SME Advisor Middle East - July 2014

Presenting partner

ISSUE 103 strategic SME partner

Stratosphere Why Mona Tavassoli is going to Kilimanjaro

Danger zone

Is your car park an accident waiting to happen?

Reaping rewards

Choosing your exit strategy

The colour of money Fatima Al Shirawi’s consultancy will brighten your business

Business productivity

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sme advisor ISSUE 103

EDITORIAL COMMITTEE SME Advisor is delighted to announce that during 2014 we will be working with some of the leading names in the SME space key figures who have kindly agreed to take part in our new Editorial Committee. This panel will play a vital role in channeling the feature content of our magazine and ensuring that we are more topical than ever - analyzing and discussing the ‘real world’ issues of tangible value to our readership and bringing industry-leading expertise across the publication and its raft of prestigious related events. We are delighted to introduce the following SME personalities:

Alexandar Mathew Williams Alexandar Mathew Williams is presently the Director of Strategy and Policy at Dubai SME, a government agency of the Department of Economic Development (DED) tasked with the development of Entrepreneurship and Small & Medium Enterprises (SMEs) in Dubai. He has logged more than 20 years’ experience in public policy and strategic programme development focusing on micro-economic, business and SME development.

Anas Halabi Anas is Managing Partner at Prediam Partners, an independent investment advisory firm, focused on real estate, hospitality and related ventures that he co-founded.

Prediam has successfully assisted in setting up, structuring and financing numerous regional and international projects and startups, including an innovative application for Muslim travelers, an aggregator website for tourists in the UAE, an income producing hospitality portfolio in Dubai and a boutique hotel development in Beirut.

Mona Tavassoli With over a decade of work experience, Mona Tavassoli is the Founder of Mom Souq (www.momsouq.com), an online community and bazaar for mothers residing in the UAE, through which mothers can network with each other, share advice and their experiences. As an extension, with the aim of continually providing support to working mothers in this region, Mona launched a new platform - Mompreneurs Middle East (www. mompreneurs.me).

Laudy Lahdo Laudy Lahdo is currently the General Manager of Servcorp, an Australian-based global provider of office solutions, in the Middle East region. She joined the company in 2003, after her move from Australia to the United Arab Emirates and as General Manager, has helped grow the company from just one office in Dubai’s Emirates Towers to 11 branches spread across the UAE, Bahrain, Qatar, Kuwait, Lebanon and Turkey. Servcorp provides both small and medium sized enterprises (SMEs), as well as multinationals, with the best locations, facilities, and technology and business support services in over 140 locations worldwide.

Simon Hodges Simon has more than 30 years of experience working for international companies at Board level. He has spent over 10 years in the UAE and was previously Corporate Director of Administration of The Jumeirah Group, Senior Executive Officer of Dubai Holding Insurance Services LLC and Head of Governance for ADNEC. He also completed a two-year assignment as head of the health funding project for the Government of Dubai. Since 2011 he has been mentoring business owners from Dubai to enable them to create and then manage effective organisations that support business growth.

Hazel Jackson Hazel has built an impressive reputation and successful multimillion dollar business – biz-group FZ LLCduring the past 19

years based in Dubai. Nearly two decades ago, and with just US$700 in her pocket, Hazel founded biz-group, which she has developed from a small training company into an organisation of 42 professionals servicing the Middle East’s corporate training, team building and business strategy needs. Passionate about impacting performance, biz-group’s success is a testament to Hazel’s entrepreneurial spirit.

Kay Braganza A seasoned public relations professional and successful entrepreneur, with five years of experience in the industry and an extremely commendable portfolio, Kay Braganza decided to pursue her love PR and start up her own agency four years ago.

Here, she aims to cater to the demand of a flexible and a truly bespoke PR service, which strives to make a lasting difference to companies of all sizes. A recognized and respected expert in the PR world, her proficiency in the field speaks for itself, after working in it for nine years and having dealt with reputed clients such as Sony Gulf, Nokia, Mom Souq, and Clarion Events amongst many others.

Nadine Halabi Nadine Halabi has been the Coordinator of the Dubai Business Women Council since August 2011. Since then, she has been managing the overall operations of the exclusive Council, coordinating the high profile board members, its stakeholders and members in line with the values, visions and missions as set out by its President, Mrs. Raja Al Gurg. Prior to her joining the DBWC, she worked at an events management and PR agency in Bahrain, where she flourished in a senior role as Deputy General Manager.

MANAGEMENT Dominic De Sousa Chairman Nadeem Hood Group CEO Georgina O’Hara Group COO EDITORIAL Group Director of Editorial Paul Godfrey paul.godfrey@cpimediagroup.com +971 4 440 9105 Group Managing Editor Melanie Mingas melanie.mingas@cpimediagroup.com +971 4 440 9152 Assistant Editor Rushika Bhatia rushika.bhatia@cpimediagroup.com +971 4 440 9115 Business Assistant Adelle Louise Geronimo adelle.geronimo@cpimediagroup.com +971 4 440 9160 ADVERTISING Group Director of Sales Carol Owen carol.owen@cpimediagroup.com +971 4 440 9110 Commercial Director - Business Division Chris Stevenson chris.stevenson@cpimediagroup.com +971 4 440 9138 Sales Manager Jason Bowman jason.bowman@cpimediagroup.com +971 4 440 9154 Media Sales Executive Emma Hughes emma.hughes@ cpimediagroup.com +971 4 440 9120 Event Sponsorship Manager Gill Fairclough gill.fairclough@ cpimediagroup.com +971 4 440 9120 DESIGN Head of Design Glenn Roxas

FROM THE EDITOR With an SME, it’s never too late to change…

Several years ago, I spent the Eid holidays on board an Indonesian-owned supertanker called the Yorvik Star. Weighing a massive 650,000 metric tonnes, it was not only the largest supertanker in the world, but - allegedly - the heaviest movable object of any kind. Now of course, when it comes to steering a vessel of this scale, it isn’t very nimble or responsive: if you want to change direction and head towards, say, Texas, you have to start turning the wheel while you’re still off the coast of Namibia! A lot of businesses are like this. Big, cumbersome entities that may have high income and hundreds of staff, but are slow and difficult to work with. This isn’t the case with SMEs - whatever else their shortcomings may be (lack of cashflow, challenges with getting market intelligence, finding talented but affordable staff, etc.), this isn’t one of them. The SME is by definition, quick, agile and highly steerable. While a large enterprise-scale business might have to start planning up to two years in advance if it wants to change its objectives, the SME can do so in a matter of days. That’s why now is the perfect time to start planning your strategy - and deciding how it will be actioned - for the remainder of 2014.

For example, if your existing sales and marketing strategy has been rather lacklustre in terms of results so far this year, it’s perfectly feasible to re-invent the game plan and do things differently.

Q4 typically has more events, conferences and exhibitions than any other time of year, and it might be a great idea to leverage extra exposure with one or more event sponsorships. People are also returning from their holidays at this time, refreshed and eager to get back to commerce, so it’s a great opportunity to offer a targeted one-week management training course, or market a business analytics programme that’s designed to supercharge accounts effectiveness in a way that’s relevant, positive and matches the mood of the moment. The point is, only SMEs have the luxury of reacting to the ‘zeitgeist’ in this way: imagine if you were a large insurer, broker or logistics business - by the time you got the go-ahead for change, you might also be making wholesale staff redundancies. It would simply be too late to change.

For the SME, in contrast, it’s almost never too late. Let’s keep this fact uppermost in mind as we enter the latter part of the year: the performance of the previous six months is no predictor of what can happen next. This is especially true given the remarkable backdrop of the UAE’s burgeoning economy and evolving status in world trade. Not to mention the countless opportunities this brings for public/private sector link-ups. Speak to the DED, for example, and it’s clear that SME confidence levels are at a five-year high. Let’s take that thought with us as we head towards an entrepreneurial next five months.

Enjoy this issue of SME Advisor.

Senior Graphic Designer Froilan Cosgafa IV Production Manager James Tharian Distribution Manager Rochelle Almeida Data Manager Rajeesh Melath

Paul Godfrey Senior Editor

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© Copyright 2014 CPI. All rights reserved. While the publishers have made every effort to ensure the accuracy of all information in this magazine, they will not be held responsible for any errors therein.

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PRESENTING PARTNER

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STRATEGIC SME PARTNER

KNOWLEDGE PARTNER

Contents

A shoddy or inadequate car park can easily signify a business that hasn’t properly thought-through its commitment to the public.

42

p14

Making money from even the best of exits can be much trickier than you might imagine. p24

‘The Colour Affects’ system is extremely intuitive and accurate. p42

The trade sector is one area that still offers terrific growth potential for SMEs. p46

07 Editorial Committee SME personalities bringing industry-leading expertise across the publication and its raft of prestigious events.

09 Editor’s Note Paul Godfrey on why it’s never too late for an SME to change.

12 Data and decision making Our new info graphic section showcases key trends shaping the SME marketplace.

Ground level 14 Car park – or an accident waiting to happen?

Your company’s car park can raise a host of worrying health and safety issues – and we investigate the likely hazards.

18 The location maze - does it really matter where your business sets up home?

Associate Editor Victoria Connolly identifies the options to consider in choosing a business location.

sme advisor ISSUE 103

Event Spotlight 32 Getting business finance – strategies for bringing money into your SME. Exclusive coverage of the premier SME conference, tackling key finance-related issues.

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Business Innovation 34 Don’t do it – outsource it!

In conversation with leading telecoms provider Etisalat, we discover how outsourcing may be an untapped golden opportunity.

Movers & Shakers 40 Skill Masters.

We speak to the dynamic duo behind the unique startup WEPUL – Mark James and Sebastian Ritter…

42 The Shades of Success.

Fatima Al Shirawi’s unique colour consultancy services can bring positivity into your business and supercharge productivity.

24 20 Setting budgets – the right way!

Are you on budget, or going for broke?

We explore the basics of planning a budget for your SME… 24 Making an exit.

Planning what you want to get from the business in the future is the best way of focusing your strategies on the present. We explain a selection of exit options.

Business Banking 28 At your service – a case study in the pursuit of excellence.

We spoke to National Bank of Abu Dhabi (NBAD) about the powerful raft of customer initiatives now under way and how these are set to provide best-in-class standards of customer care…

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Workspace 46 Finger on the pulse – trends, opportunities and challenges within the SME sector.

We present a detailed overview of the region’s SME sector.

The next level 50 The view from the top…

In an exclusive interview with Mona Tavassoli, Founder, MomSouq and Mompreneur Middle East, we discover how she’s truly reaching new heights.

Trade and Export ME 53 We present our new comprehensive section, Trade and Export ME – a practical, informative and incisive guide for the trading community in the region.

Tech Trends 80 Multiply your business productivity with these trendy mobile applications.

Data and Decision making

What does the future Mobility levels have increased by 25% over the last decade and a further 50% growth by 2020 is predicted 50%

higher sales and margins when effectively running a networked enterprise

60%+

of CEOs expect 15-50 per cent of their earnings growth in the next 5 years to come from technology-enabled business innovations

1.3 billion

People on business & social networks today

66%

of employees would consider a pay cut in exchange for a more flexible working environment

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Data and Decision making

hold for your SME? 50 billion connected devices and “internet of things� by 2030 55% 40%

executives worry that their organisations will not keep pace with technology change and lose their competitive edge

7.3 billion

number of smartphones tablets and PCs in use by 2020

59%

of workers already have the right technology to work anywhere

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SOURCES: McKinsey study, 2013 | IDC | Regus Great Big Survey 2012 | Shaw and Ivens | PwC Global Mobility Effectiveness Survey 2012 | PwC Talent Mobility 2020 and beyond | Cisco Internet Business Solutions Group

empty desks at any one point in time

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GROUND LEVEL

Car park - or an accident waiting to happen?

With parking increasingly at a premium in the UAE’s bustling cosmopolitan cities, more and more businesses are opting to convert yards and perimeter areas into company car parks. Yet for the unwary SME, this can raise a host of worrying Health & Safety issues - and it’s best to be forewarned of the likely hazards. Senior Editor Paul Godfrey investigates…

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Don’t discover it’s counterfeit toner after it’s too late Original HP Toner works first time every time,1 unlike cheap toners which fail over half of the people who try it.2 NonHP toner can compromise your printer’s performance to give you streaked, blotchy or faded prints. Only original HP Toner cartridges deliver unmatched quality for the most professional-looking prints 100% of the time.1

1 A QualityLogic 2010 study commissioned by HP comparing original HP LaserJet Monochrome print cartridges with nine brands of non-HP toner cartridges available in Europe, Middle East and Africa for the HP LaserJet P1505 and P4015 printers, HP 36A and 64A. For details, see www.qualitylogic.com/EMEAmonotonertest.pdf. 2 From a 2012 EMEA Lyra Research study, commissioned by HP. Results based on a total of 1050 HP Color LaserJet users who have used both original HP and non-HP toner cartridges, of whom 552 experienced problems with non-HP cartridges.

© 2014 Hewlett-Packard Development Company, L.P.

GROUND LEVEL

A shoddy or inadequate car park can easily signify a business that hasn’t properly thoughtthrough its commitment to the public.

How many times have you entered a company car park and seen the sign which says “The management and directors accept no responsibility for any loss or damage to property or vehicle” Unfortunately for the management and directors, they will most certainly be held responsible if: • The damage to property or vehicle is caused by structural faults in the car park design itself • The damage or accident results from incorrect or missing signage • Any damage or theft arises from a third party intruder entering the car park The reality is that simply taking a plot of land and using it in an ‘ad hoc’ way for visitor and staff parking is an open invite to litigation. While the decision to create a parking facility can be a great boon to visitors, clients and staff, it will be necessary to undertake significant amounts of well-advised and carefully-prepared work in order to reap the benefits.

On the plus side, this isn’t ‘rocket science’, but rather, it requires the business to understand and action some important tenets of risk management.

Getting the basics in place Perhaps the most important way in which many companies fall at the first hurdle is by cordoning off a pre-existing area without considering that in fact the car park is now an extension of the business itself, and projects its values, culture and professionalism.

A shoddy or inadequate car park can easily signify a business that hasn’t properly thought-through its commitment to the public. On the other hand, taking one or two key steps can leave a very good, lasting impression. For example: • Putting the name of the company and company logo above the entrance to the car park • Prominently placing a ‘welcome’ sign - and another that says

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‘thank you for visiting’.

• Ensuring that visitors with appointments have reserved spaces, with designated names above each bay All this signage will need to be of a level commensurate with that appearing on your building, produced to the same exacting standards. But remember: all these efforts will be wasted if the car park itself is pot-holed and dilapidated, or the fencing is uneven and rusting.

Before the area officially becomes a car park, ensure that it is fully resurfaced and doesn’t have craters, crevasses or other features likely to provoke accidents or tripping. Also, note that there are set protocols and internationallyrecognised standards for the type of resurfacing work you need to do. This is because, by definition, car parks attract potential hazards like oil and gasoline, aggressive chemical compounds like brake and clutch fluids, and pools of water from AC over-run. If you just use a basic paint, the area will be slippery, and the paint surface won’t last long: nor will it be an even, smooth surface that prevents tripping or accident hazards. Be sure to use a resurfacing process which is slip-resistant and certified to the international standard EN 1504-2. This will generally involve a three-stage application: • Filling in holes and worn areas • Re-sealing with waterproofing • Applying a tough, protective top coat.

Demarcation While the car park isn’t a maximum security area, you will need to mark its borders with fencing, and it’s worth investing in fencing that will prevent casual passersby wandering in and damaging vehicles, or stop motorists parking inadvertently near and damaging parked cars belonging to visitors or staff. A strong, affordable type

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GROUND LEVEL

of fencing is of a carbon steel wire mesh construction, manufactured to BS1052 or DIN 1548 and erected to a height of 2.3 metres.

Individual sections of fencing can be connected via slot-in sections rooted in reinforced concrete stands - these are highly resistant to damp, heat and impact and have a long life expectancy. Also, they don’t need to be dug-in or permanently set up by specialist workmen.

Ideally, fencing should completely surround the car park area, and visitors should be able to access the building without coming out onto the street or pavement (since these are not ‘controlled’ areas and visitors may be exposed to risks that you cannot manage or predict).

If the car park is to be used at night, good lighting is also essential.

This not only helps visitors see any steps, barriers, etc., but helps drivers navigate their way through the car park - and it also ensures that visitors are not put at personal risk.

For an outdoor car park, lighting should conform to DIN EN 12464 2. For an indoor car park, DIN EN 12464 -1. In case lighting should suddenly go out due to an electrical failure, you’ll need to install emergency security back-up lighting conforming to DIN EN 1838.

