pull-through which of course is taxable income. But we’ve got to make a bet on entrepreneurs first, that they will drive their businesses hard and that we’ll all benefit from being able to tax that revenue appropriately and so forth on the other side of the curve

H: Ok but how do you, if your business is sort of trogging along quite nicely but you’re really looking to expand and grow your business, where do you start looking for investment? We can’t all go on Dragon’s Den can we? Where do you start looking for investment? Should you go to friends and family, should you go to your bank –

A: Well I think there are good banks out there, obviously Barclays has the campaign right now to give away £500,000 which I think is a great initiative

H: Yes we’ll talk about that a little bit later on actually

A: Typically the private investors as you say, their friends and family, they’re people that you know well. As an entrepreneur you need to be out there networking, you need to be going to local events or opportunities where you can run into people and you need to talk about your business. You can’t hide it under a bush and say well I’m very nervous somebody will steal my idea, you need to be a communicator first and foremost. But second of all you have to have then the ability to talk about your business in kind of terms that these are the drivers of my business, not just the kind of big story about vision but here’s how my business really operates. The key assumptions which drive the revenue line are – which is not a bunch of gobbledygook, that really just means that you know to make sales I’ve got to get these three things right – I’ve got to have a product out there working by x day of the month, I’ve got to collect cash on this day of the month, you’ve got to talk in specifics about what drives a business so that investors cannot just be seduced by the big business concfept, but they can say ah she really knows what’s driving her business, she can break it down into the assumptions and help me understand it as a private invetstor. So it’s about getting very specific, very precise, doing business planning which doesn’t mean a huge you know accountancy kind of operation, it means putting together some numbers that help an outsider get into your business very easily

H: So they’ve got to be confident that you know what you’re doing and that you know where your business is heading, or you’d like to know where your business is heading

A: That’s right and too frequently entrepreneurs focus on the kind of seduction of the entrepreneur, let – to the investor – let me tell you about what I’m going to do, and they fail to then help the investor understand how as an entrepreneur I’m going to de-risk my venture. These are the things that could go wrong, here’s what I would do if those things go wrong

H: Right so have a back-up plan, always have a back-up plan. On that note actually Mark Williams has sent a question in – “What’s the most common reason that new businesses fail and what can I do to make sure it doesn’t happen to me? Is having a business plan as critical to my survival and growth as I’ve been led to believe?”

A: I think that the biggest thing that goes wrong in small business, particularly in the first two years is that entrepreneurs are overly optimistic about things such as cash flow, they assume people will pay on time

H: Yes

A: They assume that an order will be completed into a sale, they assume a lot of things because we’re naturally optimistic people, so all of a sudden you’re confronted with a reality – what do you mean they didn’t pay on time?

H: Yes

A: What do you mean they’re not going to pay for another 30 days? Oopsy daisies

H: So cashflow is as big problem then at the beginning?

A: Cashflow – and you need to make quite harsh assumptions about that and I always think if there’s – for every £10,000 that you have to have in your bank account you need to have 4 or 5 different insurance plans for how you’re going to get there. Don’t just count on one person. The number of times I’ve heard from entrepreneurs or small business owners – well so and so said that they would pay. Well they’re a big company, how come they’re not paying me? Well because sometimes big companies don’t pay for 90 days, and so there’s this mismatch of assumptions around cash, revenue, cost and so forth, so you know we have to temper our optimism as entrepreneurs when it comes down to the brass tacks of running the business, and to make sure that we have 3, 4, 5 different ways to get every amount of cash in there. And we need to then keep the optimism to then drive the team, keep people inspired, get people to feel that they’re part of a big thing happening, there’s a mission to this company and I want to be a part of it, and to switch from that gear to that gear can be – it can be a bit schizophrenic, it can

H: Yes. Do people learn by their mistakes generally then? I mean is that the way to do it? You must have made some mistakes along the way, what are the worst things that can happen?

A: Well I think you know I would say that you know I certainly have made so many mistakes, good entrepreneurs do, they have to have that kind of quiet come to Jesus moment when they say ok right that was me, I can’t pin that on anyone else, I did that and so forth. I think I would say hiring people too quickly because things are always go, go, go and you meet somebody and you think ah that person could be the answer to my questions, I’ll bring them on board, can you start tomorrow and boom boom boom and you fail to get to know people, and all of a sudden you find yourself three weeks, three months down the line and you think wow I don’t really know that person as well as I thought I did

H: Yes

A: They have some very annoying you know characteristics

H: I know that feeling

A: They don’t really work hard and so forth, so I would say get to know people over a period of time, if you’re interviewing them, force yourself to have them meet other people in the team

H: Right

A: So that when you really do bring them into the team you have a pretty good sense of whether or not they’re going to succeed or fail, and obviously if they’re going to fail you wouldn’t bring them into the team, but I’ve seen a lot of people hire very quickly

H: Right

A: And it doesn’t work out and then they create a bigger issue for themselves

H: Yes ok, that’s a good tip. But again it’s learning by your mistakes isn’t it?

