Just set up a new business? Read this if you want it to be a success!

As an insolvency practitioner, I have met met hundreds of new business owners…wouldn’t it be great if you could learn what I’ve learnt from all those meetings?

Well you can!  Here’s an article just for you…

So you want to set up in business, do you?

Or you’ve recently started trading but not doing as well as you hoped?

Would you like to know how to avoid going under? How to give it the best chance of being a success?

You see, there’s a big problem with small businesses.  And that is when most people go into business, they only look at the positives such as what they’ll do when things really take off.  Things like what new car they’ll buy, how they’ll spend their increased free time, how they’ll manage all that profitable work? ….
… They build the business on two things:

(i) what they think they know; and

(ii) what they hope.

They don’t go out of their way to find out what they don’t know or to plan for things not going quite to plan.

Yet it’s often what they don’t know or haven’t thought about that will eventually kill the business.  And with it, destroy their hopes and dreams, and often their own and their family’s finances.

The bad news is that’s how it turns out for the 4 out of 10 new start-ups – yes, 40% of new businesses fail within the first 2 years!

That’s almost as many businesses fail as are still alive within just 2 years.  But it doesn’t end there – of the survivors, most then go on to fail within the next 3 years.  Only one in ten are still around by year 5.

The point is you will fail if you follow the course most new business owners do. Yet with so many not making it, there’s an abundance of experiences out there that you can learn from. And it’s free to do so!  Here they are…

The business was started for the wrong reason

Some businesses are set up and then run more like a hobby than a business.  I call these ‘lifestyle businesses’ – they tend to merely exist, either doing poorly or at least not doing spectacularly, until something happens later to cause the wheels to come off…

It scares me that right now many small businesses being set up out of necessity – because there are no jobs around – rather than by someone who has identified a profitable opportunity.

Why have you set up?

I can do it all myself!

In his book, the E-myth, Michael Gerber spoke of the 3 skill-sets needed by business owners today – entrepreneurial, managerial and technical.  No one I know has all three, in the right degrees.  Businesses that don’t have and won’t buy in all three skill-sets lack the cutting edge to succeed in today’s harsh business environment.  Seeking help from outside the business to plug skills gaps is a show of real strength, not of weakness…

Read the book, plug the gaps!

Not enough money

It always costs more to set up a business than you expected and then survive the inevitable troughs later on.  At this time when the banks are selective as to whom they lend to and seem to fail to support customers when they most need them, it’s not a good idea to rely on credit lines over which you don’t have full control.

Have you taken a good amount of time to assess how much money you will need, where you can get it from and how you’d cope with what might happen when business dips?
Poor financial skills

It is vital that you understand how the business works financially.  If you don’t, it won’t be long before you won’t have a business because you don’t properly understand the machine that brings in the cash it needs works.  Also, if you’ve got weak financial skills, you probably don’t have a strong profit motive.  Sure, you love what you do, but you’ll return to stereotype ‘manager’ or technician’ – see above – roles when things get tough, and when you do, you’ll dig the business into an even bigger hole rather than solve its problems.

Do you understand exactly how how the business ticks financially?  Do you understand the figures?  Think about going to college to learn management and accounting if you don’t.  Don’t try to abdicate responsibility for your business’s finances to an accountant – sure it’s ok to hand the processing to him, but not responsibility.
The location, the product or service is all wrong

Quite simply, the business opportunity was not fully explored, optimism blinded reality… there are many businesses in our High Streets which have got the location, product or service wrong.  I stand there and think ‘just what is the owner thinking?  It just doesn’t stand a chance!’

Have you allowed your heart to overrule your head?
No planning

Have you heard the saying ‘to fail to plan is to plan to fail’.   Have you planned for what is going to happen?  And what might happen? – you see the unexpected does happen, increasingly so today!

A lot of the things that cause businesses to fail can be anticipated, plans can be formulated to avoid failure.

Have you spent enough time thinking about what is going to happen and how you’d deal with what might happen?

Poor trading levels

Where a business suffers poor trading levels, often their owners cut costs to manage their cash flows – they do this because it’s often the easiest decision and produces short term cash benefits.  However, if this is all you do, you’re merely storing up much more serious problems into the medium term.  It’s simply not possible to cut yourself to greatness!…

If things don’t work out in terms of sales levels, what’s your plan? How certain are your planned sales figures?
Poor marketing

Many businesses wait for sales to find them, because ‘that’s what you’ve always done’.  If you have worked for someone and have now gone to work for yourself, this could be a big problem for you.  I often can’t ‘find’ any presence anywhere of such businesses – there is no website, no sales force – and if I can’t find you, how can you expect would-be customers to find you?

