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High Net World Magazine
DECEMBER/JANUARY 2014
Going Global Avoiding the Pitfalls of Internationalisation WEALTH The Death of Common Sense Deflation is the Enemy ENTREPRENEURS The $10 Billion Dropbox? Dell & Vanderveldt Take Ireland INTERNATIONAL China’s ch-ch-ch-ch-changes Going Global ANGELS & INVESTORS UK Alternative Financial Markets Close in on £1 Billion
FEATURES Marketing: The Psychology of Web Traffic Judas Goat: Entrepreneurs Suffering ‘Noah Syndrome’ Tech IPO’s: Then & Now, 1998 to 2013 PRACTICAL BUSINESS Angel Investment Network - Real vs Vanity Metrics Angels Den - Crowdfunding Beer52 Haines Watts - Top 10 Tips for SME’s HEAT The High Growth Company Leaders Programme UK & Ireland
LINKING ENTREPRENEURS WITH INVESTORS & ADVISERS UK-WIDE
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DISTRIBUTION “A hard day’s write” Since its inception, High Net World HNW Magazine has been extremely fortunate in its associations with leading business angel, entrepreneurial, investment and networking organisations. This includes the Angel Investment Network (AIN), founded in 2004, which has grown into the largest angel investment community in the world. AIN has over 500,000 members across 30 networks in over 80 countries. The Angels Den, the world’s first integrated angel and crowdfunding platform which for over six years has been successfully matching entrepreneurs and angel investors. Since launching in 2007, Angels Den has raised £16 million of investment, through 10 globally based offices from over 6,000 angel members. Par Equity, one of Scotland’s most active business angel syndicates, is an investment firm with a difference bringing a hands-on investment approach and extensive experience to opportunities that have the potential for significant returns. KILTR, The leading edge professional social network for everyone with a Scottish connection, was founded with the local-to-international Scottish diaspora at its centre. The social network has over 40,000 members. LINC Scotland is the national association for business angels in Scotland with a membership including individual investors and most of the main angel groups or syndicates. Since 1993, LINC has played a significant and active part in changing the business culture in Scotland. Thrive for Business is a membership-based networking organisation for business-to-business SME’s across Scotland bringing together likeminded individuals willing to share knowledge, ideas and contacts.
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CONTENTS P7
HNW HEAT
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HNW MAGAZINE LTD, Geddes House, Kirkton North, Livingston EH54 6GU (t) 01506 419 774 (e) editorial@hnwscotland.co.uk
EDITORIAL Ed Emerson, Editor in Chief
FEATURE: WEB TRAFFIC
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WHAT ANGELS WANT
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INTERNATIONAL
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FEATURE: NOAH SYNDROME
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FEATURE: TECH IPO’S
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INVESTOR
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CONTRIBUTORS Alan Steel, Mike Williams Jennifer Vessels, Brandon Hill The Brunette, Keith Tully, Simon Hawtin, Victoria Arnold Rob Rawson, Neil Patel, Bill Morrow, Mike Lebus, Darren Holdway, Alix Medlyn Davies
GOING GLOBAL “Why International markets are strewn with the carcasses of international adventurers, and how to avoid the pitfalls.”
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HEAT: HIGH GROWTH COMPANY LEADERS MAIN SPONSOR:
THE WALL
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ENTREPRENEURS
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PRACTICAL BUSINESS
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DIATRIBE Mike Williams P.4
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The views expressed in HNW Magazine are those of invited contributors and not necessarily those of HNW Magazine Ltd. HNW Magazine Ltd does not endorse any goods or services advertised or any claims or representations made in any advertisement in HNW Magazine, and accepts no liability to any person for loss or damage suffered as a consequence of their responding to, or reliance on, any claim or representation made in advertisements appearing in HNW Magazine. By responding or placing reliance, readers accept that they do so at their own risk.
©HNW Magazine Ltd. Reproduction in whole or part is forbidden without the written consent of the editor.
FIRST WORD New Year, New Distractions…
is now the most saleable commodity anywhere on the planet; our time, our viewership, loyalty and ‘like-strength’. Thankfully, we have folks like Barry Ritholtz, Joshua Brown, Alan Steel, Mike Williams and the brilliantMaria Popova (@brainpicker) to help us sort the fly shit from the pepper. Highly recommended is Maria’s scribble on Carl Sagan and The Baloney Detection Kit,a must have for every kitchen dweller suffering the slings and arrows of all these new distractions, all these time-consuming e-conversations, all this spilled milk.
Here’s an excerpt: (From Maria Popova’s The Baloney Detection Kit: Carl Sagan’s Rules for Bullshit-Busting and Critical Thinking)
By Ed Emerson Children are wonderful. They tell you everything they know and then stop. It’s a complete information download and the facts are rarely in any order other than how they occurred to the little tyke at that moment. Maybe social media is a bit like that, and we’re all the parents trying to sort the relevant bits, discover the real story, make sense of the all the regurgitation and revelations, the predictions and proposed consequences, wipe the floor of all this spilled milk. Then later, maybe disconnect for an hour or so, drink coffee and stare at the wallpaper. But it keeps coming. The tech predictions for 2014 are daunting; $billions in tech investment stateside, and here in the UK 53% early stage investment – the majority of which in London and the South East – spread across Internet, consumer, media, ICT, BioTech, CleanTech, FinTech, with an estimated 58% more hurtling toward us in 2014.
“The tech predictions for 2014 are daunting; $billions in tech investment stateside, and here in the UK 53% early stage investment ”
And then you peer into the what’s-next, the oddly sexy alpaca hairdos and 9 year old operatic prodigy of Distractify (@Distractify), the haunting image statements of Whisper teasing at our foibles, our idiosyncrasies, our fears and deep-seated wants (@WhisperApp), the blistering pace of SnapChat’s exploding messages….and $billion offers. These are no bad things, mind you. Cleverly architected (yes ‘architected’), wonderfully addictive, and if time were a commodity in surplus for me perhaps I would linger longer, like a teenager or retiree seeking to invest my energies in some ennui-eradicating glance-worthy dalliances. I’ve little doubt that despite any potential revenue stream issues the above noted social media darlings will prevail, captivate us and capture what
But the kit, Sagan argues, isn’t merely a tool of science — rather, it contains invaluable tools of healthy skepticism that apply just as elegantly, and just as necessarily, to everyday life. By adopting the kit, we can all shield ourselves against clueless guile and deliberate manipulation. Sagan shares nine of these tools: 1) Wherever possible there must be independent confirmation of the “facts.” 2) Encourage substantive debate on the evidence by knowledgeable proponents of all points of view. 3) Arguments from authority carry little weight — “authorities” have made mistakes in the past. They will do so again in the future. Perhaps a better way to say it is that in science there are no authorities; at most, there are experts. 4) Spin more than one hypothesis. If there’s something to be explained, think of all the different ways in which it could be explained. Then think of tests by which you might systematically disprove each of the alternatives. What survives, the hypothesis that resists disproof in this Darwinian selection among “multiple working hypotheses,” has a much better chance of being the right answer than if you had simply run with the first idea that caught your fancy.
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Alan Steel Asset Management Limited is authorised and regulated by the Financial Conduct Authority.
Are you fed up with earning little or no interest on your savings
If you’re looking for an income to safeguard your long term financial future then simply having all your eggs in a bank or building society deposit account basket
Email us today for your FREE copy of our new guide at: income@alansteel.com Or call us on 01506 842 365 and ask for Carol McNicol In the guide we explain and compare the risks and rewards in both a “saving for income” and an “investing for income” strategy. One of these alternative income strategies may now be right for you. It must also be remembered that the capital value of investments and the income
HNW HEAT
HNW’S HEAT High Growth Company Leaders Can Kanye Improve Your Cash Flow? By Victoria Arnold
The festive season is now over, meaning that Christmas ballads won’t grace the airways for another 12 months. It’s unlikely that your office space will have escaped the tedious and repetitive jingles. So in this blog we look to answer whether music in the workplace is a help or a hindrance, and if so just how much entrepreneurial advice and motivation can rap and hip hop provide? Each year offices across the UK, offices spend close to a million pounds purchasing licenses that allow their staff to listen to music. Listening to your own music through headphones, however, is free.
