Enterprise - Autumn 2009 - This Time It's Different

ENTREPRENEURSHIP ALIVE AND KICKING IN THE UK

Editor's comment

'This time it's different' is a phrase we normally associate with asset bubbles and impending financial turmoil. With green shoots sprouting all around us and mega-bonuses back in favour, one might be forgiven for wondering what all the fuss was about. Is it really possible that the worst recession since the 1930s has been beaten and that we have entered a new and sustainable growth phase? Let's be cautiously optimistic, with the world's major developed economies saddled with unprecedented debt; tax rises, spending cuts and rising unemployment may yet deliver an unwelcome sting in the tail.

Sound advice But this autumn edition of Enterprise really is different. It's full of valuable insight and information and, with news and views from many of our strategic alliance partners and guest contributors, there is something for everyone. David Molian from Cranfield School of Management looks to the future, Penny Power of Ecademy gives her top ten tips on social networking for business, and Octopus Investments provides some invaluable advice for small to medium-sized enterprises (SMEs) seeking funding. And in our client profile, Aardman Animations explains how its diversified income streams have helped it weather the recession.

It's impossible to mention everyone but my thanks go to all our contributors. We hope you enjoy the result.

Survey results confirm public support for entrepreneurs

There's welcome news for those of us who champion the cause of the entrepreneur in the results of a recent survey conducted by one of our strategic partners, The Entrepreneurs Board.

According to the experiential business learning organisation's new survey of 2,000 members of the public, people in the UK not only understand and back entrepreneurship, but many are itching to get more involved, with 38% saying that they do or plan to run their own business at some stage in their career. They gave a variety of reasons, including: flexible working (45%); challenge (44%); making more money (38%); having a great idea that could work (25%) or because they could be better than the companies already doing it (20%).

Of those surveyed (remember, this is the general public), 45% feel that more funding should be given to start-up companies. Private sector businesses that fail should not be bailed out according to 47%, and 48% say remuneration should be capped for all public sector workers.

More than a quarter (28%) think entrepreneurs are likely to have the most positive effect on bringing Britain out of recession over the next year, compared to 24% opting for the Government.

Learn from your peers Many people responding to the survey supported the idea of confidential peer groups where people can learn from the experiences of other entrepreneurs – such as The Entrepreneurs Board – as the best type of leadership or personal development to equip them to manage a company. Run by the Academy for Chief Executives, a board is a 'peer group experiential learning forum', where up to around a dozen entrepreneurs from different sectors meet locally once a month for a half-day facilitated session.

The aim is to help business owners grow their company by learning from one another, testing ideas, investigating opportunities and giving each other new contacts. It's like having a 'board you could never afford'.

The enthusiasm for entrepreneurship in the UK can only bode well for our economy. And we hope that the leadership experience and support available through The Entrepreneurs Board continues to help champion their cause.

FORWARD THINKING

David Molian of Cranfield School of Management looks at the future for entrepreneurial businesses.

From time to time, business magazines run features looking back at predictions of the technologies of the future made 20 years ago and compare them with the realities of today. It's easy to laugh at the naivety of illustrations of people in undersea communities or a house full of talking robots, until, that is, you try predicting for yourself.

Forecasting is not too difficult at a general level. For instance, in the UK it is inevitable that expenditure on public services will come under the knife in the next few years, regardless of which political party is in power. And you can make an educated guess at where the knife will fall first – the soft and obvious targets, if you like. The devil, however, is in the detail; and the details are subject to unknowable deals done by yet to be elected politicians at the mercy of unpredicted events.

That said, the temptation to stick one's neck out is irresistible, especially for an academic. My thoughts are informed by conversations I have on an almost daily basis with the many entrepreneurs who pass through Cranfield School of Management.

Future for start-ups Forget about the banks

I hope by now that the lesson is well and truly hammered home that banks don't put money into start-ups. They used to lend money against security – houses, shares and so on – owned by people who started businesses. Today, even businesses that trade profitably can't get banks to lend, and mortgages are scarce. That situation will persist for some time to come. So start-up ventures must either bootstrap themselves with their own money or find other sources of cash, which won't be easy.

The technology sector will continue to be attractive

Software and web-based businesses are great places to be if you've got a winning proposition. You can get a long way to commercialisation on a modest outlay, and the speed and size of scalability are awesome. There's still plenty of interest from investment professionals as well.

Future for established businesses Winner takes more

Recessions shake out whole industries, and many weaker businesses have gone to the wall. I recently did a straw poll of 25 ownermanagers I was working with. Half are struggling to manage their growth, largely because capacity has gone out of their markets. Strong businesses will see their natural rate of growth accelerate. But that brings its own problems, so be prepared.

Niche is nice

The most successful independent businesses have found a niche in which they excel and exploit it mercilessly. Only when they are securely established with a great reputation do they diversify. Buying behaviour always becomes more cautious in a downturn, as people value every pound they spend. That won't change for some time. Focus on the core and do not be seduced into premature departure from your real strength.

The colour of money

A strong balance sheet is the best security for the future, so seize every opportunity to shore it up. While traditional banks remain hamstrung, I predict that innovative financing approaches will make an appearance. Make sure your finance director or adviser is scanning the horizon.

OPENING THE DOOR TO FUNDING

Rupert Bell of Octopus Investments' offers advice to SMEs.

For companies today, finding funding is vital, but is often a major challenge. The worst of the recession may be over but banks continue to be wary of lending or impose high...