Lighting is also a good deterrent for unwanted visitors and is proven to be a key factor in reducing the incidence of car theft.

Directional signage Basic signage is a classic tool of commonsense risk management.

Car parks are notorious for minor accidents and collisions - and without good directional signage, you could easily be held liable for the damage. Make sure that drivers know which way to go to reach the exit, and have one common direction through the car park. The best signage technique is to have luminous arrows painted on the car park flooring. These can then be supplemented by hanging ‘no

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Hanging signage should also be lit so it can be seen clearly at all times of day.

Before the area officially becomes a car park, ensure that it is fully resurfaced and doesn’t have craters, crevasses or other features likely to provoke accidents or tripping.

Security measures The majority of businesses will not have the volume of visitors (or the budget) to justify having a manned security point at the car park entrance. A good substitute is to have a basic CCTV system with several cameras located at key points. These can ensure that if there are accidents, collisions, etc., a visual record is always available. The presence of cameras is also a good, proven deterrent for unwanted visitors. It’s worth remembering, though, that a CCTV system will have to be properly maintained; and there will need to be staff on-hand who have the technical know-how to access and review camera records.

Another valuable approach - which will prevent members of the public parking under false pretenses and deter overnight parking - is to install a ticket gate access point. On arrival, the visitor takes a ticket which raises the boom. After the meeting, the ticket is validated by reception and the drive re-enters the ticket and leaves. Staff carry a pass card which operates the gate at all times. Systems of this kind are highly affordable and easily fitted, as well as being exceptionally low-maintenance.

emergency. If this is the case, they can only be converted into parking areas if new designated evacuation routes are created - because otherwise, evacuated staff may be placed at risk in a fenced-in area, or forced to struggle for exit points through a mass of parked vehicles.

Similarly, waste ground next to buildings may contain Dry Riser points, drainage outlets or sewer access. These channels will have to be re-routed if a car park is built, since there is a significant risk that they will either be obstructed, or polluted by spillage of aggressive chemicals.

This will require agreement from the relevant authorities and may involve significant amounts of time to forward-plan.

The reality is that constructing a car park is in many ways similar to building an office extension: it will provide a valuable new facility, but will also require cost, maintenance and management. It’s for individual SMEs to decide whether this more structured resource is preferable to the daily hunt for a parking space and - more often than not - opting to leave the car in a sea of sand.

Access points Areas adjacent to company property will often be the only points of evacuation in the event of fire or

For an online version, please visit: www.smeadvisor.com/2014/07/car-parkor-an-accident-waiting-to-happen/

entry’, or ‘exit’ signs, as appropriate.

Similarly, directional signage can also be used as a common courtesy for guiding people towards your building.

Two basic (and often overlooked) features of signage • Ensure it is large enough to be clearly read • Make it multi-lingual: Arabic, English, Hindi is a good guide

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GROUND LEVEL

The location maze does it really matter where youR business sets up home?

The fact is, there’s no more important decision for an SME than choosing where to be based. The wrong location can be costly and take you away from customers and suppliers - while the right choice can be a powerful catalyst in building a vibrant market, contact with the community and constructive investor dialogue. Associate Editor Vicki Connolly explores the options...

Whether a business starts life on the kitchen table or with an idea written on the back of an envelope, it is likely that decisions will have to be made at some point about where it will be based.

Location, Location, Location: it’s as vital to a venture’s success as the product or service being sold. Just a few years ago, the idea of businesses being run by a group of people working remotely from laptops or from a smartphone for example, took a stretch of the imagination, but technological changes have made this possible. Even an internet business, however, must know where to position itself on the World Wide Web, or be lost in virtual obscurity.

Choosing the right location where to start?

First, the golden rule when deciding upon the location of an SME is that the value of a piece of property for any business depends almost entirely on where it is located. This might seem obvious, but bearing this in mind at all times, means that an SME will be likely

18

to reap the business rewards associated with it. These rewards include increased consumer traffic for the retailer and easy access to suppliers and transport routes for the manufacturer. It is also important that entrepreneurs remember that the business value of a property cannot be measured in purely financial terms. A financially valuable property is usually a good sign that it is located close to resources such as transport; however, the nature of an SME will also determine how the value of its location can be measured.

Put an emphasis on closeness to housing or shopping centres if the business sells consumer goods, or try and find premises near the banking district if clients come mainly from the financial world.

An existing business must consider whether existing clients can easily reach them. Can a business afford to lose current customers? Even the most loyal patron will struggle to purchase a product or service, if the location is inconvenient. Another rule to remember when considering the location of a business is that compromise is often

the key to eventual success, especially when the SME is a fledgling operation or start-up. If an entrepreneur has a limited budget, they must put financial concerns before personal preferences for example, accepting that initially a business may have to settle for a less appealing location, as long as the savings they will make, will allow the business to move into that great office around the corner soon.

Of course, rental expenditure needs to be kept in mind as part of start-up costs for any new venture, or if the business is making a move or expanding. Using the retail operation as an example, a shopping mall can be the ideal location for this type of business - big crowds and proximity to other successful companies can contribute significantly to revenue. However, rents are invariably higher in prime locations such as popular malls. Once again an entrepreneur must think compromise - starting out in a less prestigious spot can be a sensible decision if it will allow a business to operate on lower costs in those crucial first few months of trading.

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GROUND LEVEL

Family commitments should also be a factor in the decision making process.

As with all business choices, personal happiness should be a key influence when it comes to deciding upon a company’s location.

There are many factors to consider regarding each available location, and much will depend on the specific nature of the business. Here are some important general questions to keep in mind: • Is the area zoned for the type of business you want to open?

• Will you be able to establish a good working relationship with the landlord?

• Is the neighborhood safe?

• Is the facility itself in good condition?

• Will repair work be necessary?

• Does the facility have the right layout?

• If you need to expand, will you be able to?

• Will there be enough parking for your customers?

• Is public transportation nearby?

• Are there any local business organizations that will help with marketing?

Security is another concern that must be considered when investigating the ideal location for a small business. An entrepreneur must make sure that he or she is aware of the security situation in an area before they decide to relocate their business there. If an area has poor security and a reputation for being unsafe, customers may be deterred from going there to do business. It is important for any SME to choose premises in a place where both team members and clients feel safe and comfortable.

Research the options When choosing a business location, preparation and education is key. An entrepreneur must study both the current real estate climate as well as past, and likely future, trends. Local real estate publications and wordof-mouth networking are great ways of keeping up-to-date with the latest property opportunities and may lead to an entrepreneur knowing exactly when that perfect office or shop will become

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available. It is also useful to remember that if an SME specializes in a particular field – such as computing or travel – locating it near similar businesses will enable the business to take advantage of an area’s reputation for this or that specialization.

Similarly, it can also help to be based close to your investors. If you see the role of an investor as not dimply a source of cash, but also of good strategic advice, it will be important to have as much contact and dialogue with them as possible - and this will be difficult if you are geographically remote. It may even be a requirement from your investors that you find a location where they can keep a watchful eye on what you are doing in those crucial first few months!

Finally, an entrepreneur must consider his or her own personal preferences. If a business owner is happy to spend time commuting to work, an office a little further from home will suit.

On the other hand, a central location will be vital if managers need to get to work quickly or rely on public transport.

A lot of hard work and careful consideration goes into finding the right location for a small business and it may be tempting for an entrepreneur to devote energy to more creative tasks like developing a logo or fine-tuning product selection. Is it important however, to keep in mind that none of those details will matter if customers can’t find the business or if the rent is more than the entrepreneur can afford. In order to source the perfect location for an SME, an entrepreneur must be prepared to put in the time and effort to find the best location and give his or her business the strong start it deserves.

For an online version, please visit: www.smeadvisor.com/2014/07/thelocation-maze/

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GROUND LEVEL

Setting budgets the right way!

RECENTLY, INDIA – THE LARGEST DEMOCRACY IN THE WORLD AND A PRIME EMERGING MARKET – LIFTED THE CURTAINS ON ITS MUCH-AWAITED NEW BUDGET. SPARKING A LOT OF DEBATE, THE UNVEILING OF THE BUDGET WAS A ‘DEFINING MOMENT’ – INTRODUCING A CLEAR PLAN FOR FUELLING THE ECONOMIC DEVELOPMENT OF THE COUNTRY. NOT MUCH IS DIFFERENT IN THE CASE OF AN SME, WHERE A SOUND BUDGET CAN SERVE AS A FINANCIAL ROADMAP LEADING YOUR BUSINESS TO THE PATH OF SUCCESS. IN THIS TOPICAL FEATURE, WE EXPLORE THE BASICS OF PLANNING A BUDGET FOR YOUR SME…

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GROUND LEVEL

“A budget is telling your money where to go instead of wondering where it went.”

– Dave Ramsey

A budget is a summary of all estimated income and expenditure for a specific period of time. As budgets tend to involve a lot of number crunching, they are often perceived as tools for financial control within companies. The reality, however, is that budgets are phenomenal management tools as well. They can be used for key purposes such as measurement of employee performance, appraisal of staff, minimisation of wastage, maximisation of efficiency, and so on.

Why do you need a budget?

• Planning ahead: Using projection figures for sales, production and purchases, budgeting allows you to plan for the future. It serves as a goalpost and ensures that the complete team is moving in the right direction.

• Effective communication: Different departments function differently but the company’s budget ensures that they are all working in sync and facilitates internal communication. For instance, if the production department isn’t able to meet budgeted production levels, the sales department might not be able to meet the forecasted sales figures.

• Managerial framework: Budgets serve as the ‘holy grail’ for departmental managers; this way they are completely aware

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of the targets that they have to hit and can guide their teams accordingly.

• Setting Key Performance Indication (KPIs): Using budgets, managers can set KPIs for each department and fully understand every employee’s role in the company. Without understanding the future plans of the company, it is impossible to crystallise each individual’s role within the business.

• Control: Apart from just achieving the targets set, budgets are instrumental in controlling operational procedures within the business. For instance, if a project isn’t going the way it was

PREPARING BUDGETS

Cash budget

PRODUCTION budget

SALES budget

MASTER budget

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GROUND LEVEL

Common practice within businesses is to create a dedicated team for budget preparation, often referred to as the ‘budget committee’.

46%

say budgeting takes two months or longer to complete at their companies

53%

say it takes five business days or longer to produce forecast

24%

say it takes more than 10 business days to generate forecast

Source: PwC’s CFO Budgeting Survey 2012

58%

companies rework budgets quarterly

SMALL COMPANIES, 50 EMPLOYEES OR LESS

26%

use budget only

44%

use a budget & a strategic plan

LARGE COMPANIES, 5,000 EMPLOYEES OR MORE

77%

use both budget & strategic plan

Source: Quantrix 2012 Budgeting, Forecasting, and Planning Survey

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anticipated, you can refer back to your plan, in this case the budget, and isolate the exact cause of the problem.

This allows business owners and senior-level managers to maintain control on performance and overall productivity.

Key steps before budget preparation Appointing a budget committee: Common practice within businesses is to create a dedicated team for budget preparation, often referred to as the ‘budget committee’. A budget committee is usually tasked with overseeing the preparation of the budgets, which means they don’t necessarily prepare the budgets themselves. They set the basic rules in place and coordinate the overall process.

Deciding the budget period: The next step is to determine a suitable budget period i.e. for what time period is the budget being prepared for? Does it need to be divided according to the yearly activity of the business? When does it need to revised next?

Identifying the Principal budget factor: An online article on

managerial-accounting.blogspot. ae explains, “The principal budget factor is the factor that limits the activities of functional budgets of the organisation. The early identification of this factor is important in the budgetary planning process because it indicates which budget should be prepared first.”

Understanding the master budget: Companies can create budgets for specific business units, departments, or the entire organisation – depending on the goals of the budget. The master budget is the combined budget for the company, comprising all other subsidiary budgets. A complete master budget typically includes a budgeted income statement, a budgeted cashflow and a budgeted statement of financial position.

Creating the budget manual: The preparation of the budget manual is another key step in budgeting. A budget manual is a written document providing all the guidelines and necessary instructions for those involved

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GROUND LEVEL

in the budget making process. A key element of the budget manual is an organisational chart outlining the management hierarchy within the business, thus helping with the efficient division of labour and responsibility. This document also highlights other crucial areas such as budget timelines and key assumptions made while preparing the budget.

The role of the sales budget: Prepared by sales managers, the sales budget is one of the most important budgets your company will need. It is simply the estimated amount of sales the business hopes to achieve in the budgeted time period.

Preparing the production budget: The production budget comes in after the sales budget. It highlights the estimated volume of production for the given period of time. The production budget closely ties in with the sales budget as it ascertains how much needs to be produced in order to meet the budgeted sales amounts.

It’s also a source of fundamental information like material and labour

usage, which is ultimately required in the formulation of supporting departmental budgets.

The all-important cash budget This is the most important part of the budgeting process – as an SME, cashflow is crucial and can make or break the future of your company. A cash budget is quite straightforward to prepare; it’s a summary of the company’s future cash payments and cash receipts, in a timely fashion.

The difference of the cash receipts and cash payments allows the business to ascertain its ‘surplus’ or ‘deficit’. This information helps you to plan ahead depending on the company’s cash balance or position.

For instance, if your cash budget reflects a deficit, you can seek help in the form of an overdraft from your financial institution. It also helps in the financial management process addressing issues such as what kind of credit terms can you offer to your customers, or, on the flip side, what kind of credit terms are most suitable for your company when arranging supplier payments.

Cash Budget for three months ending June 2003 April

May

June

Total

25,000

53,000

81,000

25,000

Cash Sales

23,000

25,000

30,000

78,000

Debtor

60,000

69,000

75,000

204,000

Total

83,000

94,000

105,000

282,000

Creditors

40,000

50,000

52,000

142,000

Wages

8,000

9,000

10,000

27,000

Expenses

7,000

7,000

8,000

22,000

__

__

25,000

25,000

Total

55,000

66,000

95,000

216,000

Closing Balance

53,000

81,000

91,000

91,000

Opening Balance Receipts:

Cashflow shouldn’t be confused with profit. A classic example is that of depreciation, which does affect the income of the business but doesn’t appear on the cash budget.

Careful consideration should be put into putting together the cash budget, keeping in mind only cash receivables and payables. Moreover, cash budget should also be revisited every few months to address market fluctuations, economic situations, and other possible financial constraints.

Managing the budget Once the budget has been set in place, it still requires constant review and revision. Senior-level management need to modify their budgets according to market conditions, infusion of new funding, and any other activities of such kind.

Finally, bear in mind the following excellent tips, shared in an article on entrepreneur.com by Joseph Benoit: • Adjust accordingly. During these tough economic times, entrepreneurs may be seeking ways to trim expenditures to increase cash flow. If your business expenses need to be reduced, determine which items are nonessential to your business and cut those items.

• Consult a professional. Consider consulting a trusted CPA, financial advisor or banker to help you create a budget. A trusted professional can help get you started on a budgeting system that will work best for your individual needs.

Payments:

Income Tax

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For an online version, please visit: www.smeadvisor.com/2014/07/settingbudgets-the-right-way/

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GROUND LEVEL

Making an exit If you’re struggling to build your business, chances are the thought of leaving it all behind one day and doing something else has barely crossed your mind. Yet perhaps it should: because planning what you want to get from the business in the future is the best way of focusing your strategies on the present - and don’t forget, many investors will bring their own exit strategy to the table anyway, and it may be far different from the future you had in mind. Senior Editor Paul Godfrey explains a selection of exit options…

The phrase ‘exit strategies’ basically covers two different scenarios: • Your own exit strategy as a founder, CEO, or Director. What do you want to take from the business when you leave - a large cash sum that you can re-invest (or live on for life), the peace of mind of leaving the company to family or a successor, or the ongoing rewards of a successful sale?

• The exit strategy of a private investor or a venture capital business. The investor may want to sell the business to recoup the loan at what is perceived by their financial analysts to be an opportune moment; perhaps they will want to force an IPO to flush cash through the business, or expand into an overseas market and then sell their interests to a large international player. Does this align with your own plans of where the business is going?

As you can see from the above scenarios, the most successful exits require careful planning. It pays to start considering the exit options early, because the sooner you start, the more rewarding your eventual exit is likely

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to be. This is not to say that planning an exit strategy is rocket science. The reality is, you already may have started planning without even realizing it. Many of the steps involved - including the upgrading of financial reporting systems and controls, exploring growth through internal operations, and fine-tuning your company’s strategy - are the same ones that are in any case required to build a successful company.