Rap and entrepreneurship share many similarities. When you break rap lyrics down you realise that rap and entrepreneurship share three main principles.
Rap and entrepreneurship share many similarities. When you break rap lyrics down you realise that rap and entrepreneurship share three main principles: ● It’s all about hard work ● You need to understand your market ● Timing and luck have a part to play
“HEAT is HNW Magazine’s UK & Ireland-wide high growth company leaders programme for exceptional individuals running exceptional businesses.” But how does music affect a workers motivation? 73% of employees interviewed felt they were more productive whilst listening to background music. 65% of business owners believed staff where more productive whilst listening to music. 1 in 5 businesses felt they would lose custom if did not play music. So how good an idea is it to have ‘the Blueprint’ blasting over your office speakers, or should you settle for Beethoven? At Desk Union, it’s no secret that founder Victoria can regularly be found nodding along to Drake’s ‘Thank Me Later’ or Biggie’s ‘Life After Death’, to name a few. It’s still widely debated as to whether she considers her allegiance to lie with the Crips or the Bloods.
When you analyse one of the more famous Eminem lyrics out there:-
“You better lose yourself in the music, the moment, you own it, you better never let it go, “You only get one shot, do not miss your chance to blow, This opportunity comes once in a lifetime.” You come to realise that this lyric demonstrates that first impressions are everything, whether that be with an investor, customer or potential employee/er. You only get one first impression you have to give it your all. Rap music is almost maniacal in its focus on success, the acquisition of money and the subsequent dispensation of it.
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HNW HEAT
Appointedd, Leah Hutcheon
Platinum Wave in Dubai, Suzie McCafferty This January UK based franchise consultancy firm Platinum Wave will be in Dubai to meet with several interested parties wishing to discuss a range of master franchise and area developer franchise opportunities throughout the region and other key markets. The British Franchise Association accredited consultancy works with many leading UK brands including Baguette Express, NIC Services Group, Razzamatazz Theatre Schools and many others specialising in sectors such as retail, sports and leisure, food, professional services, beauty, home improvement and popular children’s activities, all of whom are looking to expand their operations in key international markets. Earlier this year Platinum Wave brought leading UK ‘Food on the Go’ brand Baguette Express, to the middle east after the sale of its UAE master franchise to Dubai based Galaxy Food Concepts (GFC). GFC is part of the Eros Group which is a leading distributor for consumer electronics and mobility solutions in the United Arab Emirates. GFC was created in 2012 to bring quick service food brands to the UAE that meet the demands of a young and mobile generation. The first Baguette Express outlets have now opened in Dubai.
Tummy with Mummy, Geraldine Abrahams Tummy with Mummy is helping to reduce the risk of babies spending too much time on their backs and developing positional plagiocephaly (flat head syndrome) and delayed motor responses. The business is the idea of a former journalist, Geraldine Abrahams., who came across the problem in her previous job and decided to do something about it. Along with her two grown-up sons she created the innovative Tummy with Mummy product - the world’s only 2-in-1 foldaway baby & toddler seat.
New year, new start… You’ve heard it all before. Let’s be honest, you’re probably still spouting it. I know I am. But, really, what does it all mean? If we were going to make real changes in our life, why wait until an arbitrary date to do so?
Like in any startup or small business, it can often feel like a ‘new start’ every day at Appointedd. We are constantly having to pivot, react to the market, listen to our customers and deal with unexpected twists and turns. It’s the very definition of startup culture. We may not benefit from massive budgets and teams of people, but we are agile, and that can mean a lot in the world of business. We have never shied away from doing what we know to be right, even if it’s a tough decision to make. And one of our biggest decisions yet came towards the end of 2013… As many will know, we are delighted to now have opened up our software to all small businesses who sell their time by the service or timeslot. I personally find it so exciting to be able to empower any ambitious small business owner who wants to be able to better manage and schedule their time. I am endlessly inspired by the potential customers we’ve been speaking to… Entrepreneurs, doctors, hairdressers, tradespeople, therapists, tutors. It all started when we were featured on the BBC documentary, The Entrepreneurs. After the show, I was overwhelmed by the number of people who got in touch – and it wasn’t just salons. We had lots of people email or tweet us saying, “if you can do that for salons, would you be able to do if for my industry?”. We even had a language school in Japan get in touch! It was really mind-blowing how many people gelled with our idea and we realised that
we had found a real gap in the market. Yep, it was really scary to move away from our core industry, but it was really too great an opportunity to shy away from. And while we loved working with our salons (and will continue to do so), it’s great to be able to say a resounding ‘yes’ to anyone who wants to revolutionise their small business and take bookings online.
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STEEL’S VIEW WEALTH Why? Because things are good as long as wages are rising while prices are falling, or at least as long as they (wages) are falling less quickly than prices. However, central bankers don't make a distinction between good and bad deflation. That's because they believe that any deflation is bad for debtors.
GLOBAL WARMING RETURNS
They also tend to believe that deflation is a sure sign of insufficient aggregate demand justifying more easing of monetary policy. Here are some of their recent thoughts on the subject: Lagarde is on guard.
Why Deflation, Not Inflation, Is The Enemy… By Mike Williams For years, the world has been assuming that QE was going to cause rampant inflation. The experts told us we were just "printing worthless money". In that period, Gold (GLD) has gone from roughly $116 in November of 2009 to roughly $120 today, as this editorial is being typed. The issue that Reserve banks from around the globe are really fighting is deflation, not inflation. Indeed, they hope to create inflation but have so far failed to do so. Good or Bad? As our friend Dr. Ed Yardeni points out, deflationary forces have been at work for years, primarily driven by technology and improvements made at every level of output.
In a 1/15 speech at the National Press Club, IMF Chief Christine Lagarde warned: "With rising risks of deflation, which could prove disastrous for the recovery. If inflation is the genie, then deflation is the ogre that must be fought decisively." She concluded that central banks shouldn't rush to unwind their ultra-easy policies: "For the advanced economies in particular, it means that central banks should return to more conventional monetary policies only when robust growth is firmly rooted. “At the same time, countries need to use the room created by unconventional monetary policies to put in place the reforms needed to jumpstart growth and jobs." Kocherlakota is on a mission In an interview with the FT, Minneapolis Fed President Narayana Kocherlakota said he favors even easier monetary policy because inflation is too low: "'We're running the risk of being content with inflation running consistently below our target. That's inappropriate,' …. 'Right now we're sitting with an outlook for inflation that even by 2016 . . . is not getting back to 2 per cent.'"
This is a positive force as it implies jobs ended by these productivity gains free up humans to learn better tools and expand their horizons.
He has previously favoured lowering the unemployment rate threshold for beginning to discuss tightening from 6.5% to 5.5%. He would certainly be opposed to this discussion “Technology-driven productivity if inflation remained below 2%. is driving prices lower. That's He is a voting member off the not dreadful at all. In fact, we FOMC this year.
