PAUL BARRY-WALSH Entrepreneur wins inaugural Business Reporter/UCL award
GOING LARGE Why SMEs shouldn’t be afraid of working with the big boys
BREXIT STRATEGY As the UK votes to leave the EU, we assess how the result will affect small businesses
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Pre-Brexit SME exports in numbers With the UK’s vote to leave the European Union, we take a look at how SMEs who export to the continent currently fare
18% Top 10 types of export for British SMEs
Where British SMEs export to within Europe…
15%
6%
6%
Environment & renewable energy
Furniture
Homeware
Construction
Health & beauty products
10% 10% 10% 10%
DIY items
11%
Food & beverages
Fashion/textiles
Technological equipment
Industrial/manufacturing items
12% 12%
16%
17% 32%
23% 49% 24% 57% 29% 37%
Of British SMEs that export, the percentage of them that export to countries worldwide… US
10% 12%
35%
Australia Canada
13%
China Japan
13% 25% 16%
India New Zealand
20%
Brazil
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SMEs face larger fines in data protection rules update MATT SMITH
B Leave campaign leader Boris Johnson leaves his house following prime minister David Cameron’s resignation on Friday morning
British SMEs face uncertainty after UK votes to leave Europe • Sterling at lowest since 1985 • £120billon wiped off FTSE100 • Federation of Small Businesses demands government clarify impact to UK exports
“Should the United Kingdom remain a member of the European Union, or leave the European Union?”
JOANNE FREARSON
T
HE BRITISH public have decided to leave the European Union – a decision that could leave small businesses in the UK in unchartered waters. David Cameron has stepped down as prime minister, the pound has fallen to a low not seen since 1985 and the FTSE 100 has seen more than £120billion wiped off its value. More than 33 million people from England, Scotland, Wales, Northern Ireland and Gibraltar voted, with 51.9 per cent voted to leave and 48.1 per cent remain. In his resignation speech, Cameron said that it would be up to the new prime minister to trigger Article 50 of The Lisbon Treaty – the
PAUL BARRY-WALSH Entrepreneur wins inaugural Business Reporter/UCL award
GOING LARGE Why SMEs shouldn’t be afraid of working with the big boys
SIMON ASHBY If our SMEs are to be successful, we need to allow them to be so as a country
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JUNE 2016 Publisher Bradley Scheffer Editor Georges Banna Production editor Dan Geary Client manager Michele Taylor: production@business-reporter.co.uk Project manager Aaron Mustafa
LEAVE 52% REMAIN 48%
formal and legal process of leaving the EU. It is estimated to take about two years to potentially a decade to unwind Britain’s 43-year membership of the EU. For British small and medium sized businesses (SMEs), it will mean a lot of uncertainty ahead. Rich Preece, Europe VP and managing director of Intuit QuickBooks, says: “After today’s vote, there will be a transitional period while the UK negotiates an exit agreement. It is possible that negotiations may continue for several years so it will be business as usual for now, but SMEs will have to monitor how the landscape is changing.” Europe has been a big market for SMEs wanting to trade internationally. Mike Cherry, national chairman of the Federation of Small Businesses (FSB), says: “Nearly a quarter of FSB members export, the majority to the single market. Access to the single market means access to 500 million potential consumers and more than 26 million businesses. We call on the government for clarity on the impact to smaller firms who export through EU FTA agreements.
“These are crucial questions that need to be answered swiftly to ensure the confidence of the UK’s 5.4 million small businesses does not fall any further, which is already at the lowest levels since 2013. FSB calls on the government for clarity on what these decisions mean for business, including how they will have access to the single market and the free movement of people and trade.” A survey by Grant Thornton found 60 per cent of small business and 61 per cent of mid-sized businesses were in favour of Remain. Ed Molyneux, CEO and co-founder of FreeAgent, a tech firm based in Edinburgh, says: “It was clear that the overwhelming majority of micro-business owners and freelancers were in favour of the UK remaining in the EU, and that they did not think a “Brexit” would be beneficial for their own businesses or the economy in general. “The ramifications of leaving the EU are huge – especially for small businesses who sell products and services worldwide, rather than just domestically. We now look set for a lengthy period of uncertainty.”
OTH LARGE and small firms need to ensure they are fully compliant with incoming data protection rules – or risk huge fines from the regulators. While the current maximum fine for UK companies that mishandle data sits at £500,000, the EU’s new General Data Protection Regulation will increase that limit to €20million (£15.5million) or four per cent of a firm’s global annual turnover, whichever is greater. The legislation’s two-year transitional period has already begun, and firms need to make sure they are fully compliant. The information commissioner’s office (ICO) has said the UK’s data protection standards will likely remain on a par with the European Union’s, despite the Brexit vote. “If the UK wants to trade with with the single market on equal terms, we would have to prove ‘adequacy’,” an ICO spokesman said. “In other words, UK data protection standards would have to be equivalent to the EU’s General Data Protection Regulation framework starting in 2018.” “We have a lot to do within these two years,” Rocio de la Cruz, a privacy and data protection solicitor at Birmingham City Council, told Business Reporter. Many firms mistakenly believe they are compliant with existing regulations and need to ensure their security is adequate before it is too late, she said. “It is something they need to work on,” de la Cruz explained. “A lot of companies think they are fully compliant with the Data Protection Act but they do not review policies and security measures. “Some companies are more progressed in this, but the majority are outdated and need to change this. You have to check all the policies and security measures are in place, make sure you are ready to share that data and audit the other party.”
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With billions sent every year in the UK, it’s fair to say most people know just how powerful the humble text message can be - but how about in a business context? As the facts and figures below show, SMS provides a massive opportunity for today’s business owners, allowing them to reach and engage their ever-busy and always-distracted target audiences.
Messaging dominates
A TRULY MOBILE -POWERED WORLD
c
p h on it ve
e subscr
ipt
ion s
A
Did you know there are more phones than people in the UK? U
pu K po lation
The top five most popular mobile activities in 2015: 1
MESSAGING
2
BROWSING
3
4
PHOTOGRAPHY
5
SOCIAL MEDIA
The future’s bright for SMS In 2017:
BILL
ION
texts se every d nt ay
84%
90% of all texts are read within three minutes
MILLION
MILLION
A marketer’s best friend 22% of businesses rate mobile as their top marketing channel 24% of marketers use SMS; of these...
