Should I join the FSB?

Federation of Small Businesses – ‘Free’ Banking and Legal Advice

I have been fortunate; to help small businesses, solve problems when cash has been very tight. Banking and legal advice, are both important and can be costly, but they both need to be of a very high quality, especially when times are tough.

However, I can strongly recommend a SME joining the FSB. Why?

I have found the FSB banking offering and legal advice line to be excellent.

The FSB have an agreement with the Co-Operative bank, which since it has updated its online banking software, provides an excellent free online banking service. You can nominate a local post office to deposit cheques and cash.

The legal advice line, for employment issues, which I have used several times now, has been excellent. You do not get an immediate response, but you are called back typically within an hour, and the documentation and advice given is of a very high standard.

Author: Tim Jenner- Small Business Advisor, member of TGBA (tim.jenner@tgba.co.uk)

BUSINESS ANGELS – What are they looking for?
Part of the service of the Turnaround Group Business Advisors is the sourcing of appropriate funding and here is one that might be of interest.
What the Angels Say
• Never be optimistic
• A good business plan is not necessarily a good investment – find out who wrote it
-------------//------------
Friends, Family and Associates Account for 90% of Angel Investment
It was reported that:
The Degree of Management Participation
39% of Angels have active management involvement in the majority or all of their investments;
40% have involvement in selected investments only, and
21% have no involvement at all.
44.76% of Business Angels Asked Still Thought That Valuations by Management of Their Companies were Too High (8.6% Thought That They Were Too Low).
Geographical Area of Angel participation (From Their Base)
17% Locally (within 50 miles)
30% Regionally (within 150 miles)
53% UK wide and Overseas
Reasons for Investing (Top 5)
25% Higher ROI
13% Portfolio diversification
11% Have capital to invest at their discretion
10% Have built and sold companies before
7% Fun - small amounts
How Important to an Angel is Enterprise Investment Scheme (EIS) Eligibility
23% Very
49% Somewhat
15% Not
13% EIS?
Almost 60% of Angels Prefer to Invest on Their Own or Though Their Own Investment Vehicle.
Their Preferred Stage of Business
30% Start-up
23% Post-revenue
20% Pre-revenue
20% Growth
2% Second round
4% Mature
Those Requiring Support in Areas of Due Diligence
22.1% Technology
18.6% Marketing
17.3% Finance
11.9% Operations
11.5% Sales
11.1% People
4% Other
3.5% None
Their Preferred Source of Investment Opportunities
16% Angel Association
14% Other Angels
14% Self Researched
8% Company presentations
48% Numerous other less than 5% each
The Business Plan Quality and Number Seen
50% see up to 3 plans per month
40% see up to 10 submissions per month
10% see over 10 plans a month
20% of investors would wish to see more
69% are happy with the number that they receive
11.4% wish to see less month by month
88% Want Only to See an Executive Summary on First Contact
Business Plans and Detail Required
84% of plans received are rated as average or poor
16% of plans merit an above average
0% of plans classified as excellent
64% Exec Summary
24% Short Précis
10% Full Plan
2% Financials only
Reasons for Initial Failure
Unclear financials
Lack of a scalable business model that includes a clear marketing and sales plan
Not a ‘must have’ product or service rather a nice-to-have product or service
No clear exit and realistic valuation
Not understanding that it is the team that gets the funding, not the plan
‘As an investor, I back management teams’
20% management quality
20% lack of commercial reality
19 % were poor financials
10% dislike of the management team
31% Numerous other
Expected Gross Return on Investment
28% 50% - 100%
25% 101% - 151%
20% 151% - 200%
27% 200%+
How Much is Invested In One Venture?
39% Less than £20k
36% £21k - £50k
12% £51k - £100k
6% £101k - £250k
4% £251k - £500k
2% £500k - £1m
1% £1m+
Bernard Halliwell (retired chairman NBAN)
said …
… emphasises the importance of making sure that you have the right management team in place to maximise the likelihood of receiving funding, or knowing that you may have to find the right team to take the business forward.
… emphasises the importance of using professional intermediaries not only to access business angel investors, but also to help management teams and entrepreneurs really understand what they have to do to succeed