The range of exit strategies includes • Taking the company public through an initial public offering (IPO) • Selling the company to a strategic acquirer • Recapitalizing and selling the firm to the management team - also known as a management buyout None of these are right for everyone: that’s why, even though you may desperately need investment capital, it’s so important not to have your hand forced by an investor who sees a particular strategy suiting their own financial ends. Generally, the investor’s intended exit strategy will be declared ‘up front’ as part of the contractual investment offer being made to you. A golden rule here is that if the exit strategy isn’t appealing to you, because it will

contort and twist the business you have, don’t accept it. Instead, reduce the size of the sum being offered by offsetting it against another loan - this way, you will be able to negotiate milder exit terms.

Objectives are unique and personal - and they matter The reality is that different people start companies for different reasons, and that can influence their exit strategy.

Not everyone has the end-game of a Steve Jobs in mind. While some people do indeed want to change the world when they start a company, others have the motivation that they never, ever want to work for anyone else, and they’re happy to keep the business small for perpetuity.

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GROUND LEVEL

Making money from even the best of exits can be much trickier than you might imagine.

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If you’re looking to leverage growth through investment, remember that fundamentally, this buys other people a right to influence your business now and in the future. If you take on investment over time from venture capitalists, angel investors, equity investors, or individuals, you will usually give up a portion of the company, or shares, and those shareholders will have a say in any potential exit strategy.

It’s vital to have a mental checklist of the following points in mind when choosing an exit strategy: • Consider your future role in the business. Part of your decision will depend on whether or not you want to continue to manage your business.

In an IPO or a management buyout,

you and your team will play much the same roles before and after the transaction. In a strategic acquisition, however, the buyer may replace you and your team with its own people.

A strategic acquisition can be an excellent solution for companies that are struggling with successionplanning issues, while an IPO or a management buyout will work more effectively for teams that want to stay in charge.

• What are your liquidity needs - and how quickly do you want to get rich?

Making money from even the best of exits can be much trickier than you might imagine. Many business owners view their exit strategy as a chance to reap the benefits of their hard work and to increase their personal wealth.

However, not all exit strategies work equally well in this respect. In an IPO, for instance, your shares are likely to be subject to a share lock-up agreement, which means you will not be able to sell your shares - even after the IPO - for a period of time, typically six months. A strategic acquisition will often generate an immediate cash payment, thereby increasing owner liquidity. Sometimes, however, the final price is not determined until the end of an earn-out period, which can last several years. In a management buyout, the original owners also generally will receive liquidity over a period of time. There is another factor here as well: what are your investors’ liquidity needs? If you accept outside investment, you essentially take on partners, and those partners at some point are going to want liquidity. The reality is that you should look for good partners who don’t pressure you to sell or go public, but wait until the time is right and the company has matured.

• What is - realistically - your company’s growth potential? Perhaps you don’t require immediate liquidity, but can hold back and participate in your company’s future growth potential.

In this scenario, you will want to choose an exit strategy that allows you to retain an ownership interest. An IPO allows you to keep a substantial

25

GROUND LEVEL

Probably the best time to take a step back and evaluate your personal exit strategy is the moment you consider taking on board external finance.

interest in the company, as well as to time the ultimate allocation of your shares to meet your own personal needs. A management buyout also will allow for continued participation in a company’s growth. However, an acquisition will generally eliminate, or at least greatly reduce, your ownership interest in your company, as well as your ability to influence its future direction and performance.

• Assess market conditions. Demand for your company’s products or services, the appetite for IPOs and acquisitions among both investors and strategic buyers, and other market conditions also will have an impact on your exit strategy. Talk with your private equity partner, as well as with any commercial lenders, investment bankers, or other financial professionals, about trends in the marketplace.

• Don’t settle for an ‘either/or’ predicament: consider a dual-track approach. When you’re planning to sell, how you present your company to investors requires a slightly different approach than if you’re presenting to potential strategic buyers. Public market investors generally want to understand your company as a whole - what your main businesses are, what your prospects for growth are while strategic buyers may be more interested in specific parts of your

26

company that are complementary to their own interests. You can actually pursue both types of exits at the same time to capitalize on the most attractive opportunity.

Remember as well that a good many of the complexities in the choices above result from the fact that you brought in external investors who required equity and influence in return. One solution here is only to take on board a ‘risk partner’ such as a bank, who will simply require that you meet your repayments and will not want any equity stake in return. The two potential hurdles here are that you will probably need to be a more mature business to receive significant bank funding, and secondly, that you will also forfeit the positive benefits of having an experienced mentor on your board, working closely with you to give strategic growth advice.

Reviewing the options Before you can choose your exit strategy, it is important to understand what the options are, and their basic characteristics.

• An IPO. In an IPO, you sell a portion of your company in the public markets. You and your management team typically remain in place for a period of years. Meanwhile, your investors and managers may be able to sell some stock, and your company continues to operate much as it has in the past. However, your company will be subject to additional regulations, and media analysts and institutional investors will constantly scrutinize company performance. Will you want to deal with the rigours this imposes and the constant need to promote positive PR messages - which may be a key catalyst in protecting the share price?

• A strategic acquisition. In a strategic acquisition, another company purchases your business, either with cash or shares in the acquiring company or with some combination of shares and cash. The acquirer may or may not retain you and your management team, and may or

may not make substantial changes in your company’s operations, staff, and product lines. The benefit is (typically) liquidity, because if you sell the company to a strategic acquirer you might be able to sell most or all of your shares. Don’t forget, though, that the disadvantage of this exit strategy is that you are likely to lose operating control - and so is the tried and tested management team. That team may have enjoyed the freedom of controlling day-to-day operations, but with a sale, they’ll probably have to give that up.

• Management buyout. Recapitalizing the business and selling it to the next generation of managers it is known as a management buyout. This type of transaction is usually financed through some combination of debt and/or private equity investment, with the debt collateralized by the assets of the company. It provides immediate cash to the owner and early shareholders, and allows the company to continue as a private enterprise.

The other benefit is that there is usually quite a smooth transition.

Many owners and CEOs ask when is the best time to start selecting their options from the above list? The reality is that ‘Day One’ is too soon, because no-one at this stage can actually define the attractiveness of the business to investors (or to management teams!) and noone can foresee its likely growth curve.

Probably the best time to take a step back and evaluate your personal exit strategy is the moment you consider taking on board external finance. This can be an adult and sobering experience: it’s best to evaluate the options in the light that their complexities might come back to haunt you at a time when they are least welcome - when you are tired of the business and want to move on.

For an online version, please visit: www.smeadvisor.com/2014/07/makingan-exit/

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BUSINESS BANKING

At your service a case study in the pursuit of excellence

For an SME, it’s not only the availability of high quality financial products that can make or break the business, but also the way in which they’re provided. You might be looking for an expert opinion, need fast access to FX services, or a quick turnaround on a business decision. Without the right response, you might face a cashflow crisis or simply miss a major opportunity. To understand how a market-leading bank is dealing with these service imperatives, we spoke to National Bank of Abu Dhabi (NBAD) about the powerful raft of customer initiatives now under way and how these are set to provide best-in-class standards of customer care and product dialogue…

28

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BUSINESS BANKING

“Customer service isn’t only about what you deliver; it’s about the perception of what you deliver and the comfort factor you are able to provide to your customers” – Ron Kaufman, service guru and author, ‘Uplifting service’

One of the critical factors defining an SME is that, in the majority of cases, it will not have the resources to weather an unexpected expense or cash shortfall - at least until it becomes a more mature business with a significant raft of customers and payment schedules. Nor will it always be aware of roadblocks dangerously appearing ahead; it’s likely to be far too busy ‘firefighting’, wrapped up in the here and now and doing its best to meet its financial commitments to suppliers and staff.

This means that not only is there is a paramount need for financial advice and the right platform of services, but when it comes to accessing these, aspects like application procedures, sensible paperwork and the availability of a ‘one stop shop’ are all highly influential factors. In fact, they can make all the difference as to whether an SME can survive the hiatus and leverage services at the very time they’re needed most.

All of these aspects actually crystallize into one massively important area: customer service.

So, what is a recognized market leader like NBAD doing to help businesses navigate their changing fortunes and provide timely and effective access to top-quality services?

Many banks talk about being more ‘customer-centric’, but what does this actually mean in practice? How is NBAD enhancing and facilitating customer service?

Setting the service paradigm: Lead – Build – Learn – Drive One of the definitive modern guides to customer service is a book written by service guru Ron Kaufman, called ‘Uplifting Service - The Proven Path’.

It sets the roadmap for businesses wanting to provide exceptional service, whether to individual customers or SMEs. The four landmarks along the way to providing outstanding service are identified as: Lead: don’t be afraid to change systems, structures and procedures, and don’t be afraid to be the first to do

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Customers avoid one of the classic problems of the typical ‘call centre’ approach, and there’s no wasted time with referrals to a whole series of departments across the bank.

so. Be a Champion of the change to service-driven culture.

Build: this requires re-aligning systems and procedures, with retraining and investment in a service mentality for all the customer-facing teams. Where possible, centralize your service skills, so that everyone can access service expertise Learn: absorb as much market intelligence as you can; learn what customers really want and listen to the challenges that they are facing. When they call, make sure that your team really listens to them properly - and has real solutions to their queries.

Drive: enact the changes assertively and embrace the most challenging customer requirements.

Lead the change to your most sensitive and potentially rewarding customer segments.

Understanding these ‘four pillars’ is vital to appreciating the reforms that NBAD is in the process of delivering.

For example, one of the first changes that we’re seeing at NBAD is the centralization of SME services into a dedicated, expert resource, so that customers will have a knowledgeable and relevant point of contact whatever channel they’re

29

BUSINESS BANKING

These new ways of working are accompanied by a shift in branch distribution strategy, so that whichever branch you visit, you have the convenience of a ‘one stop’ service. using to get in touch. SMEs will be able to contact the bank via • A call centre • A branch visit • The website The goal is to offer a totally common delivery platform across each of these, so that there’s immediate access to the level of expertise you need, whether you can actually drop into the bank or only have time to get online. How? By creating a direct link with the SME Banking Team - sector professionals able to give detailed answers to each and every question you might have.

All enquiries are routed to this central team, who can provide a ‘once and done’ service delivery. This means that customers avoid one of the classic problems of the typical ‘call centre’ approach, and there’s no wasted time with referrals to a whole series of departments across the bank.

The ‘Build’ phase - putting the right skills and training in place Then, when it comes to the second factor - ‘Build’ - there is the reality that the call centre agents themselves will be specially-trained and able to provide a more detailed focus.

Plus, while the call centre of course offers all its services in English and Arabic, you can also request to speak to representatives fluent in other languages such as Korean, Japanese, Spanish, and so on.

30

These new ways of working are accompanied by a shift in branch distribution strategy, so that whichever branch you visit, you have the convenience of a ‘one stop’ service - there’s no need to travel longer distances to find hub branches with special areas of expertise. You’ll not only get a consistent, expert and attentive level of service, but there’s also a wealth of product literature wherever you go, both hard copy and online.

‘Learn’ - listening to customers and creating 360-degree service, across the product portfolio The new system that NBAD is putting in place offers a number of practical, primary customer benefits such as: • All your enquiries can be covered at the first point of contact • There’s a quicker turnaround time • The solutions on offer cover all sections of the SME universe • If you’re an existing customer, you won’t find the new approach disruptive - just reassuringly quicker and more comprehensive Yet it works fundamentally on the basis of listening to what customers want, learning from this market intelligence and then actioning the right delivery systems. This process follows a four-step model – Step One: You speak to a call centre agent, who asks you several key questions to collect intelligence on your business and its needs.

Step Two: Your enquiry is referred to a member of the SME Banking Team, who assesses exactly what your unique requirements would be, and calls you with detailed recommendations. You’ll then be sent relevant product literature and application documents.

Step Three: You sign and return documentation.

Step Four: The SME Banking Team call you to advise on fulfilment timings.

‘Drive’ - powerfully delivering on the service commitment The new customer service template at NBAD can handle enquiries relating to the entire product range - from trade finance to FX, from accounts services to factoring, and from deposit strategies to TCI, etc. While you’ll be able to get faster-than-ever feedback on the spectrum of products and services, if there is something more complex you need to discuss, you’ll be able to meet with a designated specialist. So, perhaps you want advice on whether your business has reached the right stage of development for an IPO? Or are looking to expand into overseas markets and wonder about credit protocols? You can talk to a specialist with vast experience in the very areas you’re wondering about.

The reality is NBAD prides itself on the motto ‘one bank, one voice’ - meaning that the same values and standards of service are present and uniform across all channels of communication. The business has basically been re-engineered to reflect the practical and actual needs of the SME community, and then drive their fulfilment through centralised distribution and delivery channels and importantly, via a newly-aligned call centre, Working with a bank that has these priorities is perhaps the best way to ensure that an SME can access core services when it needs them most, with the minimum of fuss and delay, and at the same time keep an eye on the larger strategic picture that is so often overlooked in the harsh quest for survival.

For an online version, please visit: www.smeadvisor.com/2014/07/at-yourservice/

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EVENT SPOTLIGHT

Getting business finance Strategies

for bringing money into your SME

During the event

On June 26, 2014, National Bank of Abu Dhabi (NBAD) partnered with SME Advisor magazine to host a premier SME conference, tackling key issues that business owners face sourcing finance and getting best advice.

32

Nilanjan Ray, Managing Director and Head of Commercial Banking, NBAD

Access to finance has always been a pressing priority for any SME – whether it’s a start-up or a successful enterprise needing to leverage funds to achieve the crucial next stage of growth. Getting business finance aimed to bridge this gap by addressing prime topics such as choosing between

risk-based options and funding from investors, getting start-up and secondstage finance, spreading the risk by approaching multiple funding partners and so on.

Held at the prestigious venue of The Oberoi Hotel, Dubai, the event proved to be a landmark occasion for all the SMEs

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EVENT SPOTLIGHT

region. In fact, this was the theme of the welcome keynote delivered by Nilanjan Ray, Managing Director and Head of Commercial Banking, NBAD. Nilanjan presented a compelling presentation, which took the audience through the various stages of SME finance – offering a realistic view of the current funding options available to them.

in the region – showcasing a line-up of influential speakers across diverse industry sectors.

Attracting an audience of over 250 SME owners, the event was highly successful in addressing crucial finance topics and providing an overview of the SME financial ecosystem in the

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One powerful message, four engaging sessions Following a unique and highly interactive format, the event was divided into four key sessions – ‘Getting Started – incubation, investors and the role of the government’, ‘Going for growth – classic finance solutions and working with venture capital’, ‘Cash is king – supercharging cashflow, liquidity and reducing risks’ and ‘Capitalising on success – financing expansion through banking partnerships’. Each session was led by a keynote presentation, which was followed by an engaging panel discussion – initiating a healthy debate on topical issues.

Leading Session One, Essa Ali Al Zaabi, Senior Vice President - Support Services, Dubai Chamber of Commerce & Industry, set the tone for the day with his presentation underlining Dubai’s impressive economic progress and the sparkling business opportunities it presents for SME finance and growth.

Similar sentiments were echoed by Alexandar Williams, Director of Strategy and Policy Division, Dubai SME, who also shared fresh statistics on the current state of SME finance in the region.

Essa Ali Al Zaabi and Alexandar Williams also played a central role in the first panel discussion of the day.

Joining them on Panel One were leading experts including Stuart Curtis, General Manager, Synergy-Gulf; Kory Thompson, Country Manager – UAE, Regus; and Vida Rizq, Founder, Aflamnah.

Session Two was introduced by keynote speaker Rajiv Shah, CEO, Gulf Investment Consultants, who assessed the role of the various financing options and venture capital. Meanwhile, Session Three saw Mohamed Samee Khan, Head of Eco-System & Channel, SAP MENA, talk about the role of

technology solutions in creating an attractive SME proposition for investors and other funding partners.

Panellists on Panel Two were Rajiv Shah; Suresh Kumar, Group Chairman, Values Group; Chris Thomas, CEO and Co-founder, Eureeca.com; and Martin Hughes, CEO, Carranmore.

On the other hand, Massimo Falcioni, CEO, Euler Hermes GCC; Kim Tran, Executive Director of Global Transaction Banking – Commercial Sales, NBAD; Steven Speter, Managing Director, 36 Strategies; Mohammed Samee Khan, Head of Eco-System & Channel, SAP MENA; Muhamood Ahammed, Senior Vice President – Corporate, Orient Insurance; and Ganes Raman Kuti, Director, Commercial Products – MENA, Visa Middle East FZ – LLC; engaged in a powerful debate as part of Panel Three.