25 million
people will respond to marketing messages
say it’s effective Average daily mobile phone usage
The number of times the average mobile phone user checks their device in a day
plan to invest more in SMS
of businesses will use SMS as part of their marketing strategy
47%
:) I’m in!
of businesses will have a mobile database containing more than 10,000 names (up from 32% in 2013)
For more information, visit www.textlocal.com
(Figures above from Nottingham Trent University - http://www.ntu.ac.uk/apps/news/180892-15/ People_check_their_smartphones_85_times_a_day_(and_they_dont_even_know_the.aspx)
Revealing the hidden power of business SMS “Companies of all sizes are beginning to understand the power of text messaging”
S
MS PRESENTS a massive opportunity for businesses. It offers the chance to build relationships through instant communication. Whether it’s a restaurant boosting loyalty with special offers, a courier providing tracking information or a dentist delivering appointment reminders, the range of uses is vast. At present, though, many organisations still can’t see the potential. They don’t quite realise how the humble platform of simple text messaging can now deliver not just words alone, but also rich content – tickets, surveys and attachments, for example. Or that all of these things can be delivered to an audience of more than seven billion people across the world. It really is an incredibly powerful tool.
Unrivalled reach There are currently around 30 million people in the UK who use Facebook – that’s approximately 60 per cent of the population. Its closest competitors, Twitter and Instagram, each have a user-base around half that size, according to the latest official figures. The most recent Ofcom data also shows that only two-thirds of adults own smartphones. That leaves more than 30 per cent unreachable through web-dependent
A tried-and-tested business tool
messaging services such as email, Facebook Messenger or WhatsApp. Amid all of this, the ownership of SMScapable mobile phones stands at 93 per cent. And when you consider that the majority of users keep their devices with them throughout the day, it’s clear that texting cannot be matched for reach.
A messaging addiction The list of things you can do with a mobile phone is certainly growing, but messaging still takes up the biggest chunk of the average owner’s five hours of daily usage. It comes ahead of internet browsing, email, photography and – perhaps most note-worthy for businesses – social media. It’s not that difficult to understand why this is the case. Mobile phones were introduced because people need to communicate, and SMS is by far the most convenient platform for doing so. No wonder we’re sending 23 billion texts a day.
The cherry on top for businesses So how about engagement? This is the main issue faced by those using email: small-tomedium-sized enterprises (SMEs) send millions of emails every day, but the average open rate across all industries is less than 23 per cent. That’s more than three-quarters
of all business emails going straight into the digital bin. SMS, however, is proven to be extremely effective at getting through. More than 99 per cent of all texts are opened, and nine in ten are read within three minutes. You couldn’t ask for much more.
The businesses that do embrace SMS almost always get results. The vast majority of those that use it as a marketing tool, for example, find it effective, and most are ready to increase spending on it in the near future. These users appreciate the often-overlooked adaptability of this simple technology – one that allows businesses to send links, attach files and easily monitor responses. As you’ll see further from the graphic above, the evidence in support of using SMS in business is overwhelming, so its continuing growth is in no way surprising. Jason Palgrave-Jones, managing director at Textlocal, explains: “Companies of all sizes are beginning to understand the power of text messaging as an instant and highly effective communication platform. “The technology has battled setbacks and misconception due to its misuse, but as an opt-in-only industry, the value of commun icat i ng w it h a n audience of people who have chosen to hear offers and alerts from a business cannot be underestimated.” INDUSTRY VIEW
For more information, call 03331 229 409, text GO to 60777 or visit www.textlocal.com/go
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Paul Barry-Walsh wins inaugural University College London/Business Reporter award
T
HIS YEAR’S winner of the UCL/Business Reporter Entrepreneur of the Year award was Paul Barry-Walsh, for his work at t he Freder ick s Foundation. The aim of the award was to honour someone who has been successful in setting up their own business and then used their skills to promote enterprise and provide opportunities for others – not just by handing over big cheques, but by making the most of their experience. Barry-Walsh set up the Fredericks Foundation in 2001 to help people set up new businesses or maintain or expand existing ones through providing them with loans. It has helped around 1,463 business start-ups and is open to anyone who has a viable business proposition but cannot obtain mainstream finance. Speaking after receiving his award, Barry-Walsh said: “I am very grateful. It has been an enormous privilege to help those people who have set up some wonderful businesses. “We only support people who have no chance to get funding from traditional sources like the banks. There are three things I really want to do. I want to support small business, because this is where all the diamonds are. “There are 11 times more patents from companies [with ]
Entrepreneurship at University College London in numbers 198 small businesses have been formed between 2010 and 2015
31 staff spin-offs were launched over between 2010 and 2015
50m
£ SOURCE: UCL
The value of UCL’s Tech fund, which was launched in 2016 to invest in commercialisation
Paul Barry-Walsh accepts his award at University College London
© Kirsten Holst
The entrepreneur and founder of the Fredericks Foundation called for businesses to remember their social function in his acceptance speech. Joanne Frearson reports
under 100 [employees] than big ones. In big companies you are far more busy having meetings than actually doing anything. Everyone matters in small companies – you all have a sense of a mission. When I started my first company it was wonderful – it was so free we could do what we wanted. “Lastly, I wanted to help those who did not have access to cash – everyone deserves a second chance. I do not believe in handouts, but I do believe in helping people up and supporting them. That is what we try to do.” Barry-Walsh believes it is good for the human spirit to be selfemployed, and one of the reasons why he started Fredericks was to help encourage that. “Even if people are earning no more money, they are at least in control of their own life,” he said. Barry-Walsh’s first business, Safetynet, was initially unable to raise the required funds of £300,000, forcing him to give away some of the equity in the business. He later sold the company to Guardian I T for £170million – but his philosophy is that business should be about far more than just making cash. “A lot of people go in there and say, I am going to get rich quick – I say, it is probably not going to happen like that,” he said. “You should be doing it because you
“You should be doing it because you love it, and want to make the world a better place. Bill Gates’s ambition was to put a PC on everyone’s desk, not to become the richest man in the world” – Paul Barry-Walsh
love it, and want to make the world a better place. That is a message that has got lost. Bill Gates’s ambition was to put a PC on everyone’s desk, not to become the richest man in the world. “I do not believe in the Chicago school of thought, which says profit at all costs and that is your only responsibility. That is highly irresponsible. That contributes to the v iew of the fracture between business and society. That is pretty dangerous.” Barry-Walsh believes enterprise is important to society, and he thinks entrepreneurs should use their skills, black books and money to solve problems the state finds difficult. He believes every business should have a social purpose. “It is important for everyone to give back – business is good for society,” he said. “I feel quite passionate about that and sit on the Beacon Board to try to promote philanthropy. “It is very important that we build social purpose into the fabric of our business community, rather than have social corporate responsibility, which is the last thing on the agenda. It has to be within the organisation at its soul. It should start from the very beginning.” Barry-Walsh’s approach to running a business resembles the old-fashioned way of looking after the customer’s interests
