The Blog of an Entrepreneur

My wife made a fantastic observation at the weekend which to a degree can summarise much of what is happening in the media about the Credit Crunch we are experiencing at the moment, and I think this has a lot to account for with the downturn in the economy.

Her Father is widower on a fixed insurance income and pension. He is not employed, so not likely to get made redundant and has no mortgage. What I want to demonstrate is that he is one the least likely to be affected by a downturn in the economy than anyone.

The bad press and media coverage of the Credit Crunch has worried him, so he has started cutting his spending. When he goes shopping he has stopped buying the extra’s he would normally purchase and is only buying essentials, and when he puts petrol in his car he no longer fills up but only puts a tenner or so in at a time. He is cutting his spending in fear of the economy downturn, despite this downturn having very little overall effect on his personal finances.

All that my Father-in-Law is inadvertantly causing is a reduction in consumer spending brought on by csaremungering of the press and media. By reducing his spending, he is reducing the income into the economy, who in turn are reporting reduced consumer spending to the media, who in turn are spreading doom and gloom stories to people like my Father-in-Law who then cut their spending fearing the worse. Do you see what is happening here? Now put that on a national scale, where hundreds of throusands of people around the nation are fearing the worse and cutting their expenditure into the economy, holding onto their pennies for a rainy day. Businesses then have to pull in purse strings and make redundancies to counter act the reduced spending, which then again leads to ever more bad media coverage of the economy.

Before anyone mentions the downturn in the property market, this was bound to happen. The property market could not sustain unrealistic property inflation which was pricing first time buyers out of the market and making it practically impossible for them to get onto the property ladder. For example, I purchased my first home (a 2-Bed Semi) for £43,000 and sold it 8 years later for over £160,000. How on earth can that be sustainable? The property market needed a reality check, and that is what I believe this now is. It is just a terrible shame that people have to suffer redundancies because of it.

I read Duncan Bannatyne’s autobiography last year, and must confess to finding it a good inspirational story. However I’d like to use one piece of advice he gives in his book that goes against much of the advice offered by many business advisors, and that I myself also disagree with.

My first business wasn’t a great success. I ran it for two years and it pretty much as good as went out of business. My second business struggled for the first couple of years, and that also nearly went down the pan until I changed my ways. It’s now a great success, so what changed? Well quite a lot of things changed about the way I approach my business, and one key area was that I started to use professionals to do things instead of struggling to do everything myself.

In Duncan’s book he gives reference to two examples. One is that he learnt how to form a Limited company, and then completed all the paperwork and formed his first business by himself. The second is he gives reference to learning about the legislation involved in running a nursing home. He then advises that you shouldn’t waste money paying other people to do things when you can in save that money and do the “thing” yourself. This I firmly disagree with, and I’m a true example of why it is wrong to take on that apprach and here is a couple of examples why.

Websites: I have lost count of how many businesses have poorly designed websites that they have tried to do in house to save money, without realising that all they are doing is making their businesses look too tight fisted to create a professional image of their organisation. They look tachy and I’d never deal with a business who takes pride in promoting a lame public image of themselves.

Business Cards: When someone passes you a business card printed on cheap do-it-yourself paper from a cheap stationer. Realistically it would cost you less than £50 to get some better quality business cards printed from a high street printer, on card. If you can’t afford £50 for business cards then you need to relook at your budgeting and startup costs.

Both the above reflect the impression you are giving other people about your business, and you should be thinking about creating a professional image. You want to portray a sustainable business that is going to be around for a while, not that of a business that can’t afford basic business cards. As for a website, it is better to have nothing at all than something that makes you look like an amateur.

Duncan does suggest contacting the relevant Government organistations and ordering their handout booklets to read and learn about whatever it is that you need to comply with. Personally I feel this is a waste of your own time, when you should be focusing your energies on growing, developing and selling your business. If I relied on the Government guidance on how to comply with the Money Laundering Regulations I could inadvertantly find myself breaking the law because their guidance is riddled with contradictions. If I followed their guidance on how to comply with the umpteen million different Emplyment Legislations I again could find myself breaking the law without realising, or worse still, I could find myself drowning in so much paperwork I’d never find time to run my businesses.

My advice is manage your time. It is actually sometimes a much more efficient and cost effective use of your time to use professionals to do what they are good at so you can get on with running your business safe in the confidence that “whatever” you could have done yourself more slowly has been done more quickly and professionally by a professional. I now surround myself with professionals who know how to do things much better than I do. I technically can do the programming that powers my Efiling business, but it is a much more efficient use of my time to pay others to do it better than I can. I could also technically learn how to write my staff contracts, but it is a much more efficient use of my time to pay someone else to do it. The end result is that my businesses get the attention from me that they need to grow and develop, and not have me tied up in books, leaflets and other unnecessary paperwork.

Using Duncan Bannatyne’s example of forming a Limited company. It probably cost him about £40 all in to form one of his companies himself, and by the time he received all his paperwork back it would have been about a week. So that is about 5 hours of his time learning and form filling, £40 paid out, and a week delay in delivery of his Certificate. He could have paid my “professional” company to do it for about £50, took him about 15 minutes and we would have had the paperwork back with him the next day (quicker than Companies House directly).

Even multi-millionaires can learn something from us mere trainee millionaires.

Earlier this week my salesman for E-filing Limited was calling through a number of company formation agents doing his job, selling the services of E-filing. He was doing a pretty good job too.

He did hit a problem with one company, a problem which I had anticipated but I would never have guessed it would happen with this company in question. To understand why I’ll give you a bit of history.