He says: "The major central banks all seem to share a common concern lately, namely deflation. That's because inflation rates have been can rest assured that it's ‘good’ dropping closer to zero in many of OECD recommends more QE deflation.” the advanced economies in recent months. These rates remain above In a 1/17 interview with the WSJ, OECD Chief Economist zero, but a few central bankers have spoken out recently, Pier Carlo Padoan said that while deflation isn't an warning that more must be done to avoid outright deflation." imminent risk, the ECB should be prepared to avert it with bond purchases: Case(s) Point? Before reading the scary sounding notes below remember: technology-driven productivity is driving prices lower, and that's not dreadful at all. In fact, we can rest assured that it's "good" deflation.
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“Negative deposit rates are targeted directly at what banks do, and repairing the credit channel,' he said. 'But if there is a separate deflation risk, you go for QE, and send a clear message.
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“Years from now the crowd will begin to understand that this was most likely due to both the Fed and the bond market sensing we were coming out of the fog.”
Here's Dr. Ed's two cents worth: If that's so, then why are Fed officials, who've embraced QE for the past five years, now tapering it even though inflation is below their target?
Confidence? Even though the Fed continued (until very recently tapering) to buy boatloads of bonds, the chart above shows yields have risen since Q3 began.
Kuroda is committed to ending deflation On December 25, 2013, BOJ Governor Haruhiko Kuroda presented a speech before the Japan Business Federation titled, "Overcoming Deflation and After." It is worth reading for a useful explanation of the causes of Japan's deflation, which has lasted for the past 15 years. The BOJ is committed to ending it and achieving a 2% inflation rate "in a stable manner" within two years from April of last year, when quantitative and qualitative monetary easing (QQE) was introduced. Rest Assured---We Want to Wish for Inflation As covered at the start, GLD has had a bear of a time keeping up with the fear trade in recent years. Could it be that once the news was out over 'Abenomics', many investors concluded that it was time to dump it? Maybe they even put 2 and 2 together and realized that the Fed's QE had indeed not created the desired inflationary push, as banks hoarded cash in reserve and used it to repair balance sheets. Whether we like it or not...both the TIPS and GLD markets are telling us that deflation is a larger concern for institutional capital than inflation.
Years from now, the crowd will begin to understand that this was most likely due to both the Fed and the bond market sensing we were coming out of the fog. As noted above, the TIPS market is not yet even remotely showing a fear of inflation, and be assured they will if there is any.
“Instead, what has happened is the equity side of the world has moved upward and the bond market has trapped trillions of dollars in ‘scared money’ at historically low interest rates.” That is great news for all the borrowers who took advantage of the fear flooding the system over the last 5 years…..and terrible for all those lent. And who might that be? Those who were so terrified they flooded bond funds with $1.4 trillion new dollars…
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WEALTH
By Keith Tully
According to the latest Begbies Traynor Red Flag Alert for Q4 2013, which monitors the financial health of “Corporate UK”, levels of ‘Critical’ financial distress among UK businesses continued to recover during the final quarter of 2013, as improving business confidence drove strong growth across the UK’s core services sectors and encouraged growing numbers of entrepreneurs to incorporate new businesses during the past year. P.13
STEEL’S VIEW WEALTH
Net Worth of World Billionaires changed in the previous 24 hours. He’d endured the Great Depression, World Wars, and huge Interest Rate spikes in the 1980s.
GLOBAL WARMING RETURNS
But the last 5 years of wall to wall bad news despite positive returns to investors, proved too much. He was hospitalised in 2010 when pundits lost their collective minds over a “flash crash” that froze up some share prices for 17 minutes that allegedly made US industry vanish. He told his psychiatrist at the time “these people are insane”.
The Death of Common Sense and Long-term Thinking… By Alan Steel
I felt it only right to share a couple of Obituaries that came to my attention in the New Year.
“LongTerm Thinking …1800 to 2013″ Long-Term Thinking died on New Year’s Eve. His last true friends Vanguard’s Jack Bogle and Warren Buffett were at his side. He was only 213. He’d lived an illustrious life since the start of the Industrial Revolution, when for the first time, people could think about more than their next meal. But the rise of 24/7 media recently chipped away at his health. The final blow came a few days earlier when a CNBC “expert” warned that a 10% stockmarket pullback …. which has occurred on average every 11 months over the last 100 years …. could be “devastating” for investors. “That’s it” Long-Term Thinking croaked from his hospital bed… “there’s no more room for me here”. He died soon after Bloomberg published its daily tally of how much the
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“That’s it” LongTerm Thinking croaked from his hospital bed… “there’s no more room for me here.” He died soon after Bloomberg published its daily tally of how much the Net Worth of World Billionaires changed in the previous 24 hours.
Fifty years ago according to statistics the average share was held for more than 8 years. By 2010 the average share was held for only 5 days. “Our culture has an endemic problem of short term thinking” Long-Term said in his final speech in November …. “years have become months, months have become days, days have become milliseconds, and milliseconds have become careers … However much you think you’re winning in the long run you’re judged on the short term!” Some mourn his passing. A fund manager who wished to remain anonymous, said … “It’s sad to see him go. Everyone in my field knew he was right. With our own money we think years ahead, but with clients I have 3 months to be correct or I’m out of a job. With pension funds we have a time horizon measured in decades, but I am
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judged how I perform against others or false indices every 90 days …. It’s beyond a joke.” In lieu of flowers his family asked that we turn off News Channels and stop checking stock prices every 5 minutes. And if that wasn’t sad enough I report also the passing of “Common-Sense” … whose Obituary read as follows:-
Common Sense “Today we mourn the passing of a beloved old friend, Common-Sense, who has survived much tragedy for many years. No one knows exactly how old he was, since his birth records were lost long ago in bureaucratic red tape. He will be remembered as having cultivated such valuable lessons as knowing when to come in out of the rain, why the early bird gets the worm, that life isn’t always fair, and that maybe it was my own fault. Common-Sense lived by simple and sound financial policies … (don’t spend more than you earn) … and reliable parenting strategies … (parents, not children are in charge). But his health began to deteriorate rapidly when well intentioned but overbearing regulations were put in place. Reports of a 6 year old boy charged with sexual harassment for kissing a classmate, teenagers suspended from school for using mouthwash after lunch, and of a teacher sacked for reprimanding an unruly student, worsened his condition. He declined further when schools were required to get parental consent before administering headache pills, sunscreen or sticking plasters to students, but couldn’t inform parents when a student became pregnant and wanted an abortion. He lost the will to live as the 10 Commandments became contraband, churches became businesses, and criminals received better treatment than their victims. He slipped further into ill-health when folk couldn’t defend themselves from a burglar in their own homes, and the burglar could sue for assault. Common-Sense finally gave up the will to live after a woman failed to realise that a steaming cup of coffee was hot … spilled some onto her lap, and was awarded a huge settlement. This is not long after another woman, driving a Winnibago, left the driver’s seat to go into the kitchen to make a coffee, and was injured when the van run off the road into trees. She received a settlement of more than $1 million compensation and a new Winnibago as the judge decreed it should have been made clear that “Cruise
Control” doesn’t mean you can leave the steering wheel unattended. He was preceded in death by his parents, Truth and Trust, his wife, Discretion, his daughter, Responsibility, and his son, Reason.
“Common Sense’s health began to deteriorate rapidly when well intentioned but overbearing regulations were put in place. Reports of a 6 year old boy charged with sexual harassment for kissing a classmate, teenagers suspended from school for using mouthwash after lunch, and of a teacher sacked for reprimanding an unruly student, worsened his condition.” He is survived by 3 stepbrothers … I Know My Rights, Someone Else Is To Blame, and I’m A Victim. Not many attended his funeral because so few nowadays realised he was gone. If you still remember him, do pass this on … If not, do join the majority and do nothing”.
Addendum Before he passed away, Common-Sense asked me to pass a message to Investors … that whatever is reported as “Going Wrong” in the popular media this year, will in all probability be long forgotten over the next 4 or 5 years, as unreported good news delivers positive returns to the patient and optimistic, as is normally the case.