What’s your marketing plan?  Have you written it down? Do you follow it up?
Failing to set and follow a clear strategy for success

Without a formal plan, businesses develop haphazardly.  And one day you’ll scratch your head and wonder just how the business got to where it is now – it will then be slowly strangled, by ‘unfair’ relationships with a major customer, by your banking constraints, or something other you could have anticipated, …

What’s your strategy?  have you written it down?  Do you act on it?
Business model with high fixed costs

An inflexible business model with high fixed costs may work in boom times, but it will cause significant problems in the inevitable times of bust.

Tell me all about your fixed costs…
Finally, knowledge without action is pointless, it won’t change the outcome, so now go and do something about it!
Paul Brindley FCA, Licensed insolvency practitioner
Midlands Business Recovery

When riding a tiger or hanging on to the tail of a bear, it’s rational to hold on for a while

(why it’s now time to get off the tiger)

Hi

But first…

The door bell rings just as Geoff is getting into the shower.  His wife, Sue, has just finished hers.  She quickly wraps herself in a towel and runs downstairs.  When she opens the door, there stands Bob, their neighbour.  Before she says a word, Bob says, ‘I’ll give you £1,000 to drop that towel…’  She thinks for a moment, then drops the towel and stands there naked.  After a few seconds, Bob hands her £1,000 and leaves.  Sue wraps back up and goes upstairs.  When she gets to the bathroom, Geoff asks, ‘Who was that?’  She replies ‘It was Bob from next door’.  ‘Great,’ he says, ‘did he say anything about the £1,000 he owes me?’

The moral of the story is:  If you share critical information on credit and risk at the right time, you could prevent avoidable exposure.

And that’s why I write my newsletters…you see I support your clients to make decisions that are right not just for now, but also for the future…

and you never know, you might find them useful in your own business!

We’ve got a lot to get through, so read on – and don’t forget to read the two great offers at the bottom of this mailer!

I’ve a question for you:  Is this recession (and recovery) following a pattern and if so, what’s next?

Right now, we’re out of recession, or at least that’s what we’re being told.  But is what we’re being told real?  Where could we be going next?  What impact could that have on you, me, your and my clients, our families?

Let’s look at one aspect of what’s happening out there…

What I’ve seen in my time on this planet is that when the prices of assets like stocks or property rise, ‘insiders’ get in early, then use their experience to sell on to ‘outsiders’ in a game of pass the parcel.  Those outsiders are lured in by the hope of rich pickings hoping that the upwards trend will continue forever or that they can exit just before the trend stalls. Greed, jealousy and a desire to avoid missing out on easy profit are typical motivators.  The insiders know when to get out, or how to make money from the market in different ways, the outsiders sit ride the tiger and then when price starts to go south, hold on equally tight to the bear’s tail. Such outsiders include not just the investors themselves, but also the banks who lend to them – often chasing market share, they too are caught up in a feeding frenzy, increasingly throwing caution to the wind.  But it’s ok, because everyone is doing it, or at least that’s what they convince themselves, because there’s safety in the herd.

The investors borrow money from over-eager banks to invest in the rising market because the anticipated capital gain exceeds the cost of borrowing.  And at the moment I’m seeing a lot of inexperienced outsiders following the trend.  The problem is when such margin trading goes wrong, it goes horribly wrong.  And here’s evidence of the extent of margin trading – investors borrowing (‘margin debt’) to invest in the stock market.  As you will see there’s a spike right now.

The point is that every time there has been such a spike, it’s followed soon afterwards by the real economy plunging back into recession – the highly leveraged speculation we are seeing right now has only ever ended badly.  And there’s a similar thing happening with property in the South East, where ‘capital gain trend followers’ are ignoring our Midlands based, longer, less sexy, deals to pursue short term London property opportunities.  Opportunities for a good level of growth here in the sticks are falling by the wayside for want of funding.

