Friday 27 July 2012

Mentors or Advisors?


Some while ago the Government decided that there was no longer a need for the physical entity called Business Link. As they had already spent £34million on its website they said that was enough information. They were persuaded that occasionally people starting a business would want to talk to someone so they added in a call-centre facility as well.

As it happened the British Banking Association had also persuaded them that they could provide 30,000 Business Mentors who would all work for free and therefore why would new and developing business have any need to go to an Enterprise Agency for help? Obviously this was seen as a great way of saving money by the new Government who had begun to realise that providing support for the new growth businesses that the economy needed was going to cost money they could ill afford.

Naturally, they could trust the banking profession to deliver on a promise, and they look as if they will have done so; the Mentorsme website shows an increasing number of mentoring organisations as well as individuals available. Whether all of them are free is a bit questionable.

My argument is not with the numbers or the cost, or how that relates to the initial promises made, but to the actual concept.

In my time helping small businesses I have acted as Consultant, as a Business Advisor and as a Mentor and I am qualified in all three areas so you could assume I know the difference. Unfortunately those organising help for small businesses do not, particularly the difference between an Advisor and a Mentor.

You can illustrate the difference by asking a question. Someone is starting a small business and goes to someone for help. They first ask “ How do I register as self-employed?” The Business Advisor says “You need to register with HMRC for two reasons, because you need to pay class 2 National Insurance and you need to register for Self Assessment Taxation. There is a form you need to download and complete on the HMRC website so go to…” – you get the picture.

The Mentor, in answer to that question, should say “Well, what do you think?”

This is a simplified situation but, I believe, illustrates the misunderstanding between the two roles. The Business Advisor is there to provide answers, the Mentor is there to provide guidance. We should not confuse the two.

THIS BLOG IS FROM ADVISOR KEITH - Feedback welcome.

Tuesday 17 July 2012

Solving the problem of banks lending to small businesses

I suspect that, like me, you listened to the recent announcement that the Government was going to arrange to lend cheap money to the major banks on the condition that it be loaned on to businesses with just a hint of cynicism.  We now have more detail and I am not surprised to hear that it is not quite as announced – what headline ever conveys an accurate representation of the content!

Leaving aside the Government’s definition of a small business – i.e. a business with a turnover of less than £10M and less than 50 employees – it would now appear that people who have mortgages are equally as important and therefore cheap mortgages are also included.  Put yourself in the position of a bank which has the chance of cheap Government money if it lends to either a small business or a small potential homeowner.

In the first instance you are depending on judging whether someone has a good business plan, a solvent business and an excellent reason for wanting the money – but nothing else in the way of assets.  In the case of the possible homeowner you can set the entry level as far as the deposit is concerned and thereby the percentage of the total value of the house at what you might regard as a reasonable level – commonly 25% (thus a 75% mortgage to value).  What this means of course is that you collect mortgage payments against this in the hope that the mortgagee’s circumstances do not change; if they do and they can no longer afford the payments you then repossess the property and put it up for auction with a reserve of 75% of what it is worth because that is all you need to cover your loan.

Where would you lend the money?

So let’s not be negative about lending to businesses, let’s be positive and not just knock the Government but offer an alternative.

The main reason the banks will not lend is because of the situation above.  There is not as much security lending to a small business and therefore they might lose their money.  In view of all the criticism they have had in the past about bad debts they are wary of incurring more, so, better safe than sorry, no lending without assets to back it so we can recover our money.

Why doesn’t the Government, instead of printing money to lend cheaply to banks where the best bet is that it will help the building industry, just say, lend if you think the business is properly run and has a good business plan and, if it goes wrong we will not blame you for lending the money and will make the deficit good.  The Government then becomes the small businesses’ security.  I am not saying that they can just give out the money without looking at the proposition properly and they would have to prove they had done so to get a BIS refund but we need innovative thinking if we are going to solve this problem.

What do you think? 

THIS BLOG IS FROM ONE OF COLBEA'S BUSINESS ADVISORS - We welcome your feedback.

Tuesday 3 July 2012

Not so sweet tweets

Lots of businesses have found value in using Twitter to tell customers, potential customers and business partners about what they're up to, where they are and what's new with them.  Effective use of Twitter can help build loyalty and inform about your brand but it's important to remember that there are still some 'no go' areas that make tweets less than sweet!

The problem seems to be that when it comes to social media we're all inclined to forget the 'rules' that apply in other areas of marketing.  And make no mistake - using Twitter for business purposes is marketing.  By its very nature, social media doesn't carry the conventions that we probably take for granted in other forms of marketing; it encourages us to write as we would speak and this informality can mean we get a little carried away.  For example, it's unlikely you'd take out a half page advert in the local press trashing your competitors but, for some, this type of message seems acceptable behaviour when tweeting.  Whether it's a print advert or a tweet, a "look how awful they are" approach to marketing never works!

In the same way, don't cross the divide between work and social life.  It's fine to invite your customers to join you in the Kings Arms after work but it's not so good to rave about the bar in Spain that you visited on holiday, nor to tell everyone what an enormous hangover you had the following morning!

Use tweets to inform, inspire, reinforce your culture, build your brand values and build your reputation.  The message here is very much "if in doubt, leave it out".