A: You do

H: Because if you’ve not interviewed before, you’ve not hired before, it is difficult I suppose isn’t to know that you’re taking on the right people

A: Indeed and you can hire people in your own image and maybe that’s not the kind of person that you actually need to hire

H: Right ok that’s a good tip, ok. Now we are live of course so if you would like to get your questions into Julie then do so, all you have to do is type your question in the box that’s in the screen press submit, it will come through to us here, and Mr T Perkins did just that, his question is “I’ve spoken to my banks’ small business advisor but I don’t really agree or trust his advice. Where else can I go?” He obviously thinks he knows better. Where else you can go? Should you just take the first person’s advice and run with it or –

A: Absolutely not, the nice thing about it is there’s a high street with many banks

H: Yes

A: And so I think just like you would get a second opinion on anything important I think you should probably get a second opinion when you’re looking for a bank loan or a credit facility, and you know there’s a lot more than just credit facilities, there’s invoice discounting, there’s factoring, there’s other kinds of ways that the bank can work with you. The important thing though is back to the business plan, you really do have to be prepared to have a proper conversation with the bank manager, and it’s good to ask them what format do you want to see the forecasts, what format do you like to see the management accounts

H: Right

A: And then don’t take anything to your bank manager that you don’t personally understand, don’t have it prepared by somebody else –

H: That’s a good tip

A: And then say ok, now I have a business plan, I’ll go in and I’ll give it to them. Well no they’re going to ask you questions about the business plan -

H: So you have to be able to talk it through and to understand –

A: You have to be able to talk it through, and you need to show that you’ve internalised the business. It is after all your business. All the bank manager really wants to know is how do you approach running your business. And they’re looking for a lot of information about the decisions that you make. They might say you know what are your contingency plans for your – you know for sales? They might say how much of your fixed cost, the cost that won’t go away, they never change – how much of those are already covered by reoccurring revenue, right? And these kinds of concepts reoccurring revenue, fixed costs, how much are covered by one – you need to be conversant with some of these. These are natural kind of questions that a business manager is going to say what’s the risk of us extending the loan? And actually you know sometimes the bank manager is right to not give you further credit. That sounds harsh but you know sometimes they need to go back and say you need to do more business planning

H: Ok. So I hope that helps you then Mr Perkins and good luck with whatever you’re planning for your business. I’ve got another question in from Emma, she said “I’ve always dreamt of running a small arts cafe” – sounds like a nice idea doesn’t it? “I was geared up to make a go of it but I lost my bottle when the recession hit. Is now a better time to re-launch?” All those green shoots that we’re seeing. What would you say to Emma?

A: Yes I think it depends on a lot of things. First of all you need to have your personal financial situation sorted. Right, so what I would say is if you’re in debt Emma, get out of debt. You’ve got to have a personal kind of stable family situation as well. Sometimes people say well I just set up a business and now I’m getting divorced. That’s hard, you can’t do both things at the same time. You’ve got to have a base, a foundation, right? You need to have a conversation about your partner so you’re starting on firm ground about what you’re doing, this is a venture that you can’t do in isolation of your family. And then I would say also talk to a couple of people who really know you and who care about you

H: Right

A: And what do they say about your ability – do they say I’ve always thought you should be running your own business Emma

H: Yes

A: Or do they say you know what Emma I think it would be really good for you to have a business partner who has these characteristics

H: Yes

A: Some people just want to set up their own business because they don’t like having a boss

H: Yes

A: Well guess what, if you’re running your own boss you have a boss who are your clients, your investors, your bank manager, your team – you are very accountable to a whole new set of people

H: Yes

A: It’s a different kind of relationship than having a boss, but it’s equally as strenuous and rigorous and so you know people who care about you should tell you whether or not they can see you being successful in business. Now if they say don’t, you have to factor in, you know to what extent are they risk averse and so forth

H: Yes

A: I always think that there’s a lot more people out there that have it in them to run their business successfully and they need to just, you know they maybe need to take a small step, maybe they’ll go from working in a big company to kind of doing a kind of portfolio sole trader thing for a while, and then they branch out and set-up a business and hire an employee but keeping costs low, so maybe there’s some interim steps as well

H: Ok but be realistic and if you ask someone’s opinion about you, then take it seriously really and don’t just think oh it will be fine it will all be easy – answer those difficult questions because you don’t want to have to answer them later on down the line when you’re not really very prepared

A: Absolutely

H: Ok. Thanks for that, I hope you set up your cafe and I hope it all goes well. James Ainsworth of Marketing Donut has sent in a question “will the budget on Wednesday be of benefit to business?” Well we don’t really know do we, but what would you like to see coming out of the budget for business?