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FEATURE: MARKETING
That age-old adage, “less is more,” couldn’t be more applicable when it comes to building traffic to your website.
The Psychology of… ….Creating Web Traffic By Brandon Hill Psychological research isn’t something you would expect web designers to use, yet it’s probably the most important tool in their toolbox for creating websites that get results. Since the early days of the Internet, psychologists have been conducting research to determine how the human mind interacts with websites. Results from these studies provide valuable information on how website owners can tap into psychology to enhance traffic to their sites. Culled from this body of research are five psychologybased web design principles that have been proven to attract and build traffic to a website when they are incorporated into the site’s web design.
1. Go Bigger With Headings Drawing visitors to your website is the first step towards building traffic throughout your site. The Eyetrack III psychology study finds that big headings capture the eye’s attention more so than images. What’s more, site visitors mostly look at the headline first when deciding whether to stay and browse the web page. That behavior is the reason why web designers are using bigger and bolder typography to highlight products, calls to action and other elements website owners want as the
main focus of their site. By creating a site heading that clearly describes the focus of the website and making that headline the main attraction of the web design will boost traffic to your web pages. Equally important, big headings give visitors a clearer view about your e-commerce business or service, which establishes trust between you and your online visitors.
2. Use Image Captions To Make Key Points In another analysis that looks at the psychology of ads, it was determined that captions under images are consistently read by online visitors. That’s because when people see an image, their eyes naturally scroll down to the caption. But most websites are losing a valuable opportunity to retain traffic by not including captions with images. Image captions are also appealing to visitors because information is encapsulated, making it quick and easy to read and remember. Psychologically, people feel they are not exerting any effort in reading captions, so they’re more likely to do so. Because people browse instead of fully reading content in a web design, incorporating pertinent information in an image caption is a sure guarantee that your message will get read. Web designers are using creative ways to incorporate text under images so visitors will read calls to
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“As entrepreneurs we understand that our biggest risk will always be the performance of our business.�
Helping contractors and consultants to keep what they earn
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FEATURE: MARKETING Psychology of Web Traffic (cont.)
“In psychology terms, this reaction is referred to as the human brain’s ‘safety choice.’ From a web design perspective, a minimalist design with only a few places to click, a couple of calls to action, or limited product choices will improve traffic behaviour on a website….” action or home page features to increase clicks to other web pages within the site.
4. Engage With Short Width Text
3. Less Is More
A behavioural study conducted at the University of Reading concludes that online visitors find narrower column widths of text more inviting and approachable than wider columns.
That age-old adage, “less is more,” couldn’t be more applicable when it comes to building traffic to your website. The less is more rule applies to options, products, services, or calls to action on a website. A National Institutes of Health study by a Columbia University psychologist finds that the more choices given to website visitors, the less likely they are to choose any of them. Online visitors are more likely to stay on a site, refer it to others, make a purchase, or participate in a call to action if there are only a couple of options. In the study using jam flavors, more people were motivated to buy when jam offerings where reduced from 24 flavours to six. Social psychologists determined too many choices are demotivating, thus people choose to do nothing.
Although the study also found that people read wider columns faster, there is a better comprehension of information when the text is presented in shorter columns. One way designers are accomplishing a successful mix of short and long line breaks is by starting out with short columns of text where comprehension of the message is most important and gradually going longer for secondary text. Images, media, or other elements are strategically placed to create a natural flow of column widths.
5. Use Human Face Prompts An eye gaze study by a team of psychologists at the University of Padua in Italy finds that images with human faces that either look at or point to prompts or a call to action are more successful in driving traffic. People tend to be more comfortable following the line of sight of other people, even if it’s a stranger in a photo. Similar results were found when arrows were used.
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STEEL’S VIEW WHAT ANGELS WANT
UK Alternative Finance Market Closes in… An independent benchmarking survey put together by Nesta, the University of California Berkeley, and the University of Cambridge shows how peer-to-peer (P2P) and crowdfunding firms have contributed almost £1bn in loans and equity funding. The report predicts market growth will accelerate to reach £1.6bn in 2014 and the peer-to-peer sector represents the lion’s share of market growth. The Benchmark Survey reveals that the market grew by 91 per cent from £492 million in 2012 to £939 million in 2013. The peer-to-peer sector alone contributed £287 million of this growth.
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…on £1 BILLION By Simon Hawtin, Ratesetter The benchmarking survey from Nesta describes how alternative finance models are offering investors a better return on their money:
“Both peer-to-peer lending and peer-tobusiness lending models have developed rapidly and funded £482 million and £276 million respectively over the last two years. This sector has significantly outperformed the interest rates available to investors with a relatively low-risk profile.”
WHAT ANGELS WANT
UK Alternative Finance Market Closes in…
…on £1 BILLION “There are now more than 9.4 million alternative finance investors in the UK” The Nesta report goes on to reveal the number of individuals in the UK providing liquidity in the alternative finance sector: “As with most social networking or social-based mechanisms, there are digital divides based on computer literacy, access to the Internet/Mobile technology, and comfort with web-based financial transactions. Despite these welldocumented barriers, the UK alternative finance intermediaries have attracted and sustained more than 9.4 million active donors, backers and investors on their platforms in 2013.”
The benchmarking survey from Nesta offers its forecast for growth in 2014:
“Based on the average growth rates between 2011 and 2013, we can cautiously predict that the UK alternative finance market will grow to £1.6 billion next year and provide £840 million worth of business finance for start–ups and SMEs in 2014.“ This forecast growth (plus regulation in April next year) will add further strength to the sector and increased confidence in others to finally get involved.
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STEEL’S VIEW
HEAT 2014
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INTERNATIONAL
China’s ch-ch-ch-chchanges…
By The Brunette Welcome to your new job, Janet Yellen. The global economy is picking up, the Dow Jones is breaking records and the US has re-emerged as a powerhouse (literally) in the glow of shale energy production, manufacturing, petrochemicals, and banking – even American households have made some progressing in deleveraging. But the handover from Ben Bernanke includes the likelihood that the world’s biggest economies will need to refinance their sovereign debt…to the tune of about $7.5 trillion this year. Why? Bond yields are starting to climb from their record lows. This was inevitable. And that means borrowing costs are also likely to go up. That could be bad news for the elevated budget deficits of Italy, France, India, as well as right here in the UK…and really bad news for China whose growth model (reminiscent of America in the mid noughties, but without the corporate governance) is running out of steam. China’s success has depended on holding back their household sector to drive exports and investment. The problem is the plan worked! The household sector there has now shrunk to 35% of GDP, but the savings they’ve forced can no longer finance China’s growth model. So what are they doing about it? Economic reform and a move to austerity? Nope. They’re financing the problem with debt. You see, in China the state owns the banks and the bulk of the economy, and the Communist Party controls the state-owned enterprises. About a year ago, the state moved to curb debt growth. But their hot economy reacted by slowing down. So they eased credit borrowing…a slip-
“So what are they doing about it? Economic reform and a move to austerity? Nope. They’re financing the problem with debt.”
pery slope….and the global economy and interest rates are now moving against them. This year bond yields will likely climb from record lows. That means economies like China will have to pay back more on their debts, which means they won’t be able to continue to debt finance for long, which in turn means they’re headed for a slowdown. From George Soros of Project Syndicate: “The Chinese leadership was right to give precedence to economic growth over structural reforms, because structural reforms, when combined with fiscal austerity, push economies into a deflationary tailspin. But there is an unresolved self-contradiction in China’s current policies: restarting the furnaces also reignites exponential debt growth, which cannot be sustained for much longer than a couple of years. “The cost for governments to borrow may rise further after average yields last year rose the most since 2006, as the global economy shows signs of improving and the Federal Reserve pares its unprecedented bond buying. “Refinancing needs remain elevated in many developed nations, particularly the U.S.,” Luca Jellinek, the Londonbased head of European rates strategy at Credit Agricole SA, said in a Dec. 30 telephone interview. “The key here is demand rather than supply. If demand drops as growth picks up, and we expect it will, that could put pressure on borrowing costs.” So what happens now? As David Bowie said: “Turn and face the strain, ch-ch-ch-changes…” It’s now just a question of when.