instead of your own. “What I always tell people is to treat employees and customers with respect,” he says. “Being fair is a really important thing – fair to your customers, fair to your employees, fair to your shareholders. “And if you are open and transparent and fair, it is not a guarantee for success, but it is a good foundation for success. A lot of businesses have lost that.” The same philosophy is evident at Fredericks, where Barry-Walsh provides successful applicants with mentoring, practical business advice, networking and links within the local community to help support and grow new and expanding business. Expert advice is certainly something he regards as crucial to success. “When Apple was trying to start they managed to get some of the best brains from MIT to answer questions, completely for free.” he pointed out. “Most people are happy trying to help others. You can get tremendous support simply by asking for it.” Business Reporter would also like to thank everyone involved in organising the awards, as well as the other nomi ne e s on the shortlist: Jim Duffy, Kelly Hoppen, Luke Johnson, Jamie Oliver, Emma Sinclair and John Timpson
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Insurance implications of business growth
R
A PIDLY GROWING businesses often fall into two distinct categories. There are those whose experience with the insurance industry has left them with a bitter taste. These are counterbalanced by the many who see their insurance arrangements as complementary to their growth, with good risk management and insurance advice helping profitability and opening doors to new opportunities. Growth can be a problem if the limits of your current insurance are exceeded. This can be exacerbated if your current insurance contract is not flexible enough to adapt to your increasing demands, leaving you no option but to source a new policy just when you want to be putting all your energy into your business. A broker which understands your needs will ensure your chosen insurer has more than enough room to cover your expansion. They will design your policy with growth in mind and set up on a non-adjustable basis, or with a transparent adjustment policy at the very least. It is worth noting that year-end adjustment rates vary significantly, so the difference can be very noticeable. Regular reviews are vital during periods of growth, and another way of ensuring there will be no unexpected issues at your next renewal date. Here at Higos Insurance Services we believe in doing business the right way. The needs of your business are our first priority, which we support through continued investment in staff training and a dedicated claims service. We are a member of the Globex international broking network and capable of placing business around the world. INDUSTRY VIEW
01749 834 500 www.higos.co.uk
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How SMEs can win big from big business Small businesses need not be afraid of cutting deals with the big boys, reports Joanne Frearson
W
HEN SMALL firms start out they might not see themselves doing much business with enormous mega-corporations. But big companies do not necessarily share the same view – indeed, many of them want to do business with firms that can provide them with the goods and services they need, regardless of their size. “The fact is, large corporates can and do buy from small suppliers,” says Brian Iddon, director at fibre-optic internet service provider Venus Business Communications. “In these days of austerity, everyone is looking for better value. That is the number one mistake that a lot of businesses make.” Venus itself is a fine example of this approach, having won business from larger firms such as Tesla, Tf L, Deliveroo and uSwitch simply by having a focused and clear proposition. Iddon, also a co-founder of Venus, says: “You have to be very clear about the problem you are going to solve. You need a proposition that leaves the customer in no doubt about where you can add value. You also need to remember that the big companies you are selling into were once small as well. “We have always had five points that have helped us sell to larger businesses. Firstly, do not be scared – just do it. Secondly, you have
to be clear about the problem that you are solving. Thirdly, you have to do your research. Fourth, remove risk, and fifth, know when to walk away.” By following this strategy Venus has grown from a small outfit to a solidly medium-sized firm boasting more than 1,000 business customers. Iddon advises small firms that want to grow their business to be focused from the outset. “Think about the early Microsoft vision – a computer on every desk in every home,” he points out. “They knew what they were about.” For smaller companies wanting to get bigger deals, Iddon believes it is imperative that they get the right people on board who can champion the cause. There are no excuses in this day and age, he says, with so many tools available online to help get the right people on board. Worries that bigger companies might have about doing business with smaller companies can also be mitigated by creating case studies and references. Bigger companies are more likely to be more risk-averse than smaller ones, as decisions normally have to be justified to someone else – a senior director or other management. But if a small company can create a case study from an existing customer, it can give
47% The amount of private sector turnover in the UK accounted for by SMEs Source: Dept of Business, Innovation and Skills
the bigger firm more confidence in its brand proposition. Iddon compares the scenario to moving through a football league. “You win some honours in the second division. You have references, customers who like you. You get promoted to the first division. “Believe it or not, existing customers can make the best salespeople for you if you treat them properly. You have to have those references and case studies ready, and be able to point your customers to them. If you can show how you can solve a problem successfully for others, it can be very powerful. “Having customers such as Tesla, uSwitch and the London Underground is a big part of that for us, in giving those people confidence. We have the ability to take one of our
Small businesses cut corners in cyber-security MATT SMITH
I
T CAN be tricky to stay secure as a small business. Expensive cyber-security solutions are sometimes out of reach, larger businesses snaffle promising security talent, and restricted resources limit staff training programmes. But often, experts say, the problem is that SMEs simply do not consider cyber-security to be a priority. “One of the things you seem to hear a lot from SMEs is, ‘We are too small. We do not need security,’” says Adrian Davies, EMEA managing director at (ISC)2. “But actually they can be some of the most vulnerable companies.” While 54 per cent of SMEs fear the threat of cyber-crime, a recent survey by Barclaycard showed that only one in five see tackling the issue
as a business priority, and only 15 per cent are confident they have adequate measures in place. And research from earlier this year showed that 93 per cent of small firms fail to consider how a cyber-attack could impact upon their reputations – an important asset for SMEs competing against rivals large and small for business. But the risk extends beyond their walls and threatens the security of their customers and the wider web. According to David Shearer, CEO at (ISC)2, cyber-criminals will always look for the “weakest link” when carrying out an attack. If they are looking for insider information about a large company, for example, it might be easier for them to attack the small business that designs its reports than to take on the bigger firm’s sophisticated security systems.