So there is a pattern, and it is: market/price goes up, profits are generated; momentum grows as more investors and lenders are attracted; outsiders marvel at the paper profits they’re making and re-invest them in the rising market; insiders quietly exit; something major happens to disturb the market – maybe a change in interest rates?; there’s panic, price plunges to below the level of bank debt; the panic intensifies, banks stop lending; mainstream economy falls into recession; once at the bottom the insiders return to the market, having hoovered up the outsiders’ savings.

There are two issues –

Firstly right now money that could otherwise have gone to support real businesses such as yours is being diverted into speculative lend in the stock and property markets – and

Secondly in the past when such bubbles burst, the banks not only stopped lending on such speculative deals, they stopped lending right across the board, including to real businesses.  So right now while the tap might be on, even though you may not feel like it is, but when it gets turned off, you can expect to see your facilities reduced. 

Let’s explore what this means for you, me, your clients, all of our businesses and families…

We’re all feeling a little more flush than we really should be – I bet your annual pension fund statement showed you did quite well last year, I guess you’re feeling a little happier as your home has again started to go up in value?  The point is it is not real, it cannot be converted pound for pound into cash. Like the outsiders’ paper profits, they’re meaningless.

Secondly, if you thought funding your project, business or practice is difficult today, or if your business is just holding its own, don’t expect any improvement going forward, in fact there’s every chance things could get much more difficult.  It’s a good idea to plan now for a more difficult future – to make important decisions sooner rather than later, because the risk of waiting for the optimum time to take action is too great – do as the insider, not outsider does.

Here are some tips:

1.     Get those bank finance lines put in place early, and with some leeway for further shocks to the system;

2.     Start investing now in new marketing initiatives, growing your business into areas that others can’t or won’t move into – you’ll need to have these areas fully developed so you can turn them on when needed.  Spend money on marketing, don’t cut back;

3.     Finance your company or project in ways that involve little bank finance even if it means you giving more away than you’d intended – think about getting an investor in, try that crowdfunding, sell your investment property now when the market is still strong;

4.     Start reducing your fixed costs, converting as many as you can to variable;

5.     Reduce your personal cash commitments, if you can, so you put less pressure on the business;

6.     If your business is already on the verge of insolvency now and you are either short of money or simply don’t have the stomach for a lengthy fight, then don’t waste any more time or effort, move on to something else now;

7.     Restructure the business now when you have more money, resources and options.


And that takes me on to this month’s offer for the sector that I believe will struggle most in 2014 ….     

‘The End of Lawyers …  as we know them?

‘The End of Lawyers‘ is the title of a hardhitting book by Richard Susskind.  Perhaps we should add the words ‘as we know them’  at the end, because while we’ll always need lawyers, there are now more ways than ever of delivering legal services?

Here’s a few of the more recent casualties in the sector – Linda Myers; Challinors; Cobbetts; Barnetts; Hilliers HRW; Hacking Ashton….

They are living proof that being good, even great, at what you do doesn’t stop you from going under. Here’s what Andy Hemming of ActionCoach has to say……….

Good lawyer?  Not good enough…….

We’re living in the experience economy, so it’s no longer good enough just to exhibit a high level of professional competence.  The world is changing fast, and when it comes to the law, here’s one I especially like:
“Change is the law of life. And those who look only to the past or present are certain to miss the future.” (John F. Kennedy)

I’ve noticed in the professional services (and especially the legal) sector that things are polarising – a few innovators are rethinking their business model and thriving as a result.  The vast majority are doing more of the same because it’s worked in the past.
 
Unfortunately, the pace of change in the market place means that we all need to keep reinventing ourselves, and being professionally competent isn’t enough to differentiate yourself any more.
 
So what are you doing to stay ahead of the game?
 
There has never been a better opportunity than now to catch the growth wave.  A clear strategy and the discipline to execute a great plan can put you head and shoulders above the large majority of the market. 

  • What does your strategy and plan look like? 
  • How clear is your team so they can help you achieve it?
  • When was the last time you critically evaluated your activities in order to make change to your modus operandi?

Take action now!  We can offer you a complimentary, no obligation session with one of the UK’s top business coaches to help you get clearer on the way forward.

To take up Andy’s offer, call him direct on 01562 734065 or email him at andyhemming@actioncoach.com.   Confidentiality is assured.

And if you are closing down your lawyer’s practice or part of it, you’ll have a huge storage problem – ask Dave Rose of L&R Services for a quotation for storing and ultimately confidentially destroying your records – he’s used by numerous IPs, accountants and lawyers – I have used him for almost 25 years now, there’s no one better in what he does and he does it at a great price – tel 0121 555 8838.