Fadi Malas, CEO, Just Falafel, opened Session Four by sharing his remarkable success story and offered key insights on how franchising is a sound template for financing international expansion.

Strengthening this message, Sarah Cocker, Head of Investor Relations, Just Falafel, played an active role in Panel Four alongside Vikram Shroff, Director, Regal Intl.; Dr. Anil Khurana, Partner, Strategy Consulting, PwC; and Muhammed Mahmoud, Product Manager – Head of Business Pulse & SMEs – Zawya, Thomson Reuters.

Finally, the day ended on a high-note with a special closing keynote by John Lincoln, SVP – Small and Medium Businesses, Etisalat. John put things into perspective as he spoke about the all-important ‘human element’ in the getting finance process.

The event was brought together by Presenting Partner NBAD, Strategic SME Partner Etisalat, Serviced Office Partner Regus and Technology Partner SAP. For complete coverage of the event, please visit: smeadvisor.com/events/ nbad/.

For an online version, please visit: www.smeadvisor.com/2014/07/gettingbusiness-finance-2/

33

BUSINESS INNOVATION

Don’t do it Outsource it!

When a company isn’t playing to its strengths, it makes sense to let a specialist provider take the strain and set your business free to get on with what it does best.

‘Outsourcing’ in this way is especially popular in areas such as ICT, where an expert business can consistently deliver the leading-edge capability and knowledge investment that would be impossible for a nonspecialist SME. We spoke to leading telecoms provider Etisalat about the outsourcing agenda for ICT and how it works in practice…

One of the best-selling business books of all time has the title: ‘Don’t do delegate!’ The central theme of the book is that managers can exponentially leverage extra amounts of quality time if they ask their team members to undertake the less core tasks for them.

The manager will in turn be able to ensure that the job is done by the most skilled and able person in the team, and that it will actually cost less in terms of the cost-per-hour resources being spent on it.

Any manager who has successfully delegated will know that there is a world of truth in this argument.

So, if it works for individuals, how about applying it at a corporate level, as a business model for an entire operational aspect of the business? This process is best-known as Outsourcing - which is essentially no more or less than the effective delegation of key tasks to another business, to whom you will pay a fee.

34

Outsourcing ensures that the business plays to its strengths, rather than struggling with the areas it is ill-equipped to deliver on: no business can be a ‘jack of all trades’, and the statistics show that outsourcing is increasingly popular as a strategy for focusing resources and maximizing product and service delivery.

According to a major survey undertaken by Deloitte’s - the 2102 Global Outsourcing and Insourcing Survey – there are four main reasons why businesses choose to outsource.

These are: • To lower costs - the main reason for 76 per cent of respondents • To gain access to top talent - 70 per cent of respondents • To give key tasks to specialists so that they can be done better - 63 per cent of respondents • To increase the business model flexibility - 56 per cent of respondents

What is being outsourced?

While you might presume that outsourcing would be very relevant for complex in-house procedures such as accounts payable, purchasing and accounts receivable, in practice, there is relatively little adoption of outsourcing for core business processes (only 23 per cent and 19 per cent respectively). It is in areas such as ICT that we see the

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BUSINESS INNOVATION

Outsourcing ensures that the business plays to its strengths, rather than struggling with the areas it is illequipped to deliver on.

most significant use - an average of 76 per cent of businesses either currently outsource or plan to outsource the ICT function in the near future.

Outsourcing ICT functions is in fact one of the most popular methods of reducing costs and overheads.

Especially for SMEs for whom time, capital and ICT expertise can be in short supply, outsourcing these

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functions can help free up well needed space and capital. Meanwhile, for larger, enterprise-level businesses, giving ICT functions to third-party service providers has long been recognized as a key route to making tremendous cost savings and potential gains in efficiency.

Most SMEs are only able to sustain a small ICT function at best. So,

outsourcing the potentially challenging ICT functions to outside service providers can provide the business with an effective advantage.

The 2012 Global Outsourcing and Insourcing Survey also revealed an attractive range of further benefits. For example, you can 1. Reduce and control operating costs.

When you outsource, you eliminate the costs associated with hiring an employee, such as management oversight, training, health insurance, employment taxes, retirement plans etc.

2. Improve company focus. As mentioned previously, it is neither practical, nor possible, to be a jack of all trades. Outsourcing lets you focus on your core competencies while another company focuses on theirs.

3. Gain access to exceptional capabilities. Your return on investment is so much greater when you outsource information technology to a firm that specializes in the areas you need. Instead of just the knowledge of one person, you benefit from the collective experience of a team of IT professionals. Outsourced IT companies usually require their IT staff to have proper industry training and certifications as well.

4. Free-up internal resources for other purposes. Outsourcing allows you to retain employees for their highest and best use, rather than wasting their

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BUSINESS INNOVATION

time on things that may take them longer than someone who is trained in these specific areas. Some staff may have reasonable competence in ICT concerns, but was this what they were actually hired to do?

5. Deliver results in a function that is otherwise difficult to manage Outsourcing to experts can deliver expert performance. Remember, though, that you still need to be involved even after control is delegated - monitor the performance of the outsource business; is it on a par with what you were expecting?

6. Make capital funds available.

By outsourcing non-core business functions, you can spend your capital funds on items that are directly related to your product or your customers.

What the experts say SME Advisor spoke to John Lincoln, Senior Vice-President, Small and Medium Businesses (SMB), Etisalat, about the advantages and protocols of outsourcing the ICT function in practice.

How can outsourcing the ICT function help SMEs deliver critical growth and competitive edge?

Between the promise of reshaping their IT landscape and powering innovation, ICT outsourcing delivers significant advantages to SMEs. They can largely benefit from leveraging the latest technologies, scale, reliability, operational efficiencies, sustained productivity gains, lower transactional economies and enhanced security - to name but a few.

SMEs are seeing the fastest growth in the UAE economy today, with them contributing to over 70 per cent of the GDP. To power and support this growth and transform their capabilities, SMEs need to drastically improve the customer experience and differentiate from their competitors (especially their larger counterparts).

By outsourcing ICT, they can leverage the same or better technologies that

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their larger counterparts use and compete on a level playing field.

Fundamentally, an outsourced ICT function allows SMEs to use technology as a tool and an enabler rather than as a function within the organisation. That’s a real paradigm shift.

Are there any particular areas of the ICT function which businesses most often prefer to outsource? (ie, virtualization, server hosting, switch to cloud, etc.)

Research from leading analysts states that a significant portion of the outsourcing market will move to the cloud (from 9B$ (2010) to 50B$ (2015)). This will be heavily driven by customer-facing and employee-productivity applications such as collaboration, CRM, e-commerce and web, as well as resource-intensive areas such as remote infrastructure management and disaster recovery management. Interestingly, we’re seeing strong growth potential in specialised domains such as ERP and advanced security - where a skills shortage is very evident in the market place.

What are the key services which Etisalat can typically provide when taking over an outsourced ICT function?

Etisalat today offers a diverse set of managed ICT services in domains such as public and private cloud infrastructures (IaaS, PaaS and SaaS), communication and collaboration, remote infrastructure management, managed vertical applications (retail, hospitality, healthcare, etc), information security, machine to machine, managed connectivity services (Global MPLS, WiFi, VSAT), consulting and bespoke ICT outsourcing services. The key focus is on delivering these services through a very beneficial and transformative experience that is interactive, integrated and consistent across all touch points.

How does the transition to outsourcing work? Is it a ‘one stop’ process, or does it involve a structured handover?

Realizing the true potential and value of outsourcing depends on the ability of both the customer and the provider to plan and execute an effective transition.

Transitioning to an outsourced model typically involves the process of migrating knowledge, systems, and operating capabilities between outsourcing environments to in-house staff (if they exist). Usually transitioning involves 5 key steps: 1. Discovery/Assessment 2. Solution Design/Planning 3. Testing & Pilot 4. Service Assumption 5. Steady State Turnover/Implementation The key to a successful transition is to plan for and manage typical outsourcing difficulties - often stemming from a loss of management focus and involvement from the customer after the contract has been signed. Factors to consider include: cost overruns due to milestone slips in the schedule; changes in customers’ evolving business requirements, leading to delays; and finally, a quicker-than-desired stabilization of the services. These are all key contributing factors that need to be managed well to enable a really successful outsourcing initiative.

Does outsourcing work on the basis of a monthly fee being paid to the outsource business? Or does the outsource business have to meet a monthly ‘effectiveness’ target? Perhaps you have a ‘pay as you go’ model?

Typically, most outsourced offerings are a ‘pay as you use’ model with a welldefined service level guarantee, providing

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BUSINESS INNOVATION

customers with assured levels of service and deliverables. Selectively, service credits can also be offered as a remedy to missed guarantees in specific instances.

Is there a limit to how small or large the function can be for it to be outsourced?

The advantage of an outsourced ICT model is that SMEs can leverage diversity of products and technologies, scale, and the same quality and levels of service irrespective of their size. Ideal solutions scale from a single user to many thousands delivering a unified experience across multiple products. Outsourcing allows companies, small or large, to focus on their core business vs managing ICT as a function.

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Does the company handling the outsourced function work in a ‘white label’ capacity - ie, are customers aware that the function is being handled externally?

Ensuring a seamless, unified experience for delivering solutions across various platforms and touch points is fundamental to providing a smooth customer journey, irrespective of who is actually delivering the service. Telecom operators spend a considerable amount of time, money and resource in delivering this key aspect as part of the entire proposition. Customers expect the service to be delivered in a secure and compliant manner and in accordance to the terms and conditions of the contract. Who and

where the service is delivered from is generally irrelevant, unless the customer specifies conditions in a contract which requires elements such as service provider-owned resources and locally staged data for compliance purposes.

How regularly do SMEs outsource the ICT function?

SMEs are increasingly looking to outsource key functions that are largely capex driven, resource intensive, or lighthouse technologies that effectively leapfrog their current capabilities in serving existing (or reaching new) customers. Typically, functionality such as e-commerce/web, collaboration, CRM and remote infrastructure management are increasingly outsourced. We see

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BUSINESS INNOVATION

Telecom operators spend a considerable amount of time, money and resource in delivering this key aspect as part of the entire proposition. many ‘greenfield’ companies looking at outsourcing from the very outset.

We expect that annually, every SME considers outsourcing during their budget planning cycle or while adopting or upgrading to newer technologies. It has indeed become a de-facto part of their discussion, strategy and approach.

Is outsourcing more or less popular in the GCC than in other parts of the world?

Outsourcing in the GCC was at a tipping point for several years in the past.

This was due to key factors such as the availability and choice of providers, the completeness of the solution, data privacy concerns, SLAs, the economics and the overall end-to-end integrated experience of such services. The landscape is, however, changing fast, due to the availability of world-class services within the GCC delivered primarily through telecom providers as well as by the global cloud providers coming in to the region.

How can outsourcing supercharge a business’ capability - ie, can it help a business make the technology leap it may have been putting off - benefits like upgrade to cloud, mobility of data across devices, etc.?

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The basis for most outsourcing projects is that another specialized entity can deliver the same noncore function better, faster, reliably and at a lower cost than oneself. More importantly, existing resources can be deployed elsewhere in core functions to deliver better economies. In some cases, especially in SMEs, these functions would be more time consuming, expensive or downright impossible to deliver in-house due to lack of dedicated skilled resources in ICT. Besides delivering new disruptive technologies and services to their customers, outsourcing can often deliver productivity increases, better information resilience, enhanced security, increased scalability - as well as offer significant cost savings compared to keeping things in-house.

Some examples of innovation are: • an SME using a 24x7x365 remote infrastructure management solution to keep their systems and productivity levels of employees at a level comparable to a large enterprise providing a similar service • a small retail outlet leveraging a Mobile POS and payment gateway solution or a location based service on the cloud for a monthly fee and serving more customers • a small clinic can deliver the same levels of sophistication in handling their patients compared to a large healthcare conglomerate, by using a cloud-based clinical management system that would cost them a fraction of implementing it themselves • or a small SME delivering sophisticated e-commerce and supply chain solutions to their customers through an outsourced pay-as-you-go model.

In reality, the possibilities for SMEs are endless in leveraging outsourced ICT to drive their business to the next level…

Working in harmony - and enjoying the rewards As well as ‘getting the job done’, once you have an established outsourcing relationship, it can deliver a number of major rewards which would simply not be available from other business strategies. Consider the following as major incentives Access to the latest and best in technology. Software and hardware becomes rapidly obsolete and outdated. This won’t happen when you’re working with a specialist ICT provider, offering a team of IT professionals, whose collective knowledge and skills are working to your benefit and who will know exactly how to plan ahead.

Cost savings. Outsourcing your IT services provides financial benefits such as leaner overhead, bulk purchasing and leasing options for hardware and software, and software licenses, as well as potential compliance with government regulations.

High quality of staff. Outsourced IT vendors look to hire staff with specific qualifications and certifications - whereas an SME may not know what to look for and tends to recruit generalists.

So - will you Outsource? It can be a powerful tool in your business’ upward growth and a key strategy for building momentum and all-important liquidity.

For an online version, please visit: www.smeadvisor.com/2014/07/dont-doit-outsource-it/

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Managing your multi-screens is a complex job

Get it done faster and more efficiently with our Cloud Digital Signage Service Managing an entire array of digital screens is a huge job, but it doesn’t have to be thanks to our Cloud Digital Signage Service. Powered by cloud technology, Etisalat mobile broadband service and LG Electronics, it’s the one-stop service that allows you to manage the contents of your digital screen without having to physically go to their locations.

MOVERS & SHAKERS

skill MASTERS We speak to the dynamic duo behind the unique start-up WEPUL – Mark James and Sebastian Ritter...

Tell us a little about WEPUL. How did the idea come about?

Mark: Basically, it was a combination of Sebastian and I both trying to solve our individual problems. I was trying to learn how to ride a skateboard, learn how to set up my fish tank and find someone to visit a campsite for me in Italy. Sebastian meanwhile had wanted to set up his own launch and wanted to trade his development skills with friends that could help him with other start-up skills (design, accounting, legal advice etc.). Having spent a few weeks talking about potential business ideas we decided to “scratch our own itches” and create WEPUL to solve the above needs.

What is WEPUL’s USP? Mark: We are the planet’s only skill trading site. That said, this isn’t why we think we’re unique. We’re unique not because of what we’re doing but because of WHY we’re doing it. We’re not doing this do make pots of cash or to drive metrics; we’re doing it to make the planet more collaborative,

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Mark James and Sebastian Ritter of WEPUL

to improve humanity by better distributing skills within communities and ultimately redistribute wealth.

What kind of audience interaction have you enjoyed so far?

Mark: To be honest, the reaction since the launch has been overwhelming.

Perhaps because the idea itself is simple, relatively unique and appreciable by most people, we’ve seen a lot of attention from a myriad of audiences. Best of all, it works. Every day, people are meeting up to swap skills because of WEPUL.

Is WEPUL open to users from all across the world?

Mark: Absolutely! At the moment, the significant majority of users are Dubai-

based. That said, we’re launching some new features in the next few weeks which will see WEPUL become a truly global platform.

What attracted you to become entrepreneurs?

Mark: There’s nothing that attracted me specifically to become an entrepreneur.

I was much more interested in making things that help people. I’ve created and owned businesses since I was about 14 (most of them wildly unsuccessful) and always, the opportunity to make something from nothing and touch people’s lives; with success or failure being completely on your shoulders is something I find insanely exciting.

Sebastian: For me, the idea of becoming an entrepreneur has always been an exciting one. The freedom to pursue your own vision, make your

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MOVERS & SHAKERS

own choices (good and bad), learn, iterate and take on that responsibility towards your audience is tantalizing.

Knowing how daunting the task can be is one of the corner stones behind my reasons for WEPUL’s existence.

How has your journey as a startup been so far? What were some of the biggest challenges you’ve faced so far?

Mark: As far as WEPUL’s concerned, the biggest challenge has probably been a combination of not enough hours in the day with other family, work and extra-curricular draws and then understanding when something is just good enough to be shipped. That said I think we’ve done a tremendous job thus far in managing all of this.

If you were to describe your start-up journey in three words, what would they be?

Mark: Fun, confusion, bravery.

Sebastian: Test, iterate, improve.

Mark: Everything has been selffunded thus far. If you’re starting an internet based business, you can think creatively in terms of marketing and product development and you have the mentality of “do a lot with a little.” You don’t need more than a hundred dollars or so for the first year of the business. Just decide you’re going to do something, make a really crappy version of it, then go test it.

Procrastination has its place but it will normally be the thief of time.

Tell us more about your participation in Impact Hub’s Crowdfunding competition. What do you think gave you an edge over other finalists?