“When we look at SMEs that are vulnerable, they are vulnerable for everyone who does business with them and everyone on the web,” Shearer explains. He believes that as well as day-to-day ransomware and phishing attacks, undetected malware is being positioned that could eventually be used to launch bigger operations that could even endanger lives. “This malware can have the same kind of massive implications and even affect critical infrastructure,” Shearer explains. The “burrowed in” bots and malware could be used “in a way that constitutes warfare”, he says. There is also the risk, of course, of small companies closing down. A 2012 study by the US’s National Cyber Security Alliance found that 60 per cent of small US firms hit by data breaches went out of business within six months.
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If our SMEs are to be successful, we need to allow them to be so as a country EXPERT INSIGHT SIMON ASHBY
W
customers to visit the site of another customer, or to be able to show them a service in action. You can only do that through having excellent relationships with your existing customers and providing excellent service to your existing customers. “Make sure you have satisfied customers, look for the best customer references you have within your customer base. Many corporates do buy from smaller suppliers and many corporates are looking [at companies that can] provide better value, but you have to be clear about the problem you are solving, and you have to have a real proposition.” SMEs should also have a good profile which potential customers can access and review. Iddon points out that before a company is likely to do business with you, it is probably
“If you can show how you can solve a problem successfully for others, it can be very powerful” – Brian Iddon
going to check you out before any deal has been signed. “You need to have an incredible LinkedIn profile that is up to date,” Iddon explains. “You need to have your latest accounts filed at Companies House, and all the basics need to be in place so you look like an incredible business people can deal with,” he says. But it’s also crucial to know when to walk away. According to Iddon, sometimes a big corporate entity might have a binding supplier agreement in place that they do not have the flexibility to move out of which may make it impossible to do business. But as long as they are focused and have a clear proposition that can solve problems, says Iddon, there is no reason why a bigger firm will not do business with an SME.
at their peril, say experts
(ISC)2’s David Shearer
And the threat is only increasing. Nine in ten phishing emails now contain ransomware, for example, and ransomware domain creation was up 3,500 per cent in the first quarter of 2016. As well as technology, the information security issue is also one of people and training, with human error behind nearly two thirds of data breaches. But with so much potentially at risk, how can security experts get the message through to SMEs that cyber security matters? “The thing that sends the strongest message is CEOs losing their jobs,” Shearer says, either when their firms go under or when they are sacked as a result of breaches. “But it is also understanding that you need somebody in this small business who says, ‘There are ways we can function as a small business and say this is not a core thing for us.’”
Cyber-security talent can be hard to come by in an industry facing a skills shortage. Despite the usual warnings about the cloud, Shearer says it can be the better option for SMEs lacking the in-house expertise to stay secure themselves. “Some organisations actually get more secure by going to the cloud because many have very basic control over who has access to this information. They are all over the place.” Small businesses should still make the usual checks, he explains – ensuring data is encrypted and users properly managed, for example – but this is one of many ways those without the resources for a full security team can stay secure. “There are steps that do not necessarily mean bringing in an army of cyber-security folks,” Shearer says. “That army is not there.”
E ALL know the UK economy is growing – an achievement compared to many others. However, the level of growth remains low; our economy having grown 0.4 per cent in the first quarter of 2016. SMEs, which account for 99.9 per cent of all UK business and 47 per cent of private sector turnover, are undeniably a major driver for future growth – but do we do enough to support them? Research by Royal Sun Alliance reveals that half of UK business start-ups fail within five years. This is a startling statistic and hardly evidence of a sector ready to support major growth. The latest statistics from the ONS also indicate that the UK business death rate increased by 3.5 per cent in 2014. So what should be done to help SMEs generate the high-income jobs, tax revenues and internationally competitive products that our economy needs? One thorny issue is, of course, Britain’s place in the European Union – and while the referendum is now (thankfully) over, much uncertainty and debate remains. Many business leaders value the right to free access to European markets, though for some SME bosses this advantage is outweighed by a belief that EU regulation creates too much red tape and can make access to markets outside of the EU more difficult. However, more SMEs trade in the EU than outside of it – and from my discussions with SME leaders, their biggest problem is the complex UK tax system and an uncooperative tax authority. Plus, some EU regulation is extremely beneficial. The Cornish Pasty Association in my home country of Cornwall has strongly praised the EU for legally protecting the pasty, a move which has helped to create a major revenue boost for local pasty businesses. Cost-effective and reliable finance is also essential for SMEs. Banks are not always the SME’s best friend, though it is difficult to criticise the banks for being cautious lenders, especially when we have so
recently blamed them for reckless lending practices. After all, SMEs may be entering new markets or producing a new product, but they may also have bosses who lack formal business skills and experience, so the risks can be high. Key here is for SMEs to learn how to deal with banks effectively and to provide clear business plans and realistic income and cost predictions. Again, on finance Europe is a major factor. The EU provides a lot of financial support for SMEs and easy access to banks across the EU increases competition, and helps to lower interest rates. It may also be that the UK government could provide more funds. Already we have seen the development of the British Business Bank, for example, which does much to support both start-up businesses and those looking to scale up their activities. Indeed, it is in doing so that many SMEs encounter major problems, often because they lack the necessary management expertise or fail to generate the necessary cash flows to cover loan repayments. Finally there is the issue of infrastructure. Decent roads, railways, airports and internet connections are essential for almost any business. The UK, however, continues to lag behind in these areas, despite valiant attempts by the current government. One problem here is that many voters object strongly to such developments – look at the Heathrow third runway proposal for example, or HS2. But if we are to allow our economy to grow the government must have the courage to resolve these objections. So perhaps the question here is whether we are prepared to allow our SMEs to be successful? Are we willing to give SMEs the tax breaks they need, the necessary financial support or the transport/IT infrastructure? We may all have to incur some costs in this regard, but the reward will be a much stronger and wealthier economy in the long term.