Thanks for taking the trouble to read my newsletter, please let me have your feedback, good or bad.

And don’t forget, I’m here for all your formal insolvency needs.


Paul Brindley FCA

When riding a tiger or hanging on to the tail of a bear, it's rational to hold on for a while

(why it’s now time to get off the tiger)

Hi

But first…

The door bell rings just as Geoff is getting into the shower.  His wife, Sue, has just finished hers.  She quickly wraps herself in a towel and runs downstairs.  When she opens the door, there stands Bob, their neighbour.  Before she says a word, Bob says, ‘I’ll give you £1,000 to drop that towel…’  She thinks for a moment, then drops the towel and stands there naked.  After a few seconds, Bob hands her £1,000 and leaves.  Sue wraps back up and goes upstairs.  When she gets to the bathroom, Geoff asks, ‘Who was that?’  She replies ‘It was Bob from next door’.  ‘Great,’ he says, ‘did he say anything about the £1,000 he owes me?’

The moral of the story is:  If you share critical information on credit and risk at the right time, you could prevent avoidable exposure.

And that’s why I write my newsletters…you see I support your clients to make decisions that are right not just for now, but also for the future…

and you never know, you might find them useful in your own business!

We’ve got a lot to get through, so read on – and don’t forget to read the two great offers at the bottom of this mailer!

I’ve a question for you:  Is this recession (and recovery) following a pattern and if so, what’s next?

Right now, we’re out of recession, or at least that’s what we’re being told.  But is what we’re being told real?  Where could we be going next?  What impact could that have on you, me, your and my clients, our families?

Let’s look at one aspect of what’s happening out there…

What I’ve seen in my time on this planet is that when the prices of assets like stocks or property rise, ‘insiders’ get in early, then use their experience to sell on to ‘outsiders’ in a game of pass the parcel.  Those outsiders are lured in by the hope of rich pickings hoping that the upwards trend will continue forever or that they can exit just before the trend stalls. Greed, jealousy and a desire to avoid missing out on easy profit are typical motivators.  The insiders know when to get out, or how to make money from the market in different ways, the outsiders sit ride the tiger and then when price starts to go south, hold on equally tight to the bear’s tail. Such outsiders include not just the investors themselves, but also the banks who lend to them – often chasing market share, they too are caught up in a feeding frenzy, increasingly throwing caution to the wind.  But it’s ok, because everyone is doing it, or at least that’s what they convince themselves, because there’s safety in the herd.

The investors borrow money from over-eager banks to invest in the rising market because the anticipated capital gain exceeds the cost of borrowing.  And at the moment I’m seeing a lot of inexperienced outsiders following the trend.  The problem is when such margin trading goes wrong, it goes horribly wrong.  And here’s evidence of the extent of margin trading – investors borrowing (‘margin debt’) to invest in the stock market.  As you will see there’s a spike right now.

The point is that every time there has been such a spike, it’s followed soon afterwards by the real economy plunging back into recession – the highly leveraged speculation we are seeing right now has only ever ended badly.  And there’s a similar thing happening with property in the South East, where ‘capital gain trend followers’ are ignoring our Midlands based, longer, less sexy, deals to pursue short term London property opportunities.  Opportunities for a good level of growth here in the sticks are falling by the wayside for want of funding.

So there is a pattern, and it is: market/price goes up, profits are generated; momentum grows as more investors and lenders are attracted; outsiders marvel at the paper profits they’re making and re-invest them in the rising market; insiders quietly exit; something major happens to disturb the market – maybe a change in interest rates?; there’s panic, price plunges to below the level of bank debt; the panic intensifies, banks stop lending; mainstream economy falls into recession; once at the bottom the insiders return to the market, having hoovered up the outsiders’ savings.

There are two issues –

Firstly right now money that could otherwise have gone to support real businesses such as yours is being diverted into speculative lend in the stock and property markets – and

Secondly in the past when such bubbles burst, the banks not only stopped lending on such speculative deals, they stopped lending right across the board, including to real businesses.  So right now while the tap might be on, even though you may not feel like it is, but when it gets turned off, you can expect to see your facilities reduced. 