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STEEL’S VIEW FEATURE: NOAH SYNDROME
“If you build it they will come”, might be the biggest problem faced by new The Brunette entrepreneurs; belief that their product is so mind-blowingly wonderful that it will sell itself. Rest assured it won’t and you’ll miss the boat. By Ed Emerson They should call it ‘Noah Syndrome’. something like this:
It goes
There’s a eureka moment, a mental breakthrough that happens at 3am, at the coffee shop, during a meeting while daydreaming, in the shower (toilets are wonderfully entrepreneurial locales!), while being forced to watch Coronation Street, at 3am (this time while quite inebriated) the semi-illegible notes of which you find the late morning after scribbled on a bedroom wall… And then they start building the ark.
“They test and retest the thesis in their mind, the passion for the idea often painting over the weak spots and inspiring them to continue on the P.24
development journey, in the wholehearted belief that the world will only wonder how they survived before the arrival of the ‘razzlefrazzmagadget’.” Now that may sound over the top, but self-delusion is an insidious creature that keeps folks warm at night only up until they cut off the electricity. Products/services don’t sell themselves, and just because you built it doesn’t mean the people will come, two-by-two and all that. It gets worse. Noah, as the story goes, built the ark. And the ark had to be seaworthy before the rains came and all the animals
FEATURE: NOAH SYNDROME randomly arrived. But that definition of ‘floatworthy’ is another serious sticking point, adding cubits of delay to the process while the entrepreneur seeks to build the perfect boat, floundering in the worry that the customer won’t see the beauty of the product until the vessel shines from bow to stern.
And when entrepreneurs get around to making those crucial first sales, they often make common mistakes, such as not considering the strategic advantages of a particular customer or extending a deep discount just to make the sale.
The reality is that the market will tell you more about whether your vision should be an ark or a speed boat. And that discovery will only be had by going out and trying to sell what you’ve created long before the paint dries, or even before you buy all that wood, natural tar and oil.
In our study of entrepreneurs in Hong Kong, Kenya, Mexico, Nigeria, the United Kingdom, and the United States, we shed light on how they approached the task of making their first sales and what they wished they’d done differently. I In all, we spoke with 120 founders, more than half of whom had previous start-up experience. In this article, we examine the mistakes they cited
If you labour away at perfection before you’ve asked the market if they want it, you’ll be older than Gilgamesh and just as relevant by the time you think it’s ready.
From HBR’s What Entrepreneurs Get Wrong, Vincent Onyemah, Martha Rivera and Abdul Ali write: "Salesmanship is central to the success of any young company, and entrepreneurs ignore this at their peril.
most frequently, explore the objections they faced when they began making sales calls, and present an alternative sales model uniquely suited to a start-up’s circumstances.” Regrets, We’ve Had a Few
“Yet many do ignore it, in large part because they have little sales experience and have probably not taken classes in how to sell, even if they have formal business education (as Suzanne Fogel and colleagues explained in “Teaching Sales,” HBR July–August 2012).
The founders we interviewed cited the following missteps most frequently:
“For those in search of guidance, the research and advice on salesmanship may not offer much help: The vast majority of techniques, models, and strategies are aimed at large, established companies, not start-ups, which tend to face a unique set of objections from prospects.
More than half our interviewees fully developed their products before getting feedback from potential buyers.
Starting Late
In hindsight, most viewed this as a mistake, echoing one of the mantras of Eric Ries’s “lean start-up” philosophy:
The reality is that the market will tell you more about whether your vision should be an ark or a speed boat. And that discovery will only be had by going out and trying to sell what you’ve created long before the paint dries, or even before you buy all that wood, natural tar and oil. P.25
STEEL’S VIEW FEATURE: NOAH SYNDROME
“Don’t make anything until you sell it,”LOBAL advised one entrepreneur. “Get people really interested in buying it before you invest too much time and effort.” Get in front of prospects from day one. As one CEO told us, “You’ll learn more from talking to five customers than you will from hours of market research [at a computer].” The goal should be to gauge customer reaction to the general concept you plan to build. “Don’t make anything until you sell it,” advised one entrepreneur. “Get people really interested in buying it before you invest too much time and effort.”
Failing to listen Even founders who started selling early said they were too focused on convincing prospects of the new product’s merits and not concerned enough with finding out what prospects thought of the idea. Some realized that their passion and ego made them respond negatively to criticism and discount ideas for changes that they later saw would have increased the marketability of their offerings. “Listen to the feedback from the customers and reshape your idea and your product to fit what they actually want,” one interviewee advised. Another described the process this way: “It’s really all about understanding what the pain point is in the marketplace, and the best way to do that is to talk to prospects and validate, validate, validate your idea.” As one U.S. entrepreneur who had approached the task correctly said, “The goal of our demo was not only to explain what we do but also to give the illusion of explaining what we do, while we really tried to extract information about their business and how we could help them.”
Offering discounts Faced with pressure (from themselves or their VCs) to make early sales, many founders offered price discounts in order to close initial deals—often establishing
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unsustainable pricing precedents with those customers. Worse yet, news of the discounts spread around small industries, crippling the ventures’ long-term pricing power. In retrospect, the entrepreneurs wished they had found alternative sweeteners to close early deals—free shipping, say, or a discount on orders placed before a certain date. And if you’re going to offer temporary discounts, they told us, it’s smart to put the terms in writing.
“It’s really all about understanding what the pain point is in the marketplace, and the best way to do that is to talk to prospects and validate, validate, validate your idea.” Selling to family and friends Making early sales to family members was especially common among entrepreneurs outside the U.S. and for those in the restaurant, clothing, and wealth management industries. But you never know why relatives are buying from you— often their motivation is love, pity, or a sense of obligation, not compelling product quality. In retrospect, founders believed those sales created a false sense of validation and that they would have been better off pursuing arm’slength transactions with customers who would have given them candid feedback.
TECH IPO’S, THEN & NOW
Twitter raised 1.8 billion on the New York Stock Exchange (NYSE) to become the second largest Internet IPO of all time after Facebook, overtaking global giants like Google, Yandex and Zynga. The online social networking service now trades $41 a share, a huge improvement from its $26 initial price issued by lead underwriter Goldman Sachs. LinkedIn shares are reaching record highs, with share prices now at $224.54, from initial price of $45 a share in 2011. Rob Rawson, Founder Staff.com P.27
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INVESTOR
Global By The Brunette
Investors start 2014 more optimistic about global growth prospects, especially for the US but increasingly for Europe as well, according to the BofA Merrill Lynch Fund Manager Survey for January 2014. The proportion of investors who believe the global economy will strengthen this year has risen to a net 75% from a net 71% in December, continuing a trend of rising optimism that started in late 2012.
Optimism
“The IMF forecast global growth to average 3.7% in 2014, up from 3% in 2013, and to rise to 3.9% in 2015. Global growth is expected to increase in 2014 after being stuck in low gear in 2013, says the Fund’s latest World Economic Outlook Update.”
This optimism is reflected in rising expectations for corporate profits with a net 48% looking for an improvement, up from a net 41% in December. Among the regions, a net 29% of investors choose both the U.S. and Japan with the most favourable prospects for profits. Europe has improved to a net 8% expecting profit improvement from a net 4% expecting deterioration in the December survey.