Mark: I suspect that the audience bought into the personality of Sebastian and I (we’re both reasonably eloquent and not afraid to make fools of ourselves) and perhaps unlike some of the other start-up ideas, ours was one of the few that everyone in the room could make use of and apply to their own lives.

Who is your target audience?

As a tech start-up, you can also significantly save on setting up costs. Did you find that this was the case with WEPUL?

Mark: Anyone with an internet connection, who can use an internet connected device and has a skill that someone else might want to learn (no matter how basic or niche) or wants to learn a skill (no matter how basic or niche).

Sebastian: Ultimately, I think our audience centres around people who have dreams and ambitions that are limited by financial restrictions or lack of help to get them where they want to be.

Mark: I don’t think it’s a case of saving costs, more not falling into the trap of spending money (typically someone else’s) without proper consideration for the consequences. As mentioned previously, there’s little reason a software based business should require more than a few hundred pounds/dollars to get off the ground and then validate your assumptions before you start pouring large chunks of cash into what ultimately, might be an unsustainable idea.

What kind of financing options did you look at during your initial startup stage?

What is your vision for the future?

How do you see WEPUL shaping up in the years to come?

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Mark: We hope that people all over the globe use WEPUL to “level-up” on the skills they have, start the journey of discovery with new hobbies and acquire the skills they need to improve their lives and the lives of their families.

Being entrepreneurs, what are top factors that motivate you to keep going?

Mark: The thing that keeps me motivated is that we’re doing something that can truly change the planet for the better. When you haven’t had a weekend to yourself for months or the alarm clock goes off at 4am and you struggle to get out of bed to head to the computer, you have to just remember that you’re not doing this for yourself, but for the betterment of humanity.

Sebastian: Absolutely agree with Mark. All those sleepless nights are instantly rewarded by something as small as one e-mail from a person whose life has been enriched by what you are doing.

Finally, do you have any advice for aspiring entrepreneurs in the region?

Mark: Don’t spend too much time wondering whether you should, just get on with it. Most of the problems you think you’ll face won’t turn out to be problems. While success is far from guaranteed, you’ll enrich your life if you just go do it.

Sebastian: I would add to that “Get the right team” - not only with respect to diverse skill sets, but also personality types. A good mix of people is crucial to keep you going when you feel like you’re running on empty.

For an online version, please visit: www.smeadvisor.com/2014/07/skillmasters/

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MOVERS & SHAKERS

The shades of success

Fatima Al Shirawi’s colour consultancy Understanding customer needs is a crucial aspect for virtually every business in existence. Yet, how many actually succeed in customising their products and services for the right target market? Fatima Al Shirawi’s unique colour consultancy services fill in this gap by helping businesses connect with their customers and achieve instant results. In an exclusive interview with SME Advisor, the dynamic entrepreneur talks about her company, The Gracious F, and explains how it’s succeeded with ‘flying colours’…

Fatima Al Shirawi

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MOVERS & SHAKERS

Tell us a little about your company. How did the idea come about?

The Gracious F revolves around selfdevelopment and has elements similar to those of a life coach or of a lifestyle expert. We enable our clients to get to learn more about themselves and achieve a positive state of mind – which then escalates into every sphere of their life. In addition to working with an individual, we work with their environment and surroundings too. As a result, they are able to have better understanding of themselves and start taking new challenges in their lives. In fact, some of my clients have actually started their own businesses after being inspired by the process they underwent with us.

The company can be divided into three different sections – Colour consultancy: This is all about the individual. Our colour consultancy services are based on the principles of ‘The Colour Affects’. As part of this concept, people are categorised into four different personality groups, which are then linked to four different colour groups. Essentially, there are different shades that suit each group. For example, you may have noticed that some people look great in bright colours and can carry it off. On the other hand, some people always feel tired in bright colours because that’s not their colour group.

Under this branch of our work, we organise a colour consultation session with the individual and identify their right colour group. This further goes into what careers the individual can pursue, what fabrics and jewellery they can wear and so on. The way it works is that there are certain light energy waves which colours generate that work with your personality specifically – leaving you feeling balanced and confident.

The other feature of ‘The Colour Affects’ is the individual use of colours, so if you want to communicate better, you would use the colour blue because it stands for concentration. Every

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MOVERS & SHAKERS

When you come into an office space, it is very important that each room has a colour, which is aligned with its purpose.

individual has as many as hundred shades of colour that they can wear within their group.

Styling: This arm is mainly lifestylebased. A lot of people approach us for consultation for upcoming social events and gatherings. This also caters to clients who are looking to change their jobs or their overall professional look and want something that reflects their personality.

Feng Shui: When I was studying colour psychology, I noticed that there were a lot common elements between Feng Shui and the use of colours, so that’s why I decided to combine both. This branch focuses on the space of the individual – offices or residences. We customise the space using colours that are appropriate for the purpose of the room.

The Feng Shui element emphasises the presence of different corners (within a space) which represent different elements in your life – you have the wealth corner, personal growth corner and so on.

By stimulating these corners, you can increase the energy of the space you are working in. That’s how we combine Feng Shui and colour consultancy to achieve the ultimate level of positivity.

For instance, there are certain colours that you would use within a restaurant to stimulate the appetite of your customers, make the energy flow, like red and orange. Orange is for nutrition and red is to stimulate the energy.

How can you apply some of these principles into an existing business?

In the case of existing businesses, like a store which has multiple brands, ‘The Colour Affects’ theory can be used for product placement. This helps target different kinds of customers according to the four different personality groups, which I’ve mentioned earlier.

Let me explain with an example, Middle Eastern and Mediterranean people can be identified as autumn personalities. So to cater to these

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customers, you would need to fill the store with deeper colours and a lot of textures. If you are a clothing store, you can organise one section targeted to these customers, which will allow them to get everything they want in one area without having to walk into different spaces.

‘The Colour Affects’ system is extremely intuitive and accurate – you don’t have to programme the person, they are instinctively attracted to these elements.

Is it true to say that colour consultancy isn’t very popular in the region? How do you envision your brand changing this and raising awareness about the effects of colour?

Feng Shui has been a core element within several businesses and I’ve noticed that companies are starting to take it much more seriously. Many architecture firms have also started incorporating Feng Shui into their designs.

In terms of colour consultancy, I would definitely say that there hasn’t been a lot of awareness in the region. It is a fairly new concept here. Global companies are aware of it, but a lot of smaller businesses, not so much. I think, however, businesses are starting to understand the importance of colour but haven’t completely understood the use of colour. Also, there is a tendency that when you say colour consultancy, most people have the misconception

that it is related to personal styling and dressing and so on – not the larger aspect, which is within your business.

I would like to proudly say that The Gracious F is indeed at the forefront of the colour consultancy industry. We are among the very first ones advising businesses about the different ways in which they can integrate colour into their day-to-day operations. I’ve had the opportunity to work with both local and international corporations, who wanted to try out our services, and I’m happy to say that they have seen the results and are very pleased.

What is the step by step process The Gracious F goes through when a customer approaches you?

If we are dealing with someone that already has a store, we begin with a colour consultation, which helps us evaluate their personality. We then incorporate their colours into the brand. Finally, we analyze their customers and what they are looking for.

For example, we recently worked with a local boutique store; they had a fantastic product line but the space was very dull and didn’t have a large footprint coming into the store. We started by working on colours that matched the personality of the business owner and what she wanted to incorporate into the business.

We re-designed the store, put in the right colours and moved all the things

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MOVERS & SHAKERS

How can businesses use colour techniques to motivate employees and boost productivity? For instance, how can the interiors of an office space effect employees?

into the right corners. For instance, the cash counter has to be in the wealth corner. Following this, we worked on the actual products – grouping them into the four different personality groups.

In terms of the office space, we addressed key issues such as how does she want her employees to feel or what kind of interaction does she want to have with her employees? We selected certain colours to reflect this, and incorporated Feng Shui elements.

A good example of this was that the conference table had to be round versus any other shape, in order for her to get continued support from her employees.

At the end of it all, they saw the results instantly – employees would spend longer hours in the offices and the incoming traffic into the store saw a significant rise as well.

Who do you see as your target customers?

I would say we deal with a very diverse range of customers. Our initial clientele included a majority of entrepreneurs as they are usually open to trying something different and unique. However, now we’ve been approached by a lot of large corporations and are working on a raft of projects.

The people who approach us are almost always going through some sort of ‘transitional phase’ – whether it’s in their personal life, within their company, or while working on a specific project or event.

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When you come into an office space, it is very important that each room has a colour, which is aligned with its purpose.

The accounting department should be in blue, signifying concentration, and reception areas should be beiges or yellows – colours that are welcoming and friendly.

What is a typical day like in The Gracious F offices?

I started off as a home-based business with an extremely tight budget. Naturally, running your company with limited financial resources is tough, and requires immense focus and mental strength.

You have to accept – and be fully prepared – that you won’t have any steady income while setting up your business. I also decided to take a loan and invest the money into market research, which was one of the best decisions I’ve made. This enabled me to understand my target market and reach out to the right customers.

If you were to describe your overall entrepreneurial journey in three words, what would they be?

An amazing adventure!

The mornings are dedicated to individual client appointments, the afternoons to administrative work and the evenings to on-location projects at my clients’ stores.

Did you always want to be an entrepreneur? What motivated you to start your own business?

Yes, I’ve always had the urge to do something different and I knew that I wanted to start my own business.

I envisioned having a company that would allow me to work with people and somehow help them enhance their lives.

When I came across the field of colour psychology, I instantly knew this is what I want to be doing. Initially, I started colour consulting on a freelance basis – mostly working within my family and circle of friends. As my projects began to increase, I decided to open my own company.

Looking back at your journey, what would you say were the biggest challenges?

What advice would you like to give to aspiring entrepreneurs in the region?

Don’t give up no matter how hard things get! Stick to what you are passionate about and you will surely achieve success.

Finally, what colour has your life been so far – and what colour best describes the development of your business?

I would say the colour ‘Red’ represents my life as it stands for passion and light. The development of my business can be best described as a rainbow – with its fair shares of ups and downs.

For an online version, please visit: www.smeadvisor.com/2014/07/theshades-of-success/

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WORKSPACE

Finger on the pulse trends, opportunities and challenges within the SME sector The summer months are a fantastic period for businesses to map their progress, assess the opportunities and plan for the future. As we slowly, but surely, move into the next financial Quarter, SME Advisor presents a detailed overview of the regional SME sector, and identifies crucial ‘hotspots’ which can help your business maximise profitability and success in the coming months!

While the summer months aren’t particularly rewarding for most businesses, they definitely have been positive for the country’s most prolific sector – the SMEs. This year, so far, has been a good year for SMEs, and the following compelling graphic shared in a recent Dubai SME Report is a good indication of this:

Figure 1 depicts that SMEs have demonstrated a significant boost in confidence in comparison to last year, the effects of which are sure to be seen in the form of improved overall productivity and economic growth. That’s not all. The Department of Economic Development in Dubai revealed that there has been a significant rise in the number of business licences issued from 3,753 in Q3’12 to 5,590 in Q1’14 as can be seen in the chart below.

SME Business Confidence Index 128

Figure 1

124 122 120

119.5

118 116 Q1, 2013

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126.4

126

Q1, 2014

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WORKSPACE

THE TRADE sector is one area that still offers terrific growth potential for smes.

What’s also interesting is the breakdown of the new licences issued into the following categories: Doing Business Indicator

Licenses issued by type Description 5,590

5,019 3,753 4,134

4,704

4,612 4,706

Q3-12 Q4-12 Q1-13 Q2-13 Q3-13 Q4-13 Q1-14

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Professional Commercial Industrial Tourism Intilaq Issued Licenses

Q1-2014

Q4-2013

Q1-2013

1,266 4,118 65 64 77 5,590

1,146 3,398 47 54 61 4,706

1,243 3,311 62 49 39 4,704

Source: Department of Economic Development

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Trading With 57 per cent of SMEs belonging to the trading sector, this is one area that still offers tremendous growth opportunities to SMEs. Several factors are facilitating the fast development of this sector such as the government’s initiatives with international Chambers, the upcoming Expo 2020 and the rising adoption of new technology enabling SMEs to break international trade barriers. Dubai SME’s research also shows that the SMEs within the trading sector continue to have the highest access to finance – a crucial reason behind the success of this burgeoning sector. This is mainly historical and geographical. As the city evolved its global wholesaling and trading hub status, the finance and banking sector evolved with it. Today, most banks in the UAE have mature trade financing schemes supported by many trade insurance schemes.

Further evidence of the trading sector’s growing potential lies in key statistics revealed by the recent Dubai Traders Outlook Survey 2014 conducted by Dubai Chamber of Commerce and Industry.

The Survey reported that 51 per cent of

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Figure 10

Construction Final planning Planning Pre-planning

20 15 10

Source: STR Global

Areas of growth

Hotel development pipeline, Dubai, as at Q1 2014

Roomnights growth (%)

The sharp rise in Commercial licences, from 3,311 in Q1’13 to 4,118 in Q1’14, is aligned with the fact that a large proportion of SMEs in the region are trading companies. In fact, trade continues to be one of the ‘hotspots’ for SMEs in the region alongside two other key areas – Hospitality and Technology – further detailed in the section below.

5 0 Luxury

Upper upscale

traders expect sales to increase due to Expo 2020. It also said that 60 per cent of traders expect market demand to be ‘very good/good’.

Similar sentiments were echoed in a recent Dubai SME survey forecasting business outlook for Q2’14; 59 per cent of the trading firms predicted a rise in their volumes, while only seven per cent said they foresee a decline, due to reduced activity during the summer months.

Sub-sectors that expressed positive sentiments were electronic traders, traders in the food and beverage sector, traders in the building and construction and auto traders.

Hospitality Dubai’s vision to receive 20 million visitors by the year 2020 has been a major factor fuelling the development of the hospitality industry. The recent June 2014 STR Global Construction Pipeline Report highlighted that 614 hotels were Under Contract, totalling 143, 870 rooms in the Middle East/ Africa hotel region. These figures are

SMEs in the Middle East will increase their expenditure on information and communication technology (ICT) services by over $2 billion to $22 billion in 2014, 10 percent over 2013.

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Upscale

Upper midscale

Midscale

Unafiliated

remarkable and reflect the intensive growth planned within this sector.

Technology Technology is a core element of SME development and as the region’s digital economy continues to develop, it provides sparkling opportunities to businesses in the region. In fact, Deloitte’s second annual Middle East Technology, Media and Telecommunications (TMT) Predictions Report reported that SMEs in the Middle East will increase their expenditure on information and communication technology (ICT) services by over $2 billion to $22 billion in 2014. The Report also suggested that the SME share of ICT spending in the region will be just over 23 per cent in 2014.

Cloud computing, Big Data, BYOD and mobile applications are emerging technologies that SMEs will need to take into consideration when putting together their ICT strategies in the coming months.

An increased emphasis on IT security has also been seen in the recent past with

In 2014, SME share of ICT spending in the region will be just over 23 percent.

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WORKSPACE

Sources of Additional Capital in the past

Sources of Additional Capital in the future

29%

25%

Personal Money

Did not need

6%

Friends & Family

38%

Personal Money

8%

Friends & Family

41% Bank

11%

Finance

Additional Partners

14% Bank

28%

Additional Partners or investors

Finance

companies – particularly SMEs – realising the high-risks associated with cybercrime.

Alexandar Williams, Director – Strategy & Policy Division, Dubai SME, said: “There is a great deal of opportunity for SMEs to adopt more innovation and technology in their business model to serve customers and improve internal processes. In a recent SME survey by Dubai SME, it was found that many SMEs in the Emirate were moderate to low adopters of technology be they ICT or other productive technologies that would improve overall firm productivity.

In terms of innovation too, our SMEs seem to be low to moderate in their innovation capacity. Overall investment in technology innovation is low.

“The EXPO 2020, however, could change that by giving start-ups and more established SMEs the opportunity to showcase their innovative products and creative designs.”

Future challenges One of the topmost challenges facing the SME sector continues to be lack of access to finance. 77 per cent of SMEs and 80

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per cent of start-ups have no access to bank finance.

However, on a positive note, we are seeing an evolving start-up and SME financing environment from both the government, and from less traditional sources like finance houses and equity capital firms taking a greater interest in SMEs. Alexandar recently presented the chart above, which is a fantastic depiction of the evolving finance trends within the SME sector. And, SMEs should definitely expect to see the following shifts in the sources of capital in the coming years.

Alexandar also revealed Dubai SME’s plans to launch more initiatives which will enhance the life cycle SME financing ecosystem, especially risk equity capital.