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“You need to treat failure as part of the learning curve. Prepare to go through the pain…” Whether he’s wearing his restaurateur or his entrepreneur hat, foodie icon Alan Yau is still cooking up a storm. By Joanne Frearson
A
LAN YAU might be the man behind Wagamama, Hakkasan and Yauatcha, some of the most wellknown restaurants in the UK, but his journey has humble beginnings. He didn’t start off in the glamourous establishments he’s associated with today, but in the Chinese takeaway industry and a stint working at McDonald’s. Dressed casually and looking happy, Yau has just come off stage at the Millennial 20-20 Summit, where he has given a speech about his latest gastronomic concept, Disrupting Taste. Since his early days he has certainly come a long way. As he speaks he comes across as a man who is very passionate about what he does, as well as a wealthy source of valuable advice for small businesses. “To be a successful entrepreneur in the UK you need focus and perseverance,” he
tells me. “Most importantly to expect failure at some point, but not to treat those as failures, rather as part of the learning curve. That is the key really. “For people who are starting out at a young age, the most important thing is to prepare to go through the pain. A lot of people have certain expectations, but at the same time success is hard to come by and success is not easy. The old saying of no pain no gain to me is absolutely true.” Yau, whose latest restaurant ventures include Soho gastropub Duck & Rice and Mayfair restaurant Park Chinois, has had his fair share of ups and downs. After starting a successful Chinese takeaway business in 1988, he decided he wanted to expand into the fast food industry. “The goal at the time was to do a Chinese fast food outlet, a Chinese McDonald’s,” he
Right: Alan Yau (third from right) and staff at the launch of Milanese pizza outlet and bakery Princi, a joint venture with Italian artisan baker Rocco Princi (third from left)
Alan Yau’s business empire in numbers Founded
Sold for
1992*
2011, to Duke Street Capital
1999
2001
£215m
£215m
2008, to Phoenix Capital Partners
£215m
2011, to Tasameem
*Wagamama is Japanese for “naughty child” – or someone who is “wilful and determined”
Restaurants
Michelin Stars
140+
0
14
0
19
2
says. He found himself a mentor in the form of an ex-chairman of KFC, and they both spent six months in the US looking at ways they could achieve this goal. The pair sunk around £60,000 into the project, but they could not make it work because the most important criteria for selling fast food is, says Yau, having a single successful product. He says: “We could not really come up with that product.” Instead of starting up his own version of the US burger chain, Yau went to work in the franchise programme for the real McDonald’s in Hong Kong instead, followed by a three-month programme at the KFC branch in London’s Gloucester Road, where he learned about the systems and processes of fast food. But it was only when his Japanese lodger introduced Yau to ramen that his dream was revived. It was the single product he had been looking for all that time. “When I saw ramen, I thought, this has a single purpose – a soup base of noodles and a topping,” he says. “I thought, wow, I could really do this. That really marks the beginning of Wagamama, which we opened in 1992.” The concept worked, the first Wagamama opened in Bloomsbury and its popularity saw him launch a second restaurant in Soho. By 1996, he had attracted the interest of private equity firm Graphite Capital, which funded the expansion of the business and Wagamama soon became a household name around the UK. Yau then sold his stake in the company.
Having gone through the process himself, what Yau would like to see for entrepreneurs trying to get companies off the ground today was for them have more accessible funding. One of his biggest concerns for small to medium enterprises at the moment is whether or not the funding dynamics in the UK are good enough. He says: “The government can help an awful lot in terms of setting up a much more approachable commercial funding structure. ‘Start-up’, I really believe in this country, is still a dirty word, especially to commercial bankers – and at the moment, start-ups have really only been picked up by specialist venture capitalists.” Research has certainly reflected that it can be difficult for start-ups to get funding. A report from the British Business Bank said that the success rate for start-ups to get finance in the UK was lower than for SMEs as a whole. For all applications for external finance in the last three years, 61
“When I saw ramen, I thought, this has a single purpose – a soup base of noodles and a topping. That really marks the beginning of Wagamama, which we opened in 1992” – Alan Yau
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per cent of start-ups were offered what they wanted, compared with 71 per cent for the overall SME population. Yau has mainly funded his expansions by being bought out by private equity firms or investment funds. A majority stake in his Michelin-starred restaurants Hakkasan, established in 2001, and Yauatcha, founded in 2004, was sold to Tasameem, part of the Abu Dhabi Investment Authority, in January 2008.
He now has a very large budget for his restaurants. “For my last project, Park Chinois, I spent over £30million on one restaurant,” he explains. “I can’t tell you the precise numbers because it is slightly embarrassing. “It has taken us three years to develop the project because to do 18th century Louis XIV classicism is extremely hard.” His new idea, Disrupting Taste, is something of a new area for Yau – rather
☑ Very flexible. ☑ Huge demand. ☑ High earnings. ☑ Exclusive territories. ☑ Low/no investment required for the right people.
than a restaurant, it is a food social platform led by who he calls the “taste makers”. “On the demand side, there will be people who are seeking taste and people who have the taste, and on the supply side there will be the food providers – not just the restaurants but anything and everything you can put in your mouth,” he explains. The concept came about 10-12 years ago, when Yau started to get enquiries from friends and customers about places he would recommend to eat at in different cities. “The exercise was quite enjoyable because of the positive feedback I had for recommending a really good place to eat in the city,” he says. “It really led me to think I could develop the idea further into a technology platform. In those days it was very hard for me to do that, because I have no training in that sector. “About six or eight months ago something clicked and I was able to process the idea the same way I am able to incubate an idea for the restaurant business. That really got me pretty excited, because in the past things were very black and white in terms of my world and the world of technology.” He has started working on the beta version of the platform – and this time, it will not be Yau’s own suggestions on Disrupting Taste, but those of the community of tastemakers. The idea, says Yau, is not to create yet another restaurant selection platform where a huge number of people put a numeric value on a restaurant or food experience, but it will rather be about the quality of the experience and the people rating the taste, Right, top down: which, he points out, is subjective. gastropub Duck & Yau believes that good taste can be acRice, the recently quired over time, regardless of who you opened Park Chinois, and are. He hopes it will also give a voice to the established smaller players in the industry and the Hakkasan, three of one-man bands operating market stalls Yau’s successful London-based across the world. “Disrupting Taste is not outlets about fine dining and Michelin star restaurants,” he says. “If you just like fish and chips, your community could be just about fish and chips.”