CREDIT – A personal overview
I feel there is much confusion over people's perception of their credit file held by various credit reference agencies and their attempts to borrow money at present.
Credit reference agencies are machines, whose businesses are mainly funded by lenders.
A person's credit file is only as accurate as the last lender's supply of information following a transaction between a client and a lender. Often this is inputted by a machine or occasionally a human being but who has little experience and very limited knowledge.
When a market is severely restricted, as it is now, lenders rely on machines to lend not human beings to lend. The theory being that machines make less mistakes than human beings
Lenders have no money to lend; therefore their appetite to lend is virtually non-existent.
There is no competition between lenders
There are very few lenders.
The ones that do exist are mainly owned by the government, you and me.
(Fred the Shred and his merry men succeeded in destroying the British banking system as we know it, with a little help from the likes of Lehman Bros et al, who lent to one armed unemployed illegal immigrant Mexicans who were encouraged to take out interest free, for one month, loans on valueless mobile homes. At the end of the interest free period a rate was charged which the said Mexicans could not possibly service and so defaulted on their loans. However, not before the likes of Lehman had shuffled and cut these tranches of loans into separate bundles to sell to the likes of Fred the Shred, and august pension funds, anxious to make money out of secure mortgage lending. The result as we now know was the virtual collapse of the world's banking system)
With this current situation much lip service is stated by government over the need for banks to get out and lend. But the banks have no money to lend because they have been told to improve their liquidity levels by government and European directives to protect themselves against future greed when the said Mexicans are encouraged to borrow against worthless assets at extortionate interest rates again.
The banks have no money to lend because in spite of government's quantitative easing which should have enabled banks to lend; they simply used the new money to buy government bonds in order to shore up their liquidity levels.
So the current situation of banks having no money to lend, no appetite to lend and no competition means that when lenders do deign to lend they cherry pick. So the only people who can now borrow are senior civil servants ,with index linked careers and index linked pensions whose credit rating according to the computer is impeccable. As we now know these people are about to be culled, leaving our lender nobody to lend to!
At this stage of the cycle banks are intent on shedding bad debt, shoring up their liquidity levels improving their net profits and improving their share value - not lending money. So frankly a person's credit rating is of little importance. But it is an ideal time for individuals to shed unsecured debt they struggle to service, just like the banks are doing, in preparation for the next great boom and lending and borrowing bonanza!
Already there are little green shoots appearing. My company had an approach the other day by a Chinese Bank who think mortgage lending in Britain will be a good money spinner, and they are looking to lend to people with some impairment on their credit file, some 90% of Britain's population, a big market, rejected by British banks at present, but there is nothing like a little competition to get British bank's appetite for lending back on track. So watch this space!!!
The moral of my story is at present don't borrow but shed debt, all in preparation for the next boom and please don't worry about the credit file and its rating.
I should hasten to add that this is a personal view but I'm happy to discuss any issues or offer advice around this topic, at any time.
Mike Gould TGBA a UKBA Group Member
Forwarded by David Lee of NGBA a UKBA Group Member
Mob: 07799 300 200

Daft things to do in a recession !

Mistake No 1: Cut back on Marketing:

In a recession most business leaders will mentally accept that trading conditions are difficult and as a consequence lower expectations/goals. This mind set can then become self fulfilling as the mental state that creates this thinking will determine the actions of that individual. His reduced expectations are felt by employees and, guess what, standards slip, performance suffers and targets are not met but he accepts it all.
Many business owners will expect poor performance or even “freeze” become inert and incapable of making decisions.
If you think you'll lose you will, if you believe you can win you very probably will.
If you are responsible for dictating budgets don't cut the marketing budget, if you are responsible for marketing but don't dictate the budget, fight to ensure it isn't cut with reasoned argument and the proven factual arguments for maintaining spend
The key to success is to not cut your marketing budget and do nothing (see Marketing in a recession leaflet) but to revise your marketing strategy. The following ideas are all crucial marketing activities in a recession and your strategy should be altered accordingly:
Hold back on any “test” marketing and concentrate on doing more of what you know already works.
Ensure you have an effective programme of keeping in touch with existing customers to ensure loyalty, using every means possible; e-mail, letter, newsletters, phone call, personal visit, make them feel wanted especially during a recession, if you have their confidence they'll want to stay safe...with you.
Identify the element of your prospects and existing customer base least likely to be affected by a recession either through the nature of their business or their financial strength and concentrate your marketing strategy on them, seek successful vertical markets. Avoid marketing to sectors most affected they will prove to be less profitable and obviously more vulnerable.
4. Try to develop a “We are the experts” mentality in your marketing. In a recession customers want to stay safe with somebody who knows what they are doing....”the Authority” on a subject.

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