A: Well I – you know I certainly hope so, I certainly hope that this government has taken on that – you know the only business is in the driver’s seat, it has to be – we have to be creating a business-friendly environment for overall for people to have that confidence that we’re going to pull ourselves out of recession, so I hope that we’d see things that would be about – not stimulating business by throwing money, government money at it

H: Right

A: I think we have to take a bet that SME business owners and entrepreneurs, they know what to do, they don’t need government money to do that, what they need is probably a low tax environment which gives them the confidence that they’re not going to be taxed as they set up these businesses

H: Yes

A: If you ask the CFOs and the finance directors of SME businesses, what’s the biggest problem that they face is that they have such high national insurance costs early on in the business

H: Yes

A: Let’s lower it, let’s not cripple businesses and so forth. Overall the amount of revenue that we’re going to get from SMEs compared to corporates and things like that, is negligible, right? So let’s create hundreds of thousands of new businesses and really show what this country is made out of

H: Ok. Interesting stuff. Let’s move onto one of the reasons we’re here actually, because Barclays is launching this new competition which is called “Take one small step” – tell us a little bit about this then – what is it and how do businesses get involved?

A: Well I think it’s a great initiative by Barclays to basically give away £500,000 no less to 10 deserving businesses across the UK. And they’re absolutely not biased on any part of the country or sector or anything. Anybody whose deserving, it can be a relatively new business, an older business that fits the broad category of being an SME, a local business –think of it as being a local shop, cafe, hairdresser, mechanic and so forth. These kinds of businesses that can prove that they have something to differentiate it, an unfair advantage, something they do extremely well. They’ve been running a tight ship, they’ve made it through the recession now – Barclays wants to reward them with a little bit of cash,

H: £50,000, that’s quite a lot actually isn’t it for a small business?

A: It is, it’s an incredible reward for having worked hard during the recession to now have some fuelling to finance their growth plans for pulling it out. I think it’s a great initiative and I just couldn’t help myself but want to be involved

H: Yes it sounds really great. So how do people get involved with that then? When’s the closing date?

A: Well the closing date is the 9th May, so you have about a month or so. You need to go to takeonesmallstep.co.uk website – all of the details are there plus some tips and seminars and so forth, the whole program of activity for business owners to get involved, but all of the details about what you need to do in terms of submitting are right there at takeonesmallstep.co.uk

H: Ok lovely. So it’s worth having a go isn’t it, £50,000

A: Absolutely

H: It could be you couldn’t it at the end of the day that wins it. We’re almost out of time actually but we’ve got one last question from David and Carla. They say “a lot of what you are saying makes complete sense” – that’s nice to hear isn’t it Julie?” “Could you distill your advice into three top tips for entrepreneurs wishing to start a new business as we are?” So three top tips from the words of wisdom here

A: It’s even easier than that, it’s six words – think big, start small, move fast. If you ever stop thinking big as an entrepreneur it’s really game over. That’s the fun bit is thinking big, is to think about what you can create, how do you create something different? You’ve got to start small. You’ve got to be careful in not taking costs on that you don’t need in working as a small unit that little mino boat going through the water, so keep it small but think big and then move fast, right? Don’t assume that you’re going to be able to work 40 hour weeks, it’s going to be 50, 60, 70 hour weeks, but you’re going to get ahead and you’re going to position then from which you can enjoy life more, but you’re going to have to move fast and work hard but most people find when they’re running their own business they don’t mind working incredibly hard because it’s their business, right?

H: They can see the results

A: They can see the results, it makes them feel good, they like the accountability and they like the empowerment and they like the feeling that they are in control of their own destiny

H: So Dave and Carla I hope you’re ready for that. I hope you’re ready for those long hours. Well Julie we’re out of time actually and thanks to everyone that’s sent in questions out there, hope we’ve been of some help to you, and Julie Meyer thanks so much for coming in

A: Thank you

H: I mean it’s really interesting to talk to you

A: Thanks Lis

H: If you want to enter the competition you can go to the website which is takeonesmallstep.co.uk and who knows that £50,000 could be heading your way. Well thanks very much for watching the Business Show and we’ll see you next time, bye bye