Monday, 30 April 2012

Pilot Scheme for Funding Young Entrepreneurs

A new government scheme designed to provide funding to young entrepreneurs, and trailed by George Osborne in his latest Budget, is to be piloted from May 2012.  The neat twist is that the “Youth Investment Fund” is to be based on the student loan system, and will give 18 to 24 year olds access to low interest “enterprise loans” to start up in business.

Business and enterprise minister Mark Prisk said in Parliament on Wednesday that:

"In a sense [the scheme] mirrors what is available in the market for other entrepreneurs, but it is an exciting concept because it will provide the means to take a nice idea that needs to be tested in the market through to a business plan, and then on to becoming a real business"

While the initial fund for the pilot is worth £10M, further funds may be made available once the pilot scheme has been evaluated.  At this stage the Department for Business, Innovation and Skills have not released any more details about the pilot scheme, but these should be made public in the near future.

The concept has been developed by the Government in partnership with organisations such as the National Youth Enterprise Working Group which was formed last year to try to co-ordinate support for young entrepreneurs.  Members of the working group include the Institute of Directors, The Prince’s Trust, and Virgin Media Pioneers.  With those sorts of backers, the pilot scheme stands a good chance of success.

Thursday, 26 April 2012

Are we really in a double dip recession?

Well we will be if we talk ourselves into it. The 0.2% decline is only an estimate. Only 40% of the information has been looked at. This is bound to be adjusted in the next few weeks. My guess is that it will be adjusted in a positive way and that we will not have gone into a double dip recession. We may still be dragging along the bottom with very little growth but we will not be in recession.
Why do I believe this?
Many of the other indicators are positive.
The Office of National Statistics says that the biggest culprit was the construction sector and that it shrunk by 3%. But the Purchasing Managers Index indicates that the construction PMI figure was 51.2, anything over 50 means that the sector was in growth. The same goes for the services sector with 3 months PMI figures of 56, 53.8 and 55.3.
So are we really in a double dip recession? Most probably not unless we talk ourselves into one.

Tuesday, 24 April 2012

Late Payers putting SMEs at Risk

A new report has revealed the scale of threat to business survival posed by late payments.

The late payment of trade invoices is threatening the profits, growth and even survival prospects of small firms, but few use formal procedures to tackle the problem. This is according to the findings of a research report by Graydon UK, working in partnership with the Forum of Private Business.

The survey, which canvassed the views of 500 UK small businesses, revealed that 51% of companies cite the late payment of trade invoices as a problem. Almost a quarter (23%) of these companies subsequently indicated that late payment is a serious problem, with 16% saying they have almost been put out of business as a result.

Meanwhile, 56% of those respondents not paid on time have, in turn, been forced to pay their own suppliers late, and 45% reported that late payment has eroded their profits. Almost a quarter (23%) asserted that late payments have undermined their ability to invest in growth through innovation.

The research also shows that businesses which embrace credit control procedures of some form are significantly less likely to suffer as a result of late payment. Less than half (44%), however, employ formal credit control procedures, with 38% instead relying on a mix of formal and informal processes, and 16% juggling payments on an ad-hoc basis.
Only a third (33%) of respondents offer prompt payment incentives, and just 30% use existing legislation to charge interest on late payers, while 40% use cashflow management software. In addition, debt collection agencies are employed by 42% of respondents, and 43% keep a reserve in the bank to offset late payments.

Monday, 16 April 2012

How to Write a Winning Funding Business Plan

Part 3 (final): The Content
In part 3 of this series of blogs, I want to concentrate on the required content of each section of the plan. I will not talk about the Executive Summary or the Structure of a plan as this was discussed in part 2, last month. If you missed part 1 or part 2 please contact me and I will forward copies to you
After the executive summary (section 1) the next section of a plan normally discusses the corporate structure and trading history, if any.
Corporate Structure/Company Development: (section 2)
The sub-sections in this section would normally include:
·         Company history
·         The location
·         Ownership structure
·         The management team
·         An organisation chart for the next 3 years, showing starting dates of future employees
·         A description of the staff requirements
·         Details of trading performance to date, if any
·         A list of major accomplishments achieved so far
Company Objectives: (section 3)
·         Turnover and profit and loss for the next 3 years
·         What other objectives can you list, such as:
§  Number of new products per year
§  Number of new distributors, new resellers.
§  Number of new countries to be opened up.
Product/Service: (section 4)
·         The most important part of this section is a description of the ‘Need’ for your product or service
·         Then a description of the product/service. If it is a technical product then describe it as simply as possible
·         What are the unique selling points?
·         Have you done a ‘proof of concept’? if so the results of this should be discussed in detail.
·         What future enhancements are likely?
·         What patent protection do you have?
·         Who are the competition and what are their strengths and weaknesses?