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STEEL’S VIEW THE WALL
By Neil Patel Do you know what made Zappos such a great company? It wasn’t that they were selling shoes online – they weren’t the first ones to do that. It was the way they connected with their customers. They had a few philosophies they lived by such as: ■ The customer is always right even when he or she is wrong. ■ You can make your customers happy by focusing on the experience instead of just the product. ■ By making things convenient for your customers, such as a 365-day return policy, you will win their loyalty.
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THE WALL
Connecting with your customers on an emotional level is important because if you do, they will be 300% more likely to recommend you. Or, better yet, they will be 44% less likely to shop around, and they will be 33% less sensitive when it comes to your price. To help you connect with your customers, I decided to create an infographic that will teach you how to engage with them and appeal to their wants. Never take your customers for granted because they are the lifeblood of your company. From going above and beyond to make each of them feel special to helping them out even when it may not make sense, putting your customers first will help you increase your revenue in the long run.
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ENTREPRENEURS
Judas Goat: The $10Bn Dropbox?
$500 million in VC debt versus a few hundred million dollars in sales revenue….. By Ed Emerson Dropbox, founded by two former MIT students Drew Houston and Arash Ferdowsi in 2007, has just raised $250 million in a new funding round led by BlackRock Inc. The Wall Street Journal now cites a company valuation of $10 billion. And that’s a hard pill to swallow. The Dropbox concept is simple, practical and infinitely usable: Tired of emailing files to yourself so that you can work from one computer to another? Here’s a way to always have your stuff to hand.
“Wonderful…and it works. But despite an impressive $200 million plus in 2013 sales revenue, and having climbed the market traction mountain gaining circa 200 million users, the $multi-billion valuation tag begs some evaluation… particularly from the potential investor perspective pre- or post- eventual IPO.” P.32
The Funders and Founders start up blog holds a terrific infographic on the issue where the concept of valuation leans heavily toward ‘expectation’, and therein perhaps lies the rub. A more traditional company sale valuation, Dropbox’s $200 million sales revenue could, in a perfect world (subtracting debt, overheads, brand value et al) achieve a 2x or even 3x figure of circa $400m to $600m pricetag, with considerations for management team, speed of growth, IP and other factors in tow.
“It seems valuation has become an expectation game, rather than the sum of its revenue streams…” But these are far from traditional times. The global economy has emerged in large part from the not-so-great recession of 2008, the Dow Jones is breaking all time highs, and US fracking activity has made it the global leader in oil production. We’ve come a long way baby. And while the tech sector IPO trail has recently delivered the yet-to-book-a-profit Facebook (sold 421.2 million shares of itself to investors for $38 apiece, amassing a cool $16 billion in new cap-
ENTREPRENEURS
-ital), Workday, Splunk, Palo Alto Networks, ServiceNow, Twitter, Xoom, Cvent, Tableau Software, Marketo, Fire Eye, Rocket Fuel and the list goes on….only the last six companies listed rose 50% from the offering price to the end of the first day of closing. But sentiment is what sentiment does. In response to a LinkedIn comment chain from the related Dropbox Mashable report, HNW high growth company leader and Sansible CEO Jack Hoy-Gig Ng writes: “Not too long ago (a company) with no sales was valued at $3 billion.” Saurabh Dalmia writes: “…may be another example of irrational behaviour or markets…quoting almost 40X EV to Sales…” It seems valuation has become an expectation game, rather than a sum of what’s in the company itself. That’s dangerous ground. And while I’m happy to allude to the dot.com bubble of 2000/01 as an example of some rather ridiculous sounding company valuation activity, HNW is in no way drawing a line between then and now. This is not a bubble. However, it could be a moratorium to the death of long term thinking. And if you haven’t read Alan Steel’s Here Lies Common Sense, You should do now. Following on the short-term thinking track, many forget that this is actually the second go for Dropbox. The company already raised $250 million in 2011 via Accel Partners, Index Ventures, Sequoia and Goldman Sachs.
That’s $500 million in VC debt, against a few hundred million dollars in sales revenue equalling a $10 billion valuation. With those kinds of numbers I’m not sure even Evan Stiegel, the Snapchat honch who alongside his Stanford frat buddy co-founder Bobby Murphy quite infamously knocked back a few $billion offers, could find a calculator that delivers that return.
“But sentiment is what sentiment does. In response to a LinkedIn comment chain from the related Dropbox Mashable report, HNW high growth company leader and Sansible CEO Jack Hoy-Gig Ng writes: “Not too long ago (a company) with no sales was valued at $3 billion.” Saurabh Dalmia writes: “…may be another example of irrational behaviour or markets…quoting almost 40X EV to Sales…” But you never know. Ritholtz CEO and author of blog The Reformed Broker who, by anyone’s estimation, writes some of the best financial markets eye candy out there plays the valuation vs expectation game on the Razor’s Edge…and wins. He writes about his Twitter pre-IPO investor perspect ive here and time has thus far won him a gold watch. Roy Disney said: “It’s not hard to make deci sions when you know what your values are.” The next time you read about a $multi-billion (particularly tech-sector) valuation, remember the principles of the game; value is in the eyes of the beholder, so know what’s going on behind the headline. Otherwise it’s just a Judas Goat leading another flock to the slaughter.
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ENTREPRENEURS
Dell & Vanderveldt Take Ireland
A fund of up to €10m for Irish companies to aid the deployment of technology solutions will be made available and managed through Dell Financial Services’ Irish HQ.
By Ed Emerson The Dell Centre for Entrepreneurs in Ireland formally launched on Friday 24 January at the Digital Hub in Dublin, where President of Dell EMEA Aongus Hegarty spoke alongside the renowned founder of the Dell Centre for Entrepreneurs and Dell Innovators Credit Fund, Ingrid Vanderveldt.
Included in Dell’s plans for 2014 is an offer for three Irish startups to become resident at one of the company’s Dublin, Limerick or Cork facilities where they will receive free office space and business support ranging from mentoring and access to professional networks to notebooks, servers and storage.
Only a few months ago Dell formally set about helping accelerate the development of high growth businesses in the UK with a £10 million fund and new centre for British entrepreneurs. As of last week, that concept has now launched in Ireland.
The Dell Centre for Entrepreneurs in Ireland formally launched on Friday 24 January at the Digital Hub in Dublin, where President of Dell EMEA Aongus Hegarty spoke alongside the renowned founder of the Dell Centre for Entrepreneurs and Dell Innovators Credit Fund, Ingrid Vanderveldt.
Dell announced the new resource, designed for established start-up businesses with a technology focus, to provide access to funding, mentoring and technical expertise, alongside world-class infrastructure to help young companies grow and scale quickly. Similar to the company’s UK and US initiatives, a fund of up to €10m for Irish companies to aid the deployment of technology solutions will be made available and managed through Dell Financial Services’ Irish HQ. “We believe that technology is a necessary part of growing a thriving business and strive to help entrepreneurs leverage technology to take ideas from start-up to success,” said Aongus Hegarty, president, Dell EMEA. “Our new Dell Centre for Entrepreneurs allows us to do just that.” An advisory council, chaired by Dell Ireland managing director Liam Halpin, will meet quarterly to orchestrate activities and engage with Ireland’s entrepreneurial community.
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In an earlier statement regarding the Dell UK launch, Ms Vandervelt, Dell’s Entrepreneur in Residence, said: “Dell isn’t your typical global technology company. It has supported entrepreneurs and business owners for years, sharing its technology, capital, expertise and networks. Whether it’s helping a business get to market, or rolling out a new service, Dell understands the value of having a real and comprehensive relationship with entrepreneurs. It’s good for business — and necessary for innovation.” In 2011, Dell announced the launch of its Entrepreneur-inResidence program in the U.S, hiring Ingrid Vanderveldt, an influential entrepreneur, to identify how Dell could better serve the needs of start-ups. Ingrid now oversees global entrepreneurship initiatives for Dell and was pivotal in creating the Centre for Entrepreneurs both in the U.S., the UK and now Ireland. Plans are also in place to establish a centre in Canada.