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Inspector The Inspector is delighted to hear that Andy Murray, BBC 2015 Sports Personality of the Year, has invested in three British start-ups as part of his strategic relationship with crowdfunding website Seedrs. The tennis star’s first addition to his investment portfolio – Dog Tracker Nano, a tracking device for dogs that ensures their safety whilst monitoring fitness levels – is of particular interest to the Inspector. He approves of the waterproof feature, although not necessarily the fact that owners can access their pet’s location from their mobile at all times. Indeed, Murray’s terriers Maggie May and Rusty told the Inspector when he bumped into them in the park how grateful they were for the fitness monitoring feature, as it will most probably mean more walks. Other companies Murray has invested in include Beeline, a navigation app for bicycles, which allows the cyclist to pick their own route rather than following a step-by-step navigation system, and blow LTD, a service which brings beauty treatments to your door that has also received backing from Unilever Ventures and ASOS founder Nick Robertson. Murray says: “Giving recognition and support to British entrepreneurs is really important to me, especially
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those who are the driving force behind growth-focused businesses. Every one of these entrepreneurs is passionate and dedicated to succeeding and I’m excited to have invested in their future growth.” Coffee is big business these days, and SME Union HandRoasted Coffee has released a book, Real Fresh Coffee, on how to source, roast, grind and brew the perfect cup, written by its co-founders Steven Macatonia and Jeremy Torz. Torz says: “People have suddenly switched on to the idea of how exciting coffee can be, and want to understand
BY MATT SMITH, ONLINE EDITOR
Dogberry
more. Real Fresh Coffee is a one-stop shop for people to learn not just how to brew the perfect cup of coffee, but about the origins, economics and roasting process. It’s a book for aficionados, as well as those who are interested in learning more about what goes on behind the scenes. From a business perspective, it’s an incredible way of introducing new people to Union.”
tech company Unruly, who we interviewed in 2014, received an OBE along with her co-founder Scott Button for their services to innovation and technology. She says: “This is a great moment to recognise the explosive growth of the UK digital economy and celebrate the vibrant ecosystem of educators, accelerators and investors working so hard to support tech businesses as they scale. With a new wave of entrepreneurial ambition sweeping across the UK, this is also an opportunity to reaffirm our commitment to encouraging and enabling the next generation of entrepreneurs to realise their ambitions and fulfil their potential.” Eben Upton, co-founder of Raspberry Pi, which provides low-cost, high-performance computers that people use to learn, solve problems and have fun, who was also interviewed in 2014, received a CBE.
The Queen’s 90th birthday honours list featured some faces familiar to Business Reporter, with some recipients in the honours list being previous interviewees. Sarah Wood, cofounder of video ad
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Owner Media Group CEO Chris Brogan writes about his experiences on this blog, giving tips on areas of running a small business including influencer marketing, social media and time management. Brogan also details some of his own dealings with businesses, picking out what they did well and what could have been better.
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Cyber-breach response full-day workshop • Protect your company reputation/brand in the media • Protect your financial and operational assets • Preserve your customer base • And, most importantly, experience a dry-run of a cyber-breach during a two-hour simulation
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Experts from insurance provider Hiscox give their advice to entrepreneurs and small businesses on this blog, which covers everything from the hottest trends in mobile marketing to ways to minimise stress during wedding season and quotes to inspire small business owners.
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Four pages of analysis and expert comment
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Supplying the energy to support the UK’s SME sector £
376bn
Estimated annual gross value of SMEs to the UK economy
T
HERE IS little doubt over the huge contribution small and medium-sized businesses (SMEs) make to our country, and the increasing need to appreciate and support them. SMEs are fundamentally essential to ensuring sustainable, economic growth in Britain; employing more than 15 million people, SMEs account for an estimated gross value of £376billion annually. This is equivalent to almost half of the UK economy. Last year alone, SMEs had a shared turnover of a remarkable £1.75trillion, and their numbers are climbing. An SME, defined by the European Commission as a business that has an annual turnover of less than £39million, doesn’t just provide financial benefits. Its significant contribution can also be measured by the positive effects on the local community, too – whether that’s bringing much-needed jobs to unemployment black spots, driving innovation, making resident customers feel valued or bringing revenue to commercially sparse areas. A healthy small business sector provides a fundamental service to all levels of society. This is why Opus Energy is so committed to supporting SMEs, and to helping them achieve their full potential. We supply electricity to more than 200,000 small and medium-sized businesses across the UK. As a company that has been dealing uniquely with businesses for the past 14 years, we pride
ourselves on having a close understanding of SMEs and what they’re looking for. Thanks to our experience in and familiarity with the fast-moving energy market, we are able to ensure that our B2B customers are getting the best possible deals on gas and electricity rates. As well as this, our dedicated, awardwinning customer service team are here to make sure they’re well taken care of, without exception. In 2014, we were ranked as the highest-rated provider for small- and medium-sized energy users in Datamonitor’s B2B Customer Satisfaction Survey. We aim to make the process of supplying electricity to your SME as simple as possible, because we know how time-poor most small business owners are. This is why we’ve set up an easy-to-use online account system which allows you to manage your energy usage wherever you go. Plus, our early adoption of
“An SME doesn’t just provide financial benefits. Its significant contribution can also be measured by the positive effects on the local community too”
smart meter technology means you’ll be able to stay on top of your energy consumption, saving you time and money on estimated rates, and allowing you to have a more detailed overview of where your energy’s going and how it’s being used. No one understands SMEs and their valuable impact to each and every strata of the UK economy better than we do, and that’s what really sets us apart as an energy supplier. Add to this our high standards of customer service, our flexible products, competitive prices and accurate billing, and it’s easy to see why more than 90 per cent of Opus Energy customers choose to stay with us after their contract ends. INDUSTRY VIEW
For more information on what we offer and how we’re supporting SMEs, visit our site at opusenergy.com. Or, alternatively, you can call our team on 0843 783 3421 to get a quote
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Businesses in the ‘growth spurt’ show confidence in investment
D
ESPITE THE challenges that have faced UK businesses in recent years, they continue to be resilient. Research commissioned by Lombard, the UK’s largest asset finance provider, shows that confidence and investment levels remain high. It also indicates that UK businesses are aware of what they need to do to generate growth. Investment in innovation, improved productivity and establishing strong export
need to grow straight away, and pay for it from the cash flow it generates. Asset finance already funds 32 per cent of UK investment in machinery, equipment and software, accounting for nearly £30billion per year. What’s more, once a business uses asset finance, they tend to use it again. Lombard has more than 150 years’ experience, and a team of 500 relationship managers UK-wide, focused on developing in-depth knowledge of their customers and the market
markets continue to play a key role in helping UK businesses stay competitive. In fact, more than half (56 per cent) of respondents surveyed said that, had they not invested in 2015, their business would have suffered.