Marketplace: (section 5)
I normally start this section with a description of the barriers to entry for anyone else seeking to enter this market. I then describe:
·         The exact marketplace and the size of that market today and in the future
·         Who the likely customers are and their likely spend
·         It is also a good idea to quote any testimonials that you may have been given and list any letters of intent that you may have
Sales & Marketing Plan: (section 6)
It is sad to say that many plans do not pay enough attention to this important section. I often see well written plans that are nothing more than a marketplace and product description and nothing else. This section must be given great attention.
·         What is your sales model?
·         What is the structure of the sales force and who will manage it?
·         What is the average sales cycle?
·         What sales ratios are you expecting?
§  Number of enquiries to meetings
§  Number of meetings to sales
§  Number of expected meetings per week per salesman
§  Average order value
·         What are the 3 year sales targets?
·         A full description of all the assumptions you have made in deciding upon the sales targets. Without these sales assumptions the funders cannot decide if they believe your sales and profit forecasts
·         How do your prices and service levels compare to your competitors?
·         What is the structure of the marketing department and who will manage it?
·         What is your marketing strategy?
·         A detailed marketing plan, listing with details, all the different avenues to be taken and the costs and frequency involved.
·         Finally a small spreadsheet showing the amount for each type over a three year period, totalled annually
Operations Plan (section 7)
This is often another section that gets forgotten about. You have described the product and how you are going to sell and market it, but you have not described how the company is actually going to operate.
In this section you need to describe:
·         The facilities and location of the office you already have, or will need
·         What people in which positions you already have and how many new people you will need and when?
·         What equipment will you need to purchase?
·         What are the manufacturing, ordering and fulfilment processes?
·         What suppliers have you already in place and which need to be found?
·         What customer service and complaints/returns procedures are in place?
The Management Team: (section 8)
·         Who are they?
·         Their track record and industry experience
·         Their experience in key functions
·         Future management requirements
·         The management team remuneration packages
·         The share ownership structure
Financial Model: (Section 9)
It is important to put into words the information that you show in your financial model. Not everyone is comfortable with complex spreadsheets and prefers to read about the information instead. The subsections in this section include:
·         What are the drivers of your business?
·         A summary and description of all the forecasts
·         The balance sheet
·         Repeat all the assumptions that have been made in the forecasts
·         List all sensitivities
·         A SWOT analysis
·         Details of any historic accounts
·         What corporate Governance will be in place?
·         What are the funding requirements?
·         The amount of capital introduced to date and from where
·         What is the funding needed for?
·         Prospects for the investor, either ROI or IRR.
·         Your exit strategy
·         The costs you have included for raising the funds

There are many different ways of writing a winning funding business plan. My way is not the only way but it is the way that I have used successfully for over 10 years. If you follow these guidelines you will have the basis of a good plan.
If you have missed part 1 and part 2 of this blog please contact me on or Tel: 01932 244810
Follow us on Twitter and keep up to date with funding issues: @peterekelly

Tuesday, 3 April 2012

Cash Management VIP for Manufacturers.

KPMG’s third Business Lending Survey has found that 95% of manufacturing executives across Europe and the Middle East say that maintaining a sound balance sheet and improving cash and working capital management are currently top priorities for their business.

Other priorities include:

           Changing business operations to realise cost efficiencies (42%).
           Innovation through product development (35%).
           Looking for growth in emerging markets (31%).
           Exploiting growth opportunities through successful transactions (28%).

Looking ahead, 82% of manufacturing executives agree that they will need to capitalise on trends such as emerging markets, efficiency of resources and sustainability. They believe that such activities will better equip them to withstand market challenges such as increased regulation, shortages of raw materials and threats from new competition in a changing market environment.

In the long run, however, innovation through product development is expected to be a key driver for the manufacturing sector. At the moment, 43% of manufacturing executives believe that a shift towards the commercialisation of current technologies and products over traditional research and development is expected in the near future.

Stephen Cooper, UK head of diversified industrials at KPMG, said: “The government will need to play its role in this movement if the UK’s manufacturing base is to benefit from the commercialisation of current technologies. Business-friendly intellectual property laws and targeted incentives will be required if the UK is to become a pioneer in technologically innovative products.”