Among the initiatives will be to map in detail the angel investment scene, launch a business angle investment platform, strengthen the investment case for start-ups, and build more informational platforms for both investors and investment-seekers. For SME debt financing, Dubai SME will launch a “be bankable” initiative to help

more established SMEs improve their capacity and capabilities that includes the following: - Guide SMEs through a step-by-step process to approach banks for finance.

- Help SMEs prepare a bank finance application and also self-assess readiness for banking.

- Offer information on banking products, services, processes and documentation.

- Highlight qualified auditors and address key topics such as identifying a good/bad balance sheet, preparing and managing auditing contracts, selecting an auditor and so on.

Looking to the future The region’s SME sector continues to go from strength to strength, but this success isn’t without its peaks and troughs. And, in such a scenario, equipping yourself with the above mentioned key trends and industry knowledge can be nothing but a source of wealth.

For an online version, please visit: www.smeadvisor.com/2014/07/finger-onthe-pulse/

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THE NEXT LEVEL

The view from the top…

True entrepreneurs are those who set their minds to a specific objective and refuse to give up until they’ve succeeded in achieving it. SME Advisor met one such entrepreneur, who is not only aiming high, but is also determined to tackle any challenge that comes her way, even if that means climbing the ferocious Kilimanjaro – 19,341 feet above sea level. In an exclusive interview with Mona Tavassoli, Founder, MomSouq and Mompreneur Middle East, we discover how she’s truly reaching new heights…

Well Mona, it’s lovely to see you again – exactly after a year!

Looking back at the past 12 months, what were the peaks and troughs for MomSouq and Mompreneur Middle East?

I have to say that it has been a great year! Through the various initiatives led by MomSouq and Mompreneur Middle East, we have managed to create a significant impact within the community. We’ve also received a lot of support from our partners, members and mom-entrepreneurs. Things have turned out better than I anticipated, and the entire team is overwhelmed with the tremendous feedback.

We are in the process of revamping MomSouq’s website to make it more user friendly so that visitors can enjoy a better experience. We are also in the process of introducing a new set of events for moms, children and families. A lot of exciting plans are in the pipeline!

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Being an integral part of the SME community, what are some of the latest trends you’ve noticed within the sector?

There has been an increase in the number of young entrepreneurs looking to start their own businesses.

However, they continue to lack access to a raft of extensive learning material, which can help them gain expertise in areas that aren’t their strengths. I believe the SME community needs to build on its range of practical training sessions, comprehensive learning guides and business mentors.

Tell us a little about your trip to Kilimanjaro. How did this initiative come about?

The moment I heard about the trip, I knew this was the perfect opportunity to support the cause that’s been so close

Mona Tavassoli, Founder, MomSouq and Mompreneur Middle East

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the next level

to my heart. Let me explain by sharing with you one of my strongest beliefs, which not only led me to take up the Kilimanjaro challenge, but also lies at the core of my businesses – MomSouq and Mompreneur Middle East.

From a very young age, I’ve had the view that women have a huge influence on their family, community and society. Although most of our leaders are men, majority of them were raised by a woman. That woman’s belief system had a direct influence on her children. It is way easier to invest in the next generation, raise them differently, with love this time. I am strong believer that a person who has experienced love and is in peace with himself or herself, cannot harm another being. Women raise the next generation, that’s how powerful they are.

Through this Kilimanjaro trip, I will be campaigning for “World peace through women’s empowerment”, the very reason why I was determined to take up this challenge.

What do you aim to achieve as part of this initiative?

As mentioned, my campaign is “World peace through women’s empowerment”, which will be represented on a flag that I am taking with me. I am dedicating my time and energy to empower myself first and other women especially in the Middle East and less privileged countries around the world. This is not a feminist campaign, to the contrary, the wellbeing and happiness of women, empowers men even more. I believe in living in harmony and peace. My campaign started with helping school girls in Afghanistan and my aim is to continue this route to support more countries especially in the Middle East.

I will be raising funds for The Womanity Foundation through this campaign. Education plays an important role in empowering women to follow their dreams. This is the very reason I chose this Foundation as

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THE NEXT LEVEL

its vision is aligned with this campaign.

The Womanity Foundation is an independent private foundation established in 2005. Guided by its vision to contribute to a world where all women and men have equal and full social, economic and political participation, The Womanity Foundation undertakes to empower girls and women to shape their future and accelerate progress within their communities.

My goal was to raise US$ 6,000 and I’m delighted to say that I’ve currently already received donations worth over US$ 4,000!

Do you think lessons that you’ve learnt as an entrepreneur will help you during this initiative?

Yes, absolutely! I know that this trip will challenge me physically and mentally.

The strength that I’ve gained from being an entrepreneur is priceless.

Every challenge or opportunity in my life – including being an entrepreneur – has made me a stronger person. I am fascinated by our abilities and have learnt how our limiting beliefs stop us in life. I am practicing to listen to my heart more often, my mind is still debating with me from time to time. I have also made a mental note to enjoy the journey even if I can’t reach the top.

The mountain is a spiritual journey to me, I’m sure the climb will make me appreciate life even more.

How does CSR play an important role within MomSouq?

From the very start, MomSouq is built on the solid foundations of networking and creating connections. It is a strong advocate of ‘unity is strength’ and encourages moms to come together and help one other in various ways. So, the reality is that CSR has always been a part of the equation since Day One. One

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of our primary goals has always been creating a unique platform which adds value to the community.

In every action that we take at MomSouq, we constantly ask ourselves, “how can we add value to this person”, and this has enabled to create this effective platform to empower women.

Managing a business while also participating in CSR activities like these can be quite challenging.

How do you see yourself achieving the perfect balance?

Being an entrepreneur, I’ve realised that it is important to manage multiple responsibilities and don different hats as required by the task at hand. I have to manage my time wisely, and dedicate time to my business, my family as well the community in order to participate in powerful initiatives like these.

My family – especially my husband – has played a huge supporting role in allowing me to achieve this balance and I’m extremely thankful for their backing.

You’ve pioneered Mompreneur Middle East, which is a large network of mom-entrepreneurs.

Do you see your Kilimanjaro visit inspiring these mom-entrepreneurs and encouraging them to do the same within their businesses?

Yes, definitely! I believe that this trip has given me the opportunity to do whatever little I can to give back to the community, and if I can inspire fellow mom-entrepreneurs to do the same, it will be truly gratifying.

I have already started receiving a lot of messages from women who are part of Mompreneur Middle East expressing their support to this cause, which of course feels great.

Finally, looking to the future, what are some exciting plans you have in store for MomSouq and Mompreneur Middle East? How do you see the business shaping up in the next five years?

Specific to Mompreneur Middle East, we have two very exciting partnerships lined up, which will prove to be quite fortuitous for our member base.

Firstly, we have linked up with The Impact Hub to provide training sessions for entrepreneurs as well as the larger SME community at very affordable rates. These sessions will be divided into three different categories: ‘The Idea Group’, ‘The Early Stage Group’ and ‘The Growth Group’.

As we are currently in the Pilot phase, we are going to begin with six sessions over a time period of three months focusing only on the Early Stage Group.

This will kick-start in September and the time duration for each session will be three hours. These training sessions will cater to those individuals who already have their business set-up and are looking for advice on key ground level topics such as hiring new talent, setting up a social media account, managing finances and so on. Members of Mompreneur Middle East and Impact Hub will enjoy special discounted rates.

We hope to start training sessions for the other two Groups in January. The Idea Group sessions will follow a similar format but will focus more on how to get your ideas off the ground. Meanwhile, the Growth Group sessions are about how you can take your business to the next level.

We will also be putting together some very interesting events in the next few months, in association with our partners – Dubai Business Women Council and Right Selection.

For an online version, please visit: www.smeadvisor.com/2014/07/view-fromthe-top/

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presents

BUSINESS INTELLIGENCE FOR INTERNATIONAL TRADE www.tradeandexportme.com

58 4%

Contents

8% 57% 74%

16%

9% 2%

56 ADVISORY BOARD Key personalities sharing their expertise to ensure that we bring you the latest trends and issues in the field of trade.

Hospitality & tourism 58 Investment outlook Jones Lang LeSalle shares with us the latest data on – cross border investment.

22%

8% 87% 5%

Free zones encourage entrepreneurs to set up businesses by cutting bureaucratic red tape, reducing start-up costs, and generally rolling out the red carpet for investors. p68

TRADE AND EXPORT MIDDLE EAST

76

68

72

Trade & growth 62 The rise of Internet retailing The team at Euromonitor International gives us an overview on the key developments and the competitive landscape of the fast-growing market of Internet retailing.

Business setup 68 Free Trade Zones roll out the Red Carpet for Investors In an exclusive feature, Peter J. Fort, CEO, RAK Free Trade Zone Authority, explains why FTZs remain at the core of the country’s appeal as a global centre of business.

As forecasts look sunnier for the greenback, however, uncertainty remains high, leaving the dollar vulnerable to setbacks. p76

Finance 72 Across the borders Hisham Farouk, Managing Partner of Grant Thornton UAE gives us an idea on what businesses should keep in mind when expanding overseas and dealing with international trade.

76 Currency highs and lows The Western Union Business Solutions team gives us their highly researched update on the currency movements for the month of August.

TRADE and export middle east

ADVISORY BOARD Trade and Export Middle East presents a dynamic group of industry experts and leaders as part of its Advisory Board. The following key personalities will help add value to our analysis and ensure that we bring you the latest trends and issues in the field of trade.

H.E Saed Al Awadi CEO, Dubai Exports, Department of Economic Development, Dubai

Dr. Adeeb AlAfeefi Director, Foreign Trade & Export Support International Economic Relations Sector, Department of Economic Development, Abu Dhabi

Khalil Saqer Bin Gharib Corporate Communications Director, Dubai Customs

Lakshmanan Sankaran Chairman, Regional Banking Commission (MENA)- ICC Paris

Moin Anwar Trade & Investment Commissioner (Middle East), New South Wales Government, Australia

Peter Fort CEO, Ras Al Khaimah Free Trade Zone

For more information, please visit www.tradeandexportme.com

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HOSPITALITY & TOURISM

Investment outlook THIS YEAR, GLOBAL HOTEL INVESTMENT WILL HIT A FIVE YEAR HIGH, REACHING $50BN, AND RISING 35% ON 2013 VOLUMES. ALSO ACROSS BORDER INVESTMENT FROM THE MIDDLE EAST IS RIDING HIGH. JONES LANG LASALLE SHARE THE LATEST DATA.

8%

74%

16%

9 2%

8% 87% 5%

The time of year for the Middle East’s largest investors and most famous family firms to travel to Europe with an agenda of shopping and business, is almost here.

Mixing that business with pleasure, some return to the Middle East with slightly larger

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holiday souvenirs than the rest of us can afford. Taking a strategic look at the figures, as reported

by Jones Lang LeSalle, Trade and Export ME looks at one key influencing factor on the rise in global hospitality transactions, cross border investment.

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HOSPITALITY & TOURISM

4% 8%

2%

57% 11%

9%

87%

22% 96% 4%

36% 34% 25% 5%

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North America

Africa

Latin America

Asia

Europe

Australasia

Middle East

Global

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HOSPITALITY & TOURISM

Middle Eastern investors, who accounted for US$4bn in outbound capital in 2013 are predicted to continue their current behaviour in addition to growing interest in portfolio acquisitions.

Cross border investment rising Opportunistic purchasing of assets – for example trophy purchases such as Katara’s recent snap up of iconic IHG properties in Europe, or the rumoured interest of Middle Eastern buyers in the original Scotland Yard HQ in London – will continue to fuel investment patterns.

With cross-border investment accounting for 30 per cent of global hotel investments in 2013, driven by outbound capital from the Middle East and Asia, it is surprising to learn that this will increase in dollar values, but that monopolies in the number of buyers, will cap further growth.

Middle Eastern investors, who accounted for US$4bn in outbound capital in 2013 are predicted to continue their current behaviour in addition to growing interest in portfolio acquisitions.

Hotel demand: The drivers • 15 per cent increase in outbound travel from China, 2013, rising further in 2014 • Leisure demand up: driven by baby boomers • Corporate demand up: driven by Millennials • MICE • Development of secondary locations • Mid-market development

At a glance: global hospitality transactions 2013 retrospect

2014 snapshot

$46.7bn

$50bn

Transaction total up 35% on 2012

$24bn

$28bn

post 30% uplift witnessed Americas

target projection growth, the Americas

$13.2

$16bn

Transaction values up 17% on 2012, EMEA

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predicted global total of hotel deals

EMEA transactions, driven by debt restructuring

The most famous trophy purchases of Middle Eastern investors

Harrods bought from Mohamed AL Fayed by the Qatari Royal Family in 2010 for $2.3bn IHG Europe Qatar-based owners, developer and operator Katara last month snapped up InterContinental Carlton Cannes, the InterContinental Amstel Amsterdam, the InterContinental Madrid, the InterContinental Frankfurt, and the leasehold interest in the InterContinental De La Ville Rome Valentino another purchase of the Qatari Royal Family, the Italian fashion house was bought for $857m in 2012 Art reports last year estimated that Sheikha Al-Mayassa bint Hamad bin Khalifa Al-Thani and the Qatari Royal Family spend an estimated £600m a year on art.

Groupe du Louvre Portfolio Constellation Hotels (part of the Qatar Holding investment vehicle that has invested in Sainsbury’s and Barclays) acquired the four hotels from Starwood Capital for $955m Marriott UK ADIA (Abu Dhabi Investment Authority’s) purchased of 42 Marriott hotels in the UK for $900m Malmaison and Hotel du Vin portfolio bought by private equity firm KSL for $319m.

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HOSPITALITY & TOURISM

The intercontinental comparison Hotel market cycle MEA

Hotel market cycle Europe Berlin

Muscat

Vienna

Moscow Istanbul

Amman

Bratislava Prague

Dubai Jeddah

RevPAR growth slowing

RevPAR falling

Cairo

Barcelona Budapest Brussels Munich, Krakow Frankfurt

Beirut RevPAR rising Kuwait CapeTown

RevPAR decline slowing

RevPAR growth slowing

RevPAR falling Madrid

RevPAR RevPAR Copenhagen rising decline St. Petersburg slowing Dublin Milan Sofia Paris, London Regional UK Lisbon Rome Geneva Zurich Amsterdam Warsaw Source: Jones Lang LaSalle

Riyadh Abu Dhabi Source: Jones Lang LaSalle

The region’s $180bn global real estate spree Looking to the future it is predicted the Middle East will continue its real estate reign, spending to the tune of $180bn over the next decade, according to research from CBRE. The focus will continue to fall on Europe, with interest also developing in America.

Growing role of Middle east capital in global commercial real estate investment market, by type of capital 15 All other investors

Sovereign wealth funds

12

$ Billions

9

6

3

0

2007

2008

2009

2010

2011

2012

2013

Source CBRE Research, RCA, *All commercial real estate and hotels, cross regional capital flows only

For an online version, please visit: www.tradeandexportme.com/2014/08/investment-outlook/

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TRADE & GROWTH

THe rise of internet retailing Internet retailing continued to report a rapid growth in the UAE, as the convenience of being able to shop at any time drives consumers to utilize this industry. This being said retailers of all kinds are expanding their product offering and are immensely capitalizing on the benefits of the Internet. In the following feature, the team at Euromonitor International gives us an overview on the key developments and the competitive landscape of this lucrative industry.

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Jabbar Internet Group FZ LLC, (Souq.com) leads with a

14%

value share in 2013

Internet usage booms as consumers become more confident to shop in 2013

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TRADE & GROWTH

Housewares and home furnishings most significant category in internet retailing with

42% current value growth in 2013

20%

growth in internet retailing in current value terms reaching AED 2 billion in 2013

14% CAGR in constant value terms

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Market trends Internet retailing has increased in popularity, specifically across housewares and home furnishings, video games hardware, apparel as well as consumer electronics towards the end of the review period, storebased retailers’ value shares have eroded. One primary reason behind this is that consumers have grown in confidence to purchase online because of their increasingly busy lifestyles. Another is that many consumers cannot afford to pay up front, hence on average 60 per cent of electronic transactions online. A good example for this is Jadopado. com, wherein most transactions are made through credit cards, which has helped grow the electronics portal online.

• Internet retailing grew by 20 per cent in current value terms to reach AED 2.0 billion in 2013, showing faster growth than the 11 per cent CAGR of the review period. The review period experienced a downfall in internet retailing during the economic recession, which then picked up towards the end as new players came into the market, such as Jadopado.com. This met growing online demand as did Souq.com acquiring Sukar.com in 2012, growing its resources, which all benefited the online business towards the end of the review period. Consumers also became more confident to shop online as the economy picked up and online retailers introduced safer payment systems through PayPal and other new security systems to encourage consumers to trust online retailers via warranty, and guarantee the products that they purchase.