Let’s explore what this means for you, me, your clients, all of our businesses and families…

We’re all feeling a little more flush than we really should be – I bet your annual pension fund statement showed you did quite well last year, I guess you’re feeling a little happier as your home has again started to go up in value?  The point is it is not real, it cannot be converted pound for pound into cash. Like the outsiders’ paper profits, they’re meaningless.

Secondly, if you thought funding your project, business or practice is difficult today, or if your business is just holding its own, don’t expect any improvement going forward, in fact there’s every chance things could get much more difficult.  It’s a good idea to plan now for a more difficult future – to make important decisions sooner rather than later, because the risk of waiting for the optimum time to take action is too great – do as the insider, not outsider does.

Here are some tips:

1.     Get those bank finance lines put in place early, and with some leeway for further shocks to the system;

2.     Start investing now in new marketing initiatives, growing your business into areas that others can’t or won’t move into – you’ll need to have these areas fully developed so you can turn them on when needed.  Spend money on marketing, don’t cut back;

3.     Finance your company or project in ways that involve little bank finance even if it means you giving more away than you’d intended – think about getting an investor in, try that crowdfunding, sell your investment property now when the market is still strong;

4.     Start reducing your fixed costs, converting as many as you can to variable;

5.     Reduce your personal cash commitments, if you can, so you put less pressure on the business;

6.     If your business is already on the verge of insolvency now and you are either short of money or simply don’t have the stomach for a lengthy fight, then don’t waste any more time or effort, move on to something else now;

7.     Restructure the business now when you have more money, resources and options.


And that takes me on to this month’s offer for the sector that I believe will struggle most in 2014 ….     

‘The End of Lawyers …  as we know them?

‘The End of Lawyers‘ is the title of a hardhitting book by Richard Susskind.  Perhaps we should add the words ‘as we know them’  at the end, because while we’ll always need lawyers, there are now more ways than ever of delivering legal services?

Here’s a few of the more recent casualties in the sector – Linda Myers; Challinors; Cobbetts; Barnetts; Hilliers HRW; Hacking Ashton….

They are living proof that being good, even great, at what you do doesn’t stop you from going under. Here’s what Andy Hemming of ActionCoach has to say……….

Good lawyer?  Not good enough…….

We’re living in the experience economy, so it’s no longer good enough just to exhibit a high level of professional competence.  The world is changing fast, and when it comes to the law, here’s one I especially like:
“Change is the law of life. And those who look only to the past or present are certain to miss the future.” (John F. Kennedy)

I’ve noticed in the professional services (and especially the legal) sector that things are polarising – a few innovators are rethinking their business model and thriving as a result.  The vast majority are doing more of the same because it’s worked in the past.
 
Unfortunately, the pace of change in the market place means that we all need to keep reinventing ourselves, and being professionally competent isn’t enough to differentiate yourself any more.
 
So what are you doing to stay ahead of the game?
 
There has never been a better opportunity than now to catch the growth wave.  A clear strategy and the discipline to execute a great plan can put you head and shoulders above the large majority of the market. 

  • What does your strategy and plan look like? 
  • How clear is your team so they can help you achieve it?
  • When was the last time you critically evaluated your activities in order to make change to your modus operandi?

Take action now!  We can offer you a complimentary, no obligation session with one of the UK’s top business coaches to help you get clearer on the way forward.

To take up Andy’s offer, call him direct on 01562 734065 or email him at andyhemming@actioncoach.com.   Confidentiality is assured.

And if you are closing down your lawyer’s practice or part of it, you’ll have a huge storage problem – ask Dave Rose of L&R Services for a quotation for storing and ultimately confidentially destroying your records – he’s used by numerous IPs, accountants and lawyers – I have used him for almost 25 years now, there’s no one better in what he does and he does it at a great price – tel 0121 555 8838.

Thanks for taking the trouble to read my newsletter, please let me have your feedback, good or bad.

And don’t forget, I’m here for all your formal insolvency needs.


Paul Brindley FCA

The second golden rule is if you have big debt problems is…

‘Only choose an option other than bankruptcy if it better protects your income or assets’

The first golden rule has shown you if you go into bankruptcy, it’s almost certain that you’ll lose no income nor assets.

So, please ask yourself two questions

  • Will bankruptcy see me losing any income or assets that are important to me or my family?
  • Will the other solutions I’m thinking about taking better protect my income or assets?

The key point is that in the real world most other solutions don’t better protect your income or assets than bankruptcy.

So…

Why do it?

Come back here in a week’s time for some other essential facts…