in which they operate. This helps them to offer the right form of financing to support your business’s ambitions. Lombard is working with businesses to provide an understanding of how asset finance can support growth.
Businesses are turning to crowdfunding for finance
E
NTREPRENEURS AND start-ups are increasingly turning to crowdfunding to raise funds. Alternative finance is now a global phenomenon, with $34billion raised in 2015 and 200 per cent growth year on year. Since the financial crisis in 2008, banks have dramatically decreased lending, and it has become increasingly problematic and challenging to take a business from concept to fruition. Lack of financing, difficulties in fundraising and a grassroots approach to entrepreneurship has created a natural attraction for crowdfunding, and while the world has changed in this regard, the mentality of bank lending has not. In April this year a new innovative online crowdfunding platform, LEOcrowd, was launched in the heart of London’s Tech City, the hub of the business start-up community. LEOcrowd is built on an incentive-based model enabling start-ups and SMEs to raise funds without giving away equity. “LEOcrowd is a community devoted to bringing creative ideas or start-up businesses to life,” said LEOcrowd managing director David Johnstone. “We bring together those start-ups or SME businesses that have a project, product or creative idea together with people that are willing to financially back such projects. I am confident that LEOcrowd will help launch tens of thousands of businesses around the world. Our mission is to set entrepreneurial spirits free, and we aspire to be the world’s leading incubator for businesses around the globe.”
How does LEOcrowd support projects? Firstly, LEOcrowd has a comprehensive training platform, with a detailed eCourse complete with videos and PDFs that is unrivalled in the industry. It also hosts networking and educational events on a regular basis. Secondly, LEOcrowd facilitates payment through digital currencies such as Bitcoin or LEOcoin, as well as traditional currencies. Access to digital currency fundraising will enable projects to be more global and breaks down financial barriers.
Thirdly, LEOcrowd partners with established business and entrepreneurial organisations to help provide planning, strategy and delivery for the projects.
Educating entrepreneurs The LEOcrowd platform was born out of Learning Enterprises Organisation Ltd (LEO), a global online business training company. LEO’s “learn, earn, own” business philosophy empowers entrepreneurs through resources and education to give them the tools necessary to be a success. Co-founders Dan Andersson and Atif Kamran have built a global membership base of more than 200,000 entrepreneurs in over 140 countries. The education platform moves LEOcrowd closer to a business incubator than just another crowdfunding site.
Successful projects LEOcrowd has already successfully funded a number of projects. One that reached its target was Artwars, by London-based curator Ben Moore. “LEOcrowd helped me fund my latest exhibition of Star Wars Stormtrooper helmets, and I found the process straightforward.” Another project that reached its funding target was Smoove, a small team of vegan enthusiasts whose aim is to create five simple and delicious protein mixes. Owner Scarlet Wilderlink highlighted the support she received. “This was my first crowdfunding project so I was a little apprehensive,” she said. “But LEOcrowd’s Sophia Lourenco visited our premises to better understand our business and then helped us build a social media presence. The funding we received from the LEOcrowd platform is helping us get our new business off the ground.” LEOcrowd is proving to be more than just another crowdfunding platform. INDUSTRY VIEW
If you want to discuss launching a project or partnership contact the LEOcrowd team: david@LEOcrowd.com www.LEOcrowd.com
Lombard helps to support your business ambitions
INDUSTRY VIEW
Asset finance could help your business to become more productive, efficient and competitive. One of the key benefits is that your business could buy the equipment you
Visit www.lombard.co.uk Follow @LombardAF Security may be required. Product fees may apply.
1. Lombard’s ‘Attitudes to Business Investment’ was conducted by Research Now and published in March 2016 2. Financing and Lease Association market trends – www.fla.org.uk/index.php/research/asset
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How specialist lenders can help small businesses grow
L
EADING SPECIALIST lender Together has provided finance to businesses and individuals for more than 42 years and has seen huge growth in recent years as the alternative finance sector booms. “Specialist” and “alternative” finance can cover a range of modern funding options, but in the case of Together, its specialist approach is all about common sense lending. A recent survey by Together found that there is a widespread lack of awareness of the alternatives to the traditional banks. Almost half of people believe that credit rating makes the biggest difference in a loan being accepted, while more than a third think that computers, not people, decide who gets offered a loan. Unlike mainstream lenders, Together doesn’t base its decisions on credit scores, or a rigid computerised approach, but assesses each case on an individual basis, applying a common sense approach. Specialist lenders are opening doors for businesses that may not meet the criteria of traditional lenders for a variety of reasons. SMEs in particular are discovering that there is an alternative when their high-street bank can’t assist; whether it’s for short-term cash-flow, office or retail space, to buy stock or equipment or to make an acquisition.