INTERNATIONALISATION
Going Global Avoiding the Pitfalls of Internationalisation Many companies who are facing revenue struggles at home are being lured by the bright lights of international expansion, by the drumbeat of globalisation and by the vision of vast untapped markets of consumers or business buyers overseas. And for the people who run these businesses, this venture is their first foray into the great unknown. Unfortunately, many will make the same mistakes and suffer the same consequences as those who have gone before. International markets are strewn with the carcasses of global adventurers who have ventured and failed. So what are entrepreneurs to do to seize the lucrative opportunities before them? By Jennifer Vessels
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Business angels More than just money Millions of ÂŁs, Thousands of jobs, Hundreds of deals, One Network...
LINC Scotland is the national association and representative body for the business angel community in Scotland, and was a founder member of the European Business Angels Network (EBAN). Since our establishment in 1993 our members have made investments in hundreds of companies.
EUROPE & SCOTLAND European Regional Development Fund Investing in your Future
of millions of their own risk capital, on average levering three times more from other sources. Just as importantly they have invested their own skills and experience in the next generation of SMEs. The companies supported have created thousands of high quality jobs in the Scottish economy.
www.lincscot.co.uk
INTERNATIONALISATION One thing above all else will save them from a similar fate: learn from the lessons of others. Here are some of the reasons businesses have failed in their efforts to expand internationally. If you avoid these mistakes, you will be way ahead of the game and increase your chances of international business success.
Reason #1: Expansion for the wrong purpose The first mistake companies make is in choosing the wrong reason to expand internationally. Going abroad simply because the domestic market has little or no growth is a bad reason, according to Aneel Karnani, a professor of corporate strategy and international business at the University of Michigan: “Too many times, that kind of thinking results in adding a lot of new costs that don’t deliver new value,” he said. According to a survey of 3,700 US senior executives sponsored by SAP, one third said they planned to expand their customer base by exploring new international markets. Specific targets for this expansion are Brazil, China, India and Russia. As seen below, the allure is strong, but must be approached with caution. The Crocs Story
through retail stores, the internet and company-operated kiosks that promote their products and increase brand awareness. “Every day we learn more about our business, particularly overseas. Plus the geographic diversity of our company-operated and third party manufacturing facilities allows us to move efficiently and cost-effectively serve specific markets around the world” said Ron Snyder, President and CEO of Crocs, Inc. Advice: Play the long game – and gradually erode your rivals’ market share Snyder recommends adopting a slow-build approach and gradually eroding rivals’ market share before taking over the competition. This could take years – even decades. Understand that things may take
“International markets are strewn with the carcasses of global adventurers” longer abroad. He advises companies to allocate the level of investment, strategy, adaptation and time needed to be successful. He says, “Plan for a longterm investment in the region, not a short-term win. Be patient!” The urgency of expansion plans is driven by the perennial business driver to reap the first-mover advantage. This desire to be first in a market can blind otherwise cautious executives to the pitfalls and missteps that line the path of global business strategy.
Crocs, the fast-growing maker of brightly hued plastic footwear, is one of those companies contributing to an impressive American record of international trade. It has reaped the benefits of the skyrocketing popularity of its odd-looking yet comfortable shoes. Crocs has steadily expanded the availability of its shoes internationally, adding Europe, China, India and Brazil as target markets. In 2004, Crocs expanded their product line, added warehouses and shipping programs for quick assembly in North America and distribution throughout the world. Today, Crocs are sold through over 6,000 US store locations and in 40 different countries. Sales channels are
Don’t rush in. “Impatience causes entrepreneurs to do some stupid things that can jeopardize key relationships,” says Joseph Monti, a partner at management consulting firm Grant Thornton LLP in Los Angeles. “It takes time to establish your com pany in an international market and form lasting business relationships. Although Americans prefer efficiency, much of the rest of the world moves at a slower pace. It all comes down to understanding cultural idiosyncrasies and realizing they play a vital role in all international relationships.”
Reason #2: False assumptions about the international market Companies who have products and services that are successful in the US often assume that the appeal in international markets will be just as great and that this “under-served” market will be a bonanza requir-
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INTERNATIONALISATION ing a small investment in sales and marketing. The painful lesson that many companies learn at great cost is that their product or service doesn’t fit the market, or even more commonly, that the pricing is way out of line with what customers are willing to pay. Adequate and objective market research can help avoid this pitfall. Advice: Consider strategic acquisition An alternative approach that can achieve the same goal is a strategic acquisition of a company already established and operating in that market. This approach allows the leveraging of many advantages such as local contacts, existing business relationships, and legal requirements.
Yet another approach is to allow your customers’ global expansion to pull you into the international market. The risk is reduced because you will have a base of demand in advance of your investment in support and delivery infrastructure. It’s a “pay-as-you-go” model. However, all of these considerations may be premature. Joseph Monti advises, “Identifying the primary characteristic that distinguishes your product or service from the competition is the smart entrepreneur’s first move. Is it a brand name?” Monti asks. “Does it establish critical mass? Does it provide access to existing distribution channels? Is it proprietary technology?” Unless you know these answers, you’re clearly not ready to take on any market outside your own, he maintains.
Reason #3: Underestimating the operating costs in international markets Failure to account for all of the costs of operating in the new market can cripple an otherwise successful marketing and sales effort. Local expenses may include higher taxes such as a value-added tax (VAT), additional fees and assessments that are uncharacteristic of business overhead in the US. Many times these unaccounted-for expenses deplete the anticipated profit margins based on domestic sales and marketing models.
It is critical to engage the services of knowledgeable and experienced people in the local market who can help you understand the real cost of doing business locally and steer you past dangerous miscalculations about the true financial opportunity available. Advice: have a local general manager Don’t entrust the management of an international operation solely to expatriates. “In my opinion, it’s not the best strategy,” says Monti. “While they understand the company and the product, they don’t understand the local practices and culture and don’t have the relationships. The best strategy is to have a local general manager with a support staff that could be seeded with expatriates.” In order to succeed in a local market, companies and products eventually must be accepted as their own. (Cont. on P.45)
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PRACTICAL BUSINESS HNW Magazine’s Practical Business section looks at key areas of business needs across legal, accountancy, marketing, finance, leadership, strategy, research and other areas of support.
REAL VS ‘VANITY’ METRICS Mike Lebus, Angel Investment Network
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TOP 10 BUSINESS TIPS FOR SME’S Darren Holdway, Haines Watts
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CROWDFUNDING: BEER 52 Bill Morrow, Angels Den
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PRACTICAL BUSINESS
“Understanding the difference between vanity metrics and those that actually matter.” By Mike Lebus
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PRACTICAL BUSINESS
Top 10 Tips for SME’s to help run a Successful Business… By Darren Holdway The Haines Watts business growth survey asked amongst other things about the biggest drivers of growth for SMEs.
We gathered these 10 top tips on running a successful business from the more than 1,000 business owners who responded.
you and know you’re reliable, you’ll always be in demand. Word of mouth might even bring you new customers keen to try you out.
1. Instil a passion for strong customer service. High standards of customer service are the bedrock for growth. Existing clients will come to rely on you if you’re flexible, always available and great to work with. Quality staff who buy in to your vision and share your passion for customer service are key.
6. Source new and different customers. You should always be on the lookout for new business relationships. Picture your ideal customer, then tap into existing contacts and make carefully targeted approaches to key prospects. Network, network and network some more. If necessary, recruit dedicated sales staff.