• There has been growing internet penetration with the number of broadband internet subscribers at 1.8 million in 2013, as well as 70 per cent of households owning a computer and 99 per cent of

households owning a mobile phone.

Furthermore, there have been growing mobile internet retailing transactions, with 0.37 per cent of purchases carried out through smartphones, and 99.63 per cent carried out through other means such as PC and tablets. A lot of consumers go online to browse different product offerings as well as use social networking websites.

Hence a lot of companies that do not offer internet retailing have targeted social media sites such as Twitter, Facebook and Pinterest to promote their products as another way to grow sales.

• In value terms, housewares and home furnishings internet retailing grew by 42 per cent in 2013, although this growth stemmed from a very small base. Followed by video games hardware internet retailing with 21 per cent value growth and then followed by digital gaming and apparel internet retailing in 2013.

• Despite this, consumer electronics and video games hardware internet retailing is the most significant in internet retailing in value sales terms. Through industry sources, 170,000200,000 people visit consumer electronic portals a month in the country. The reason for this is that consumers have grown to trust and be loyal to certain brands, and online retailers such as Carrefour, along with IC4UAE.com and Jadopado. com, have managed to build this trust through quick delivery, discounted prices or promotions and secure purchasing.

Furthermore, consumers in the country are tech-savvy, very fashion-conscious and are keen to acquire the latest technological innovations in consumer electronics and video games.

• Packaged food internet retailing, housewares and home furnishings, on the other hand, are the products least desired to be purchased

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TRADE & GROWTH

Internet retailing in the UAE is mainly dominated by local and regional players rather than international players, as these are the most known in the Middle East region.

online in value sales terms. This is because consumers seek fresh food and with home furnishing, consumers like to touch and feel the product before consumed.

• Growth in internet retailing has affected manufacturers in the sense that more store-based companies are seeing the opportunities with the high customer base online, and are looking to grow further. Over the review period, some companies such as Géant (www.geantonline.ae) and Lulu (www.luluwebstore.com) took the opportunity to launch online, these online stores were mainly launched to compete with IC4UAE. com within the electronics field.

Through this it can be seen that it is mainly grocery-based retailers that are impacted by internet retailing, and venturing out into multichannel development, which is seen to have wide product offerings as well as promotions, increasing their consumer base.

• Through industry sources, UAE residents hold approximately one third of credit cards in the region, and at 59 per cent is one of the highest penetration rates in the world. According to Euromonitor International, electronic direct/ACH transactions grew by 13 per cent in 2013. Towards the end of the review period, online retailers gave options for consumers to pay via instalments

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as well as cash on delivery, with free delivery charges and free returns. This has encouraged more consumers to buy online however 40 per cent of them are still cautious about putting their credit card details online.

• In regards to delivery options, towards the end of the review period some changes were implemented. The significant factors show that a lot of online retailers are using to differentiate themselves from store-based retailers include same-day delivery and customer service to build trust with merchants online, to help grow their business on an online platform.

Competitive landscape Jabbar Internet Group FZ LLC leads the Middle East region, thanks to its brand Souq.com.

• Souq.com has managed to build a regional network across the Middle East with its wide range covering various categories in internet retailing such as consumer electronics, video games, apparel, jewellery and watches, and beauty and personal care. It also operates both as a retail site and as a marketplace for third party sellers.

It also acquired Sukar.com in 2012, which added to its continued leadership in the internet retailing category. Sukar.com was established to mainly target the Middle East with its name having a strong Arabic connotation.

Amazon.com Inc. is the second top online store in the region.

• It has built its reputation in the UAE through its name being known back in expatriates’ home countries, as well as providing products that are not easily available in the UAE. • Pure internet retailers led internet retailing by the end of the review period. They have performed better than multichannel players in the UAE. This is mainly because they have established a wide consumer base among

expatriates with their offerings.

Consumers mainly know their brands through their experience online. Apparel internet retailers, however, are mainly pure online players such as Souq.com, Sukar. com, Namshi and Reebonz as they have been established to sell the products of a wide variety of top designers all in one online platform. They seek to provide the convenience that consumers want, and their competitive prices have also helped in establishing their presence.

• Internet retailing in the UAE is mainly dominated by local and regional players rather than international players, as these are the most known in the Middle East region. Furthermore, the provision of free shipping and free returns is popular among Middle Eastern countries, and this has encouraged more consumers to purchase from online stores. By these sites offering these services, it gives them a competitive advantage over global internet players such as Amazon.com Inc. Certain European websites do not provide delivery to the UAE, or if they do they have expensive shipping fees.

However, certain items such as media products and games are mainly purchased via Amazon.com Inc, hence this company still has a huge presence in the UAE. • Other leading retailer players have been absent from online retailing in the UAE, mainly because there are no set regulations when items are purchased online, so if a fraudulent transaction takes place, credit card holders have more rights than vendors. Furthermore, the law does not have set rules as to how to deal with returns or fraud through online transactions.

Looking ahead • Over the forecast period consumers will become more confident in purchasing online as online retailers are expected to secure

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TRADE & GROWTH

As much as electronic purchases have grown online, the UAE is a very cash-driven society due to security purposes.

payment methods further. Also, their current payment methods of cash on delivery and PayPal for prepaid purchases will continue to help maintain security against fraud.

Online retailers will also introduce product protection to ensure products have enough warranty, to give consumers that sense of security when they purchase a product online. Store-based operators are also seeking to go online, exemplified by Al-Futtaim Group’s IKEA launching in 2012, and Géant and Lulu Hypermarket launching online in 2013. This trend will help consumers embrace online internet retailing more.

• The forecast period is expected to record promising growth of 14 per cent CAGR in constant value terms, in comparison with the 10 per cent CAGR of the review period.

Internet retailing’s main growth is expected to be contributed by other media products, housewares and home furnishing and consumer healthcare, mainly driven by a small market value base. For bigger internet retailing markets, consumer electronics is expected to see 15 per cent constant value CAGR alongside with apparel internet retailing at 10 per cent constant value CAGR as fashion-conscious consumers increase in number in the UAE, and will have more purchasing power

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•

•

•

•

with the economic boom expected.

More expatriates are expected to enter the country because of the political instability happening in Egypt and Syria, and the crisis in Europe, which will all contribute to value growth. Payment systems will become more secure, consumers are expected to build more confidence in shopping online.

In 2016, m-commerce is expected to have a one per cent growth.

This will be mainly due to expected increase in the number of smartphone purchases, at just under 100 per cent, as well as shorter product lifecycles increasing the number of product launches.

However, as much as electronic purchases have grown online, the UAE is a very cash-driven society due to security purposes.

Furthermore, banks were introducing schemes to give benefits for credit card users over the review period, and will continue to do so to encourage more consumers to use credit cards. There is also a portion of the population, mainly Emiratis and Arab expatriates, who seek Islamic credit cards for religious purposes and hence the availability of such cards has grown through marketing campaigns, and will help contribute to growth over the forecast period.

According to industry sources 60 per cent of consumers purchase using credit cards, and this is a higher portion than cash buyers.

This is mainly due to consumers trusting their merchants as well as being encouraged through secure payment methods.

By 2018, 2.2 million people are expected to have internet subscriptions in the country, which is 25 per cent of the population.

This growth will be primarily due to the increase in the number of tech-savvy consumers, which will influence online purchases positively. The growth in the number of smartphones and computer possessions by then will

also contribute to online purchases.

• Apparel and personal goods and eyewear are expected to outperform other categories over the forecast period in value growth terms.

Other product types that have been under-represented within internet retailing such as housewares and home furnishings are expected to see strong performance. This is because consumers will seek more deals and have less time to shop from furniture stores.

• More players are also likely to penetrate the category as more store-based operators start launching online as they see online retailing grow. On the other hand, consumer electronics and video games hardware internet retailing are expected to see strong growth too of CAGR 15 per cent in constant value terms. Consumer appliances internet retailing will have the slowest constant value CAGR of nine per cent mainly as such products are hefty and require consumers to shop around and see the product.

• Store-based retailers are expected to face price pressure as they will need to react to lower price offerings online. In this sense more store-based retailers will venture out online to take advantage of the wide consumer base, as well as to help them regain profit margins as prices remain competitive online.

Store-based retailers will also need to introduce wider promotion offerings to help compete with online retailers.

For an online version, please visit: www.tradeandexportme.com/2014/08/ the-rise-of-internet-retailing/

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TRADE & GROWTH

Expert Insights Internet retailing has been one of the primary drivers for consumer goods sales over 2008-2013. However, in terms of personal accessories, internet retailing accounted for less than four per cent of global sales in 2013, representing its nascent nature in several key markets for the industry. A deeper dive into individual markets reflects a growing influence of locally-based third party websites as most manufacturers remain wary of operating internet retail portals.

Global exposure to online sales

With internet retailing accounting for a double-digit proportion of its sales in 2013, consumer electronics is an industry far ahead of the fashion world in terms of accepting online transactions. Within the latter, both apparel and beauty purchases are more likely to be completed online as compared to those related to personal accessories.

Relative Influence of Internet Retailing

Source: Euromonitor International

As of 2014, only a handful of online retailers dedicated to apparel and accessories have managed to establish a consumer following across multiple markets. These include Net-A- Porter, Neiman Marcus, Yoox and Asos, all of which have operations that focus on North America and Western Europe. Global internet retailing leaders such as Amazon, Tmall and Rakuten also

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offer substantial portfolios of personal accessories, as partnerships with them represent the foremost internet sales strategy for several global brands.

China

As the largest personal accessories market in the world, China’s retail landscape is of special interest to leading global manufacturers. Internet retailing in personal accessories is at a primitive stage in China, and accounted for less than two per cent of overall sales in 2013.

While international retailers have found it extremely tough to operate in China’s bargain- driven internet marketplace, certain local retailers are successfully tapping the consumer demand.

Over 2014 and 2015, Hong Kongbased jewellery retailers are expected to expand their respective portfolios offered through self- operated online portals. The willingness of local brands to explore the internet is evident in bags as well.

US

Despite being overtaken by China in terms of absolute value sales, the US remains one of the most evolved personal accessories markets in terms of brand communication and price segmentation. Internet retailing commanded over 10 per cent of retail sales in the US in 2013, representing one of the highest contributions in the world.

In fact, internet retailing forms an integral part of the growth strategies for several US- based global players. These companies have evolved to focus on an omnichannel experience for the consumer, which includes sales and communication through brand websites, catalogs and social media. All of these are dedicated to provide a lifestyle experience rather than just serving as an additional retail channel.

Apart from manufacturers’ own initiatives, online operations of major retailers such as Amazon and Macy’s are expected to be increasingly vital for mid-priced and accessible luxury brands in the US.

India and Brazil

India and Brazil both have immense growth potential in terms of overall personal accessories sales. However, the evolution of internet retailing has been

Sulabh Madhwal Analyst - Personal Accessories and Eyewear, Euromonitor International

rather stunted in both markets. This is expected to change over the next five years as local online retailers are starting to find consumer acceptance as well as willing investors. In May 2014, two leading internet retailers in India – Flipkart and Myntra – announced their plans to merge and focus on new brand partnerships across apparel and accessories. In Brazil, dedicated online fashion retailers such as Dafiti and Privalia have a steadily growing portfolio of international brands which is helping popularise the retail channel among the masses.

Local retailers set to lead the way

Historically, non-US based personal accessories manufacturers have been reluctant to explore self-run internet retail portals. Although certain Asian manufacturers such as Chow Tai Fook are keenly looking at its prospects, traditional industry leaders such as LVMH and Swatch remain skeptical as concerns about erosion of brand equity and increased possibility of counterfeit goods sales prevent them from committing to internet retailing.

All the same, the sprouting of a number of third-party internet retailers in both developed and emerging economies indicate an existing consumer appetite for online fashion purchases. While manufacturers make decisions on retail partners, the key will be to gauge the market level preferences for various products. For instance, jewellery is more exposed to internet retailing as compared to bags and watches in France. Given the present circumstances, local third-party internet retailers are expected to be an increasingly popular route to market for brands across personal accessories.

For further insight, please contact Sulabh Madhwal, Personal Accessories and Eyewear Analyst, at sulabh.madhwal@ euromonitor.com.sg

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BUSINESS SETUP

Free Trade Zones roll out the Red Carpet for Investors

Peter J Fort, CEO, RAK Free Trade Zone Authority

Free Trade Zones have emerged to become hotspots of entrepreneurship, innovation and commercial success. In an exclusive feature for Trade and Export Middle East, Peter J. Fort, CEO, RAK Free Trade Zone Authority, explains why these Free Trade Zones remain at the core of the country’s appeal as a global centre of business…

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The Irish businessman Brendan O’Regan had found himself in a desperate situation. As the owner of a duty-free merchandise shop in the Shannon, Ireland airport in the 1950s, he depended on the fact that flights between Europe and North America had to stop and refuel there, bringing with them a steady, reliable flow of customers.

But after commercial airlines developed long-range fuelling capacity, allowing them to bypass the airport and with it Mr O’Regan’s business, he made a critical adaptation. He submitted a proposal to airport authorities for a special manufacturing zone that offered tax breaks, thus creating the world’s first free trade zone.

The Shannon Free Zone, still in effect today, generates commercial traffic that specifically comes to the airport because of its advantages and benefits to investors. The business that the free zone created helped to save the late Mr O’Regan’s company.

The free zone was also a successful effort by the Irish government to promote employment in a rural area, make use of a small regional airport, and generate revenue for the Irish economy. It set the stage for other free trade zones around the world that use the same idea of offering tax breaks and other incentives to stimulate the economy in underdeveloped areas.

Free trade zones are geographical areas where goods can be handled,

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manufactured, and re-exported without the intervention of customs authorities, with fewer or no taxes, and with faster company set-up and support than can be found outside of these areas.

Also known as special economic zones, free zones are usually set up around major seaports, international airports and national borders with geographical advantages to facilitate trade. They offer numerous economic benefits to the areas where they are established, such as attracting employers – thereby reducing poverty and unemployment – stimulating the area’s economy, and promoting the construction of offices, warehouses, shops and other buildings where businesses can thrive. Multinational corporations often use free zones to set up factories which produce goods such as clothing, electronics, toys, shoes and other products.

Free zones clear the hurdles to foreign direct investment. For example, the Shanghai Free-Trade Zone, which was launched last year, allows certain kinds of products that are otherwise banned in China – such as the sale of video game consoles – to be sold only in the free zone.

Free zones around the world also offer other benefits, including 100 per cent repatriation of capital and profits, 100 per cent free transfer of funds, 100 per cent exemption of import and export duties, fast-track visas and licences, low-cost labour, and easier recruitment procedures.

In the UAE, free zones offer a particularly important advantage for entrepreneurs from other countries.

There are generally two options for foreign investors to set up a business here. The first option, outside of a free zone, is to partner with a UAE National, who will own 51 per cent of the business. The other choice, one that most foreign investors prefer, is doing business in a free zone, where investors can own 100 per cent of their business, rather than just 49 per cent.

The Ras Al Khaimah Free Trade Zone (RAK FTZ) differentiates itself from other free zones in the region by offering the same benefits as other special economic zones, but at substantially lower cost. The cost of living and doing business in Ras Al Khaimah can be 25 to 50 per cent lower than in other emirates. For that reason, companies which want to take advantage of the economic opportunities arising from the World Expo 2020 in Dubai can set up shop for less money in RAK FTZ. Less than an hour’s drive from the Middle East financial hub of Dubai, RAK FTZ offers awardwinning services and world-class facilities that are on par with other free zones, but in a much more cost-effective way, allowing for a healthier return on investment. For business owners, every dollar that is not spent on renting business facilities, paying for workers’ housing, or purchasing a licence can go instead to the bottom line.

What Mr O’Regan learnt back in 1950s Ireland still applies today: Free zones encourage entrepreneurs to set up businesses by cutting bureaucratic red tape, reducing start-up costs, and generally rolling out the red carpet for investors.

In today’s rebounding economy – where costs and competition are steadily on the rise – setting up shop in a free zone can easily make the difference between failure and success.

Peter J Fort is the Senior Economic Advisor to the Government of the Emirate of Ras Al Khaimah and the Chief Executive Officer of the Ras Al Khaimah Free Trade Zone Authority.