When I started Quick Formations in 2002 the Pay-Per-Click market was pretty new in the UK, and at the start there was only myself and one other company formation agent bidding for key positions on the likes of Yahoo!, MSN, etc for our industry’s main search terms. It reached a point where we were trying to outbid each other and the end result was that we were paying way over the odds per click on our main search terms costing us both a fortune. It was a rediculous situation and needed to be sorted, so I gave the other company owner a call. We agreed to alternate weekly who would hold 1st place and the other would sit in second place. We had a gentlemans agreement between competitors and it worked very well… until the competition in the industry increased and then it just didn’t work because there was too many people. Whilst it was working though it saved us both a small fortune, a simple example of competitors working together.

So this company owner having experienced us working together, I was most surprised when he said he wouldn’t deal with E-filing because we are the “competition”. As a side note, the two companies are actually run and handled independantly at arms length .. just clarifying that point for the readers :-).

As a business owner I spent a lot of time talking with my competitors. We share knowledge about our industry with each other, industry gossip, and market trends. Some of them I have become friends with and often enjoy a round of golf or good long ol’ chat over the phone or lunch with. I have learnt a lot from their strengths and they have learnt a lot from my strengths. The end result is that each of our businesses have become stronger and more profitable.

That is not that you should run off and become all buddy with all your competitors and give away all your trade secrets, because I have also been bitten quite badly by someone who after a year of chatting on the phone at least weekly double crossed me quite badly. So you must tread carefully when getting into contact with competitors and building these relationships, because some of them will be just out for the take, but there are others who are genuine professional business people. They are the intelligent ones who share a common goal where everyone wins, and these are the ones you need to seek out and work with. Share and share alike, you help them and they will help you. It’s all about give and take.

This is where E-filing Ltd works so well in that when I speak to my customers of E-filing I share knowledge I have gained from Quick Formations with competitors of Quick Formations, we all bounce ideas off of each other. The results speak for themselves, QFL wouldn’t be doing as well as it is today if I thought I knew everything and did everything based on my own opinion alone. It is good to bounce ideas off someone not only in the same situation as you, going through the same experiences as you, but in the same industry as you.

My advice for today, if you want to move your business forward at a significant rate work with your competition. By doing this both businesses will benefit, and you need to be willing to help the competitor(s) you work with. If you are not willing to do this then don’t bother even considering it.

In the day to day activities of my Quick Formations business we frequently deal with people who are setting up a business with a friend or family member, or even an old work colleague. These people are always keen to work together, they have a shared vision or dream, and know they are going to be successful.

Unfortunately for 50% of these people, their relationship is going to break down and their business is going to suffer significantly as a result. The meeting I had this morning is no exception.

We have two married couples setting up in business with their business owned 25% by each person. Everything straight down the middle, it couldn’t be fairer. They were all very keen to get started, and really motivated to make a success of their new business venture.

You only have to look through some of the posts in the Legal section of the UK Business Forums to see exactly how many people find themselves stuck in a situation with a business partner they no longer want. It’s a sad story, but one that could so easily be resolved by spending some time working out how to deal with all sorts of situations before they arise. How will each person be rewarded, salaries and bonuses. What about if someone wants to break from the partnership? You agree all this at the start, whilst you are still talking to each other and not through solicitors!

I’ve recently got involved in a new business venture with someone else called UK Golf Forum, and acquired a stake in another business venture called Calltracks. One of the first things I ensured was done in both instances was have a shareholders agreement drafted and signed, because I was one of those unfurtunate people through bitter experience lost hundreds of thousands of pounds through a bad business experience. I had no shareholders agreement in place, and did not take proper legal advice. I’ve since learnt from that experience, and found the experience a valuable learning curve - although I was pretty upset at the time as I’m sure you can imagine.

I used two firms to write my shareholders agreement for me. The first for UK Golf Forum was written by a gentleman called Ian Mason from Mason Bullock Solicitors, and the one for Calltracks I had written by a lady called Andrea Wyld from Franklins Solicitors. I received an excellent service from both firms and can highly recommend both, my advice is call both and deal with the one you feel that grasps a better understanding of your business. This will be important when drafting your shareholders agreement for you.

Last week I was asked by a nice chap called Robin Neighbour from Young Enterprise to be a judge for the Daventry and Northampton Young Enterprise Awards. Of course I was more than happy to do so, and am happy to say I will be happy to do so again.

I found this event extremely valuable to be involved in, and gave me a great insight into the minds of our future generation of Entrepreneurs. I also enjoyed the fun debates with the other judges, who me being me I often disagreed with. Particularily because they generally came from a corporate background and I came from a more Entrepreneurial background, and this is part of the problem with the UK’s economy when the Government base their budgets on corporate policy.

The best example came about when trying to decide who the final three should be. I wont go into any more detail than that because it wouldn’t be fair to expand any further.

We had narrowed the decision down to 4 companies. Two were unanimous, but the last two I thought one and the other two judges thought another. They felt company C should be in the final three because they had made a lot of profit exploiting a small market in their school, but I felt company D should be shortlisted because they had a niche market and a more sustainable business model. However company D had not made as much profit as company C.

Tough call perhaps, but do we award people for making a quick buck without considering the long term consequences? Is this the sort of Entrepreneurial culture we want to develop? Personally I do not think so, I believe we should develop a more calculated and thought out economy where long term consequences are considered where businesses, and our environment, are more sustainable. We don’t want our future run by a load of fly-by-nights. We want job security. We want stability. We want a future that will last, even if the profit margins aren’t as high as perhaps they could be, so long as it is sustainable.

I’m pleased to say I argued my case well and the other judges agreed with me!