2. Get competitive on pricing and delivery. Greater cost efficiencies could let you offer the same quality at a better price. Fast turnaround times can be just as critical. In some sectors, that means maintaining stock availability for next day delivery. 3. Answer customers’ ever-changing needs. The market is constantly evolving; make sure you change with it. If a customer is looking for someone to provide a new service, consider offering it yourself. Selling more and better services to existing customers is an easy win in the current climate.
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7. Do more marketing. Communicate with your customers and prospects. Generate interest using Twitter, Facebook, LinkedIn and the like. Tell the world what you do and how you do it differently. Then follow it up with regular client contact closer to home. 8. Expand into new markets. Your usual market not showing you enough love? Others may be more appreciative of your skills and expertise. Take your offer to complementary markets within the UK or test out overseas markets with targeted products.
4. Invest in product development to diversify. Regularly launching new or improved products can generate consistent growth. Research what it is your customers want and get inspiration from your most profitable lines. If you’re looking to export, design new products that will take emerging markets by storm.
9. Reinvent your business. Adaptation is often the secret to survival and success. Get out and make discoveries. And grab every sound opportunity that comes your way.
5. Maintain a glowing reputation. Deliver what you say you will, when you say you will. If your customers trust
10. Keep putting in the hours. Never underestimate the power of your desire to stay in business.
PRACTICAL BUSINESS
Beer52 Crowdfunds £100k on Angels Den
By Bill Morrow
Beer52 The UK’s fastest growing craft beer club, Beer52, have succesfully raised £100k on the Angels Den crowdfunding platform. The Edinburgh-based startup launched on our platform in December 2013 and raised £100k in 38 days from 23 investors (they had 22 days remaining). One investor put in £30k, so will now receive free beer for life. Beer52 founder James Brown said crowdfunding is an effective and innovative way for the startup to grow the business. “Crowdfunding provides our fans with the chance way to become part of our story and join us on our craft beer adventure and we are really looking forward to rewarding them with some amazing beer in the post.” Beer52 is an early stage startup, launched just three months ago, and is already the UK’s largest and fastest growing craft beer club with more than 2,500 paying subscribers – for £24 a month they send you a mixed case of eight craft beers.
The Beer 52 team is now focused on developing the next stage of the business, which is an online community focused on craft beer. Brown, who is also the company’s “Head of Beer Tasting” said: “The investment will allow us to launch a really engaging new website and acquire 10,000 members, which will allow us to help the best independent craft breweries reach thousands of new drinkers in the UK.” Angels Den founder and CEO Bill Morrow said that Beer52 did the“hard yards upfront” making the rest look easy. “They had obviously nailed the basic proposition which made it easy to ace the video, they then blitzed their message out to their supporters. “On top of that, they attracted 15 accredited angels at our SpeedFunding event which supplemented the crowd and, perhaps more importantly than raising the funds, now allows them access to the contacts, experience and advice of these experienced business people. “Angel led Crowdfunding is the future of funding.”
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INTERNATIONALISATION Internationalisation (Cont. from P.39) With the exception of products that thrive on being “imported” or whose brand is tied to an allure of the originating country, companies should strive toward acceptance as a local brand. Success in this effort depends upon a variety of “localisation” efforts. Assuming that marketing materials and collateral simply need to be translated into the local language is a serious mistake. Marketing and advertising campaigns are most successful if they originate in the local market and reflect local values, culture, language and marketing nuances that may not be understood by domestic marketing resources.
Reason #4: Deciding to become a global company too late Companies are complex structures not unlike houses. The foundation is laid and the supporting infrastructure is built based on the expected character and intended use of the house.
Reason #5: Failing to get expert advice Few entrepreneurs possess all of the knowledge and skills required to lead their companies into a global expansion. There are many experts who have been there before and can provide the advice and guidance to help avoid the many missteps and pitfalls awaiting the unacquainted. Expert advice is not cheap, but it pales in comparison to the costs, missed opportunities and damage to the corporate psyche and reputation caused by failed first attempts or other errant initiatives. Additionally, commit the internal resources required. Select an internal staff for which the international expansion is not just an extension of their current responsibility. Have this as their primary responsibility. Partner them with external experts and ensure a knowledge transfer so that you’re developing internal expertise while growing the business. Advice: Be cautious, be clear, be patient
Additions to the house expand the square footage but are unlikely to change the character of the house. They are easily identified as additions to something existing. Companies are much the same way. A “purpose-built” global company has an infrastructure that more easily supports such operations. Companies with a “bolt-on” approach to global expansion will have a more difficult time appearing and behaving like a global company. That being said, the earlier in their growth process a company establishes the strategic direction of a global company, the earlier they can take on the appearance and behavior of a company positioned and organised to support global operations. Having this international expansion vision early sets the management expectation early and cascades through the organization from the start.
Most importantly, the company leadership must have a clear understanding of why they want to grow internationally.
This vision impacts organisation, staffing and business strategies from the very beginning which is far more advantageous than having to retool the organization and dislodge entrenched interests in the status quo.
Their vision of global success must be tempered with the recognition that international business is not simply an expansion of their domestic operations beyond their own shores.
Advice: Have a globalisation strategy right from the start
It is very much a different business with additional requirements, considerations and cautions than they have known before.
Planning early is about being committed to grow internationally from the start. This means understanding the implications of decisions made on future international business early. Having that thought process in planning growth early is a vital part of building a platform for international success in the future, even if the plan is not to do something on an international basis immediately.
Jennifer Vessels is CEO of Next Step, a Silicon Valley-based company providing practical consulting services in sales, marketing and people development for international companies expanding into the US. P.45
DIATRIBE
Networking Without An Agenda? That’s No Way To THRIVE!
By Alix Medlyn Davies, Thrive for Business There are a number of networking holy grails that one is always told to remember: research, agenda, follow-up (R.A.F). If possible knowing who you want to talk to and researching them prior to your meeting never hurts – mentioning a project or an initiative they did is not only a great way into conversation but demonstrates you as an informed individual. Secondly by entering the room with a clear agenda – who you want to talk to, what you want to say and want from them – you optimise your chances to achieve an ROI from networking.
I was under the impression that I needed to amaze everyone I met: working into the conversation all the achievements I boasted on my CV and the accomplishments of the organisation I represented. I found my attempts to engage senior delegates met by luke-warm reception and often confused responses. Those I met, like me it seems, were a little confused by what I wanted to achieve from such a self-promotional and self-referential expounding.
Finally, it is essential to make contact within a few days after your initial meeting: by following-up via email or phone you can not only chase-up on any proposals you may have made but also merely establish a basis for continued communication in the future, thus developing your newly established professional relationships.
Conversation fell short, and following up was strained and difficult – “Dear So-and-so, remember that tedious and irrelevant conversation we had the other week? Let’s keep in touch!”
However, my experience has taught me, it is not always possible to know exactly who you will meet or even exactly what you wish to achieve through your new connections: you don’t always have the ‘A’ of your R.A.F. networking squadron.
By all means self-promote, but there is a time and a place. If you want to achieve an ROI from Networking, the real aim of the ‘game’ is to make business human – if you think you can achieve an ROI from brochures and cold-calls then send them and make them – just don’t come to a Networking event merely to recite the catalogue you memorized or pass round a price list.
Yet, opposed to conventional belief, I believe there is a lot to be said for networking without a ridged business agenda.
P.46
My early attempts at networking stand to illustrate exactly why ‘Networking’ can often be seen as a dirty word: no one is interested in the sycophantic, self-oriented ramblings of a misguided delegate attempting to ‘Wow’.
Put a human face to your company.
Aye Cloud
New Technologies New Economy New Scotland
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