For an online version, please visit: www.tradeandexportme.com/2014/08/ free-trade-zones-roll-out-the-red-carpetfor-investors

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FINANCE

ACROSS THE BORDERS LEADING EXPERT HISHAM FAROUK, MANAGING PARTNER, GRANT THORNTON UAE, SHARES HIS VIEW ON INTERNATIONAL EXPANSION, GROWTH STRATEGIES AND DIMINISHING TRADE BARRIERS.

Hisham Farouk, Managing Partner of Grant Thornton UAE

For local businesses, which are looking to expand overseas, what are key factors to bear in mind?

The first consideration for any company expanding overseas is to ensure they identify the right market to suit their product, capacity, service delivery and target audience. These elements need to be considered at the preliminary stage given that doing business varies across borders.

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Barriers to entry are easing across the world given new markets are much more accessible, with the availability of logistics and technology, local businesses must choose wisely as to which is the right market for them in order to meet their growth strategy.

There is an opportunity cost in every transaction and therefore they should analyze what suits them, their target audience and business the most.

Research from the International Business Report, highlighted that Singapore (88 per cent) and the UAE (66 per cent) are two countries most interested in growing through cross

border transactions, therefore these factors must be considered when entering new markets and expanding overseas, which provide differing challenges and opportunities.

What countries and products, according to you, have potential for trade with Dubai in the coming years?

This is dependent upon the product and service that the entrant would be marketing in response to local

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FINANCE

need and want for different products and services. It is a competitive market, which will continue to present opportunities in the years to come, however how you approach this market and target the audience for your specific business will be the reason for success or failure.

What role do you envision the Expo 2020 playing in facilitating international trade?

Overseas expansion is a very consuming project both in time and resources.

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market need and demand. The economy in the UAE has continued to grow throughout the years and has overcome the economic downturn rapidly. It has increased by more than six fold over the past 26 years to become the fourth largest economy in the Arab world.

There are many options open to international companies seeking to establish a business in the UAE. Countries from the Far East, Africa, India and Western markets all have opportunities to trade with Dubai in the coming years, as the population continues to diversify so does the

Expo 2020 is a six month trading event that will allow global companies to interact under one roof. It also provides a great opportunity to identify other businesses and understand the global dynamics in your chosen market. It will allow companies to showcase innovation in their sector and align their business on a global platform. It is estimated that this win will create innumerable opportunities due to the increased demand in various sectors namely leisure and tourism (with an estimated 25 million visitors expected to arrive), construction and logistics.

This win will see the emergence of entrepreneurial businesses and dynamic SMEs who will work collectively to deliver the ambition that the UAE has, which will inevitably facilitate international trade and truly position the UAE as a regional business hub.

What advice would you give to exporters from the UAE looking to expand overseas?

Ensure your house is in order first. Overseas expansion is a very consuming project both in time and resources. Also ensure that you have studied your chosen market carefully. Understand rules and regulations, tax regime,

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Always seek the right advice and ensure you do your due diligence and conduct a feasibility study before taking any expansion action, as without this it could be a costly mistake.

ownership rights and expatriation of funds. You can also consider whether certain markets may be advisable to have a local partner to support your initiative. Always seek the right advice and ensure you do your due diligence and conduct a feasibility study before taking any expansion action, as without this it could be a costly mistake.

What are some of the biggest trade barriers local businesses face when expanding overseas?

This is dependent on the goods or services but regulations on manufacturing and taxes are two key points of consideration.

Some jurisdictions require local materials to be used or impose high custom duty. As Dubai is a non-tax enforced environment, it is critical to understand the tax implications for trading overseas and impact on margins you have achieved previously in Dubai.

Are SMEs in the GCC at a disadvantage when it comes to pricing, as compared to businesses in dominant markets, such as the USA? The SME eco-system is still at is primacy in the region and therefore the support they require is still very much developing as we speak.

This support mainly comes from three key aspects, availability of finance, which is more expensive if accessible, supplier payment support and access to position themselves in the market. However, we must also consider that the UAE in particular along with other GCC countries provides a fluid market for SMEs, as opposed to the USA where there is no mid-market

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between the larger conglomerates and the start-ups who enter the market. Therefore, the GCC does present more opportunities for dynamic SMEs who have a distinct USP.

How can a business trading online ensure that it has a true USP, when it might have thousands of global competitors, whom anyone can access?

Online trading is about identifying a gap and providing services or goods that fulfil it. Since there are thousands of online companies, and searching/marketing your product is fairly cost effective, businesses must position themselves effectively in the online space to ensure they are easily accessible (via SEO etc.).

What is very true to any business is also true for online, which is consistency and quality of service which are the key ingredients to success. When a consumer/ customer shops online, they expect the same level of service and efficiency as with any transaction.

What kind of support/services does Grant Thornton offer to businesses looking to do international trade?

Grant Thornton is one of the world’s leading organisations of independently owned and managed accounting and consulting firms.

These firms provide assurance, tax and specialist advisory services to privately held businesses and public interest entities. Clients of member and correspondent firms can access the knowledge and experience of more than 38,500 staff in over 160 countries and consistently receive a distinctive,

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FINANCE

Social media and technological solutions enable you to market and reach a significantly larger audience at a fraction of the price.

high quality and personalised service wherever they choose to do business. As a global professional services firm, we can advise on markets, assist with setting up, and introduce our potentials to stakeholders in chosen markets through our network. We are known as the advisors of choice for dynamic organisations.

How can local businesses ensure adherence to global standards and best practices?

As stated earlier, due diligence is critical for this and local businesses should seek assistance from a qualified advisor to ensure adherence to all rules and regulations.

Is arbitrage another opportunity for businesses working in international markets?

It may be, but it isn’t an immediate viable consideration in regional markets given the limitation of real timeliness of information.

Finally, what influence do you think social media and other technology solutions have on the world of international trade?

It’s one of main reasons borders and barriers to entry are diminishing. If we take a simple example of Amazon and how it revolutionized online sale - today, you can practically order anything in almost any part of the world.

Social media and technological solutions enable you to market and reach a significantly larger audience at a fraction of the price.

With crowd funding and open source developments, you can effectively raise funds, R&D your product, find a manufacturer to lease a production line and sell your product all from your laptop in a coffee shop somewhere. Rules of engagement have completely changed with current and rapidly advancing technology and the use of social media which allows you to promote your product on a one to many basis as opposed to one to few - all at the touch of a button.

Trade finance and trade credit insurance are two crucial financial instruments that could help companies when doing business overseas. What are key trends you see in this sector? Do you think these areas have been utilised to their full potential?

I believe there is great opportunity to expand in these sectors and provide more structured products which will inevitably increase and support trade.

www.tradeandexportme.com

For an online version, please visit: www.tradeandexportme.com/2014/08/ across-the-borders/

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FINANCE

Currency highs and lows The team at Western Union Business Solutions gives us a preview of what to expect from the three major currencies in the market.

Find out what’s in store for the USD, EUR and GBP for the month of August.

USD It’s been all year in the making but the greenback finally finds itself on the brink of a meaningful upturn.

America’s buck is hot off a fruitful July when it powered to multi-week highs overall and multi-month peaks versus the Euro.

Sentiment brightened on July 15 after Federal Reserve Chair Janet Yellen laid the groundwork for an early rate hike if the economy continued to show signs of improving health. Testifying before a congressional panel, Ms. Yellen said last month that if faster job growth led to a quicker decline in the jobless rate, the bank might have to move sooner and more rapidly to raise rates.

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At last check, the job market was on its best winning streak since the late 1990s. Through June, the US economy had added at least 200,000 jobs which drove unemployment to a 5 ½ year low of 6.1 per cent. Unemployment is now on the brink of tipping below six per cent, a level the Fed in June forecast wouldn’t materialise until next year. A jobless rate below 6 per cent would serve as a big vote of confidence in the greenback as it would bring the Fed closer to attaining its goal of maximum employment.

Although the US economy continues to recover at an uneven rate, conditions look much brighter than they do in the Eurozone which continues to be restrained by high unemployment and low inflation.

That adds up to Euro-weakening divergence for both growth and central

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FINANCE

As forecasts look sunnier for the greenback, however, uncertainty remains high, leaving the Dollar vulnerable to setbacks.

bank policy. The European Central Bank in June stepped up monetary stimulus while the Fed this year has increasingly dialed down on its monetary support to the improving US economy. Meanwhile, the Fed’s QE bond buying programme, which has been positive for growth but negative for the Dollar, is on course to end in October.

Consequently, the recent foundation of strength the greenback has formed could have the trappings of a durable upswing.

A stronger Dollar is a boon for American importers who buy their goods from overseas. As forecasts look sunnier for the greenback, however, uncertainty remains high, leaving the Dollar vulnerable to setbacks. Meaningful liftoff of the US currency may have to wait until the Fed sketches a more hawkish outlook and Treasury yields take notice and rise.

Upcoming Critical Events August 1: US July Non-farm Payrolls August 1: US July ISM Index Manufacturing August 13: US July Retail Sales August 20: FOMC Releases July 29-30 Meeting Minutes August 28: US Q2 GDP revision

Economic Indicators 3-month deposit: 0.24% GDP: -2.9% (ann.) Q1 Inflation: 2.1% June Unemployment: 6.1% June Trade deficit: USD -44.4 billion May

EUR The fallout has happened, now what?

The European Central Bank (ECB) threw the proverbial ‘kitchen sink’ at the markets in June and the fallout from that historic monetary policy

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announcement helped to take the Euro to eight-month lows against the US Dollar, two-year lows against sterling and five-month lows against the Yen during the month of July. So what comes next?

The economic situation for August does not look too much altered from July. Monetary policy is not widely expected to be altered at the next ECB meeting on August 7th, despite calls from the IMF to embark upon quantitative easing measures. The central bank has been relatively clear in its policy communique and economic data from July is not generally seen as something that will have altered the outlook from policy makers.

The ECB has said that it will wait until after the first tranche of lending has gone out at the beginning of December before assessing whether or not to embark upon additional extraordinary policy measures. That means investors will continue to cling to all economic data as they determine whether or not more policy measures will be required at the beginning of next year.

With that in mind, growth remains uneven and weak. Surveys on the manufacturing and service sectors did show some signs of improvement in the month of July, but so far quarterly growth for Q3 is estimated at a poor 0.4% with the manufacturing sector in France still contracting.

On inflation, the ECB hopes that the liquidity injections expected later in the year will increase demand and help lift prices. There have already been some signs of bottoming in HICP figures. So as long as consumer prices remain steady and potentially improve, there will be little reason for the ECB to take more policy action anytime soon.

The rate of unemployment seems to have also steadied and in some places is even falling. On balance, the Eurozone economy seems to be treading water and it will take time for the Central Bank’s policy

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measures from June to impact real economic data.

In the meantime, there are some external factors and internal events that could have a bigger immediate impact on the Euro. Clearly geopolitical risk has been heightened and the damage it could make on business sentiment figures has yet to be revealed.

Given the degree of offsetting events and economic data in the Eurozone, the Euro’s direction over the course of August could be a matter of default, meaning it could be subject to movements outside of its specific realm as investors focus on the greater uncertainties of when the UK and US will embark upon tighter monetary policy.

Upcoming Critical Events August 01: EUR July Manufacturing PMI August 04: EUR June PPI August 05: EUR July Services PMI and June Retail Trade August 07: EUR ECB Monetary Policy Committee Meeting August 13: EUR June Industrial Production August 14: EUR Q2 GDP August 17: EUR June HICP August 18: EUR June Trade Balance August 28: EUR August Business Climate Index

Economic Indicators 3-Month Deposit Rate: 0.11% GDP (annual rate): 0.90% Inflation (annual rate): 0.50% Unemployment: 11.6% Trade Balance: EUR 15.4 billion

GBP The Pound’s run to multi-year highs came to an abrupt end in July as the recent string of strong UK economic data began to fade. At the same time,

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signals from the US turned more hawkish. As a result sterling suffered its biggest weekly decline in months against the US Dollar to hit onemonth lows. The question for August is whether this is the beginning of a sustained fall or just a temporary levelling out. The Bank of England may hold the key to the answer.

The Financial Policy Committee’s announcement regarding new measures to combat housing market risks was one of the key talking points of July but it was inflation data which really caught the eye.

Sterling edged closer to six-year and two-year peaks against the US Dollar and Euro, respectively, helped largely by data showing a significant increase in British consumer price inflation – a rise which limits the room the BoE has to keep interest rates at record lows for longer.

However, UK economic data on wage growth, manufacturing, retail sales and house prices painted a more dovish picture while minutes from the BoE’s July meeting confirmed that no members currently see the need to consider earlier rate rises. Perhaps the most significant development in July, however, came from the US where the Federal Reserve began talking about the possibility of raising interest rates sooner. The US Dollar strengthened putting pressure on the pound despite another strong UK GDP report.

Data in the final week of July from abroad may dictate currency volatility in the early part of August.

Markets will watch for US GDP figures and the latest US non-farm payrolls report as well as important inflation data from Europe.

However, the BoE’s Inflation Report on August 13 could be the makeor-break moment of the month for the Pound. In November the report caused significant movement in the sterling exchange rate. In February BoE Governor Mark Carney used the report as the moment to launch

the bank’s second version of forward guidance which sent the Pound soaring to new highs.

If the BoE uses August’s report as an opportunity to tell markets that over the coming months they will start to see some members of the Monetary Policy Committee voting for higher interest rates, then Sterling could potentially add yet another leg higher to its incredible climb since last year. New multi-year highs for sterling is a real possibility.

But if a still dovish Mark Carney delivers a somewhat disappointing UK economic growth and inflation outlook, then the Pound’s slide in July may turn into a more sustained fall in August. Some analysts are already predicting that it’s now “game over” for Sterling.

Upcoming Critical Events August 05: GB July Services PMI Survey August 07: BoE Interest Rate Announcement August 13: GB June Wage Growth August 13: GB June Unemployment August 13: BoE Quarterly Inflation Report August 19: GB Consumer Price Inflation August 20: BoE August Meeting Minutes

Economic Indicators BoE Interest Rate: 0.5% GDP: 0.8% Q2 (q/q) Inflation: 1.9% June Unemployment: 6.5% May Trade Balance: GBP -9.2 May

For an online version, please visit: www.tradeandexportme.com/2014/08/ currency-highs-and-lows/

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TECH TRENDS

Multiply your business productivity with these trendy mobile applications , Rushika Bhatia s view...

LinkedIn Pulse This popular app will completely change the way you access your daily news. LinkedIn Pulse enables you to get all your stories in one news feed offering a truly seamless experience. As the name suggests, the app is a part of LinkedIn and users have the option to log in using their LinkedIn accounts. The application delivers news stories from most major publications and users can customise their content – so what you read is personalised based on your interests. What is particularly attractive about LinkedIn Pulse is its ability to download news for offline reading, so you don’t have to worry about internet connectivity.

Available on: App Store and Google Play Cost: Free.

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TECH TRENDS

Duolingo How many times have you travelled for business without being familiar with the foreign language? Duolingo is a fantastic app that offers free tutorials for languages such as Spanish, French, German, Portuguese, Italian and English. The app’s interactive interface makes learning simple and fairly straightforward. More importantly, it saves you from the hassle of enrolling into different courses or buying various books for every language. What’s distinctive in the app is its option to track your progress, so that you know how well you are doing.

Available on: App Store and Google Play Cost: Free

Snapseed This photo-editing app is a quick, easy and convenient way to perfect images. If you are putting together a business proposal on-the-go, this app can be quite handy in resizing images, adding effects and so on. The app’s useful ‘Center-Focus’ feature allows you to highlight the primary subject of the picture by blurring out any background elements. Snapseed also offers a variety of image filters that help improve the overall appearance of the app.

Available on: Google Play Cost: Free

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TECH TRENDS

LogMeIn LogMeIn, with its advanced features, is perhaps one of the most useful apps you’ll come across. Following a few basic instructions, the app allows you to remotely access your computer using your Android device. So, for instance, you may be in a client meeting, where you need to urgently get hold of additional information to close the deal with very limited time on-hand.

Using LogMeIn, you can easily get all the files on your computer without having to travel at all! Of course, you do have to ensure that your computer has the LogMeIn software installed.

Cost: Basic version and services – Free

Podio Podio is the ideal app for project management. It provides a common platform for all team members to work remotely on projects using handheld devices. With notable features such as idea sharing, instant feedback, project handling, measuring progress and so on, Podio can play a major role in boosting team performance. A unique dimension that makes this app an absolute must-have is its chat feature, which allows one-on-one interaction as well as group messaging. So, no matter where you are, you can continue collaborating on significant projects with the entire team.

For an online version, please visit: www.smeadvisor.com/2014/07/multiplyyour-business-productivity/

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Available for: Google Play and Apple Store Cost: Free

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TECH TRENDS

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