Customers come to Together for commercial loans via professional introducers including accountants, solicitors and financial advisers, and the company has an outstanding reputation for speed and service, often delivering funding against tight timescales, which can be essential for helping small businesses stay on track when finance is needed fast. INDUSTRY VIEW
Find out more at www.togethermoney.com
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The debate How can SMEs best drive growth?
Lynn Morrison
David Johnstone
Auriol Stevens
Dave Martin
W
I
W
T
INDUSTRY VIEW
INDUSTRY VIEW
HY IS that more than four in five technologies developed globally never make it to the commercial world? For the tech-driven SME the inability to cross the “Valley of Death” – the chasm every new business idea must surmount if they want to create a business and achieve growth – lies within SMEs themselves, investors and the wider market. SMEs fail because they lack the ability and experience to build aligned teams, develop a robust business model and lack the skills in identifying and exploiting market opportunities. Investors typically fail to understand the true market potential of an innovation until they can see the proof in paying customers, and markets and customers need to be educated to the potential of your transformative technologies and their potential positive impact. Converting potential to actual value in the market should drive strategic decision making. Growing a business demands customers first then talented individuals and investors will flock to join your SME. Obsess about the customer!”
0843 783 3421 www.opusenergy.com
david@LEOcrowd.com www.LEOcrowd.com
INDUSTRY VIEW
Head of business engagement Opus Energy
Managing director LEOcrowd Ltd
E ASKED SME owners what they needed to grow their business, and there were no surprises in their answers: more time and more money. Unfortunately, getting those things isn’t straightforward. Driving growth on limited resources means that you have to make every moment of your time work as hard for you as possible. Take a careful look at your business partners and suppliers and cut back on any relationships that are costing you more than they are worth. Replace them with companies who have built their business practices with the SME owner in mind. Being able to quickly understand invoices and order forms will prevent your time from being wasted and help ensure you don’t overpay. Look for companies that have accessible customer support teams to answer your questions as quickly as possible. Finding the right balance between price and service will allow you to free up both time and money so you can reinvest it in your business.
DO NOT believe it is possible to stand still in business. You are either growing or you are dying – and this is especially true for SMEs, where the often tough business environment means that growth is essential for survival. One way SMEs can drive growth is by using the recent global phenomenon of crowdfunding. While still a new industry, in 2015 some $34billion was raised globally using crowdfunding, and tens of thousands of SMEs and start-ups used the funds raised to grow their businesses. What makes this sourcing of funds through a crowdfunding model so attractive? Firstly, the SME does not have to give away equity but only a reward. Secondly, there are no up-front fees, as only if projects are successful is there a fee paid to the hosting platform. Thirdly, and most powerfully, SMEs can build their own “crowd”. The reason more and more SMEs are using crowdfunding to grow their business is simple – it works!
CEO VTC Group
Managing director DLMads Ltd
HE CURRENT economic climate is not over generous in providing small and micro businesses with margins to enable them to promote growth. However, if bold business owners use some of the tools now available to them through the internet they can cut costs by culling conventional methods of advertising, credit control, IT support to name just a few and replace them with some of the growth scheme programmes that are now available. This is exactly what our company promotes in the advertising field where by purchasing advertising through a platform promoting profit share a company can not only improve its Search Engine ranking so increasing its sales enquiries through its website but generate an income which over a period of time will pay for that advertising and more in the future, leaving more cash available for increasing staffing and IT efficiency or anything else that is necessary for that company to grow in the direction it desires. INDUSTRY VIEW
07720 540805 DLMads.com
020 7096 1960 www.thevtcgroup.com
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Why don’t most global enterprises know what they spend on IT?
S
ENIOR MANAGEMENT want to understand the total cost of ownership of their IT assets. They want to know what they’re spending, where they’re spending it, and what they need to be spending. But no accounting department can provide this detailed information on their own. The sphere of “IT ” no longer covers just desktop computers and landline phones; it now incorporates laptops, mobiles, tablets, terminals, software, cloud computing, servers – and tech pricing is moving away from one-time purchases to recurring costs. Inefficiency in business can be defined as spending more money than necessary to arrive at the same result. As companies grow, it becomes more difficult to ensure they are paying only for what they use and at the negotiated rates. For example, in the UK, enterprises are spending £1,272 per mobile device per annum. This represents an average overspend of £352 per device, equating to £3.7billion per year for British businesses. There are still a huge number of businesses without any system to analyse their IT expenses. Firms cannot expect every employee to be motivated to monitor their mobile bills, avoid running up huge roaming
£ 1,272 The amount UK enterprises spend per year on a single mobile device
costs or cancel old contracts for no longer used phones and software licences. Inertia is not the only cause of unnecessary IT expense; misuse (for example, using a company mobile to vote on TV talent shows, or calls to a speaking clock) and fraud also represent huge costs to businesses, and many companies are still unknowingly paying for services at former offices, or even the mobile contracts of ex-employees. Without visibility and control of their IT estate, firms are at risk of unchecked billing
errors, which are more often than not in the vendor’s favour. Enterprises often blindly pay invoices from various suppliers with no means to ensure the rates they are being charged are those they fought hard to negotiate. MDSL has spent the last 21 years helping some of the world’s largest global corporations understand and manage their IT expenses. Each year they avoid further unnecessary costs as their systems continue to grow in complexity.
MDSL is a UK success story. Founded in Tunbridge Wells, Kent in 1995, MDSL has grown to seven offices around the world, with coverage in every region. MDSL’s unified IT expense management platform manages the complete lifecycle for whatever technologies enterprises use. These can include financial market data, telecoms, I T assets, cloud ser v ices, hosted applications and more recently machineto-machine (M2M) and print expense management. Ironically, the answer to the question at the top of this article is that firms need more specialised technology designed to analyse their growing IT expenses. Gratifyingly, this is technology that actually pays for itself over and over again. A single knowledge-base containing all staff, locations, devices, software and usage allows MDSL’s solution to present insightful and actionable business intelligence, eliminate unnecessary costs, and provide a structure and process for controlling the purchasing of new devices and services. INDUSTRY VIEW
For more information, visit www.mdsl.com