Talk Business July 2013 by Talk Business

W W W . T A L K B U S I N E S S M A G A Z I N E . C O . U K

FOR THE ENTREPRENEUR

BY THE ENTREPRENEUR

July 2013 £4.50

Pipe dreams Charlie Mullins, the Pimlico Plumbers’ millions – and how it almost went down the plughole

400,000 zombie apps How to avoid the curse of the undownloaded

Buckle up Full-throttle marketing fit for the fast lane

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Our achievements 2012

Our achievements for our franchisees. We: • Re-branded the Tesco hand car wash estate to the new design standard, operating under the Tesco brand • Created the new design standard for all new-build Tesco hand car washes • Opened our 100th Tesco hand car wash • Released our smart phone app with a customer store locator • Piloted a promotion using Tesco ClubCard • Ran campaigns with the Tesco local marketing team to offer incentives to customers to return to the store and the car wash to receive incremental benefits • Ran a promotion through the petrol filling station tills for discounts at our car washes - nearly 2,500 customers took this up across 20 stores with 60% being new to the car wash on average • Achieved unprecedented levels of brand recognition and positive feedback from Tesco’s own customer research • Ensured our hand car wash installation is ahead of current planned EU legislation • Negotiated operational savings and supplier discounts for our franchisees; e.g. we reduced their insurance premium by 24%

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• Launch a partnership advertising campaign featuring Tesco Bank • Implement a business development plan for our franchisees to use to grow their own businesses • Help to drive footfall by promoting sponsorship of different charities And there’s more to come...

Do you want to be part of this exciting opportunity? If so contact us on 020 8877 3884 www.wavescarwash.co.uk NEW COLOURS (FORMAT CHANGE) NEW COLOURS (FORMAT CHANGE)

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Best in class “Tesco Hand Car Wash is without doubt Best In Class. We are now offering our customers a great service that we can be proud of and that we know our customers love. Ethical, professional and reliable… our customers enjoy an industry-leading standard of service. Tesco Hand Car Wash is a world-class car washing service for our customers with a profitable model for our operators, Waves and Tesco” Peter Cattell - Category Director - Tesco Speaking December 2012 to Waves & Tesco Franchisees “Since we started in October we have seen the business grow steadily. Waves have provided help and support and being able to run promotions via the Tesco petrol station netted us lots of new customers.” Roland Shahini - Franchisee - Tesco Hand Car Wash Burgess Hill “We have had a solid flow of customers from the day we opened. We have four sites operated by our family and another on the way and we are very happy with Waves; being on a Tesco site means we get access to far more customers than we could ever expect if we had a stand-alone operation. “ Suni Rasim - Franchisee - Tesco Hand Car Washes in Stow and Cheltenham

aves has a long and established relationship with Tesco going back to 2006, but in 2011 when Tesco wanted someone to manage their entire hand car washing estate they choose Waves to become the sole provider.

“I think it is because we shared the same values and concepts of customer service that was crucial in us winning the contract” says Joanna Graham, a founding director of Waves, and their principle contact at Tesco on a day to day basis. “What we have done since winning the contract is to convert all of the existing car washes to the latest Tesco design standard, and this means we now offer a best in class service to our customers” explained Graham. This is clearly evident today when you visit any of the current 120 stores where Waves is operating. All staff are in uniform and they all deliver the same types of services. Everyone operates from a smart cabin situated in a prominent location within the car park - always within easy access of the store. “Ours and Tesco research shows that customers are happy to leave their vehicles whilst they shop” Graham explained, “but it is important that we are close enough to the store entrance so they can get back and collect their car easily.” Waves provides a complete package for all new sites and we completely build, install and equip the hand car wash. The full installation also includes Tesco approved signage and marketing materials, together with training and on-going support. It is also a business that lends itself to the management franchise model, where a single franchisee will operate a cluster of locations. Five year Tesco hand car wash franchise packages start from £47,500 + VAT. For more commercial information and for available locations please call us on 020 8877 3884 or please visit www.wavescarwash.co.uk.

All operational contracts will be with Waves Consultancy Limited. Please note that as franchisee you will have the right to use the on-site installation however the installation and equipment remains the property of Waves Consultancy Limited for the duration of the term.

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51 Contents

iNSIDE 11 Editor’s letter

Focus on strategy 51 The branding column Rich With 53 Comedy of errors Strategy mistakes 56 Keeping your contacts Social media contacts

13 Letters 15 News & events

61 The Flexible approach Flexibility 62 Reaching your goals Adam Caplan 65 Email fail Email mistakes

Focus on MARKETING

18 Focus on Success 18 Plumber to the stars Founder of Pimlico Plumbers, Charlie Mullins 26 Take one company Goldgenie 29 Introducing… TB grills a young up-and-comer 31 Awake your innner entrepreneur The entrepreneur mind

67 The marketing column Kimberly Davis 68 Out in the cold Cold calling 70 It’s not you, it’s me… Customer care 73 Bullseye Social marketing 75 Sites to excite Web design 79 The Sales doctor Solving your sales problems

102 Dawn of the dead Monetising apps 105 I’ve got an app for that… Our fave business apps 106 Lenovo vs Toshiba This month’s best desktop all-in-ones

109 Franchise news

86 The apprenticeship argument Apprenticeships

Focus on MONEY

89 If you’re happy and you know it Personal development

46 A day in the life… Diary of a Start-Up Loan recipient

97 What’s in a name TLDs

81 The people column Lee McQueen

130 He said/she said What are our entrepreneurs saying this month?

44 Share the wealth Share options

94 Caught in a web Website hosting

Focus on FRANCHISE

35 Book reviews

41 Strange bedfellows PE vs VC

93 Our man in the valley David Richards’ tech column

Focus on people 83 A very long engagement Retaining talent

37 Do you take card? Payment options

Focus on technology

90 Secret diary of an entrepreneur A week in the life of Sherbet Pip’s founder

111 Spotlight Recognition Express 114 Take one franchisee Really Awesome Coffee: Mike Woods 117 Mastering a franchise Marketing strategy

Focus on aDVICE 120 Orega 123 Freelancer 126 HR Insight

102

49 Before you sign on the dotted line… Legal agreements

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Editor’s letter

Scan this QR code to subscribe to Talk Business

EDITOR

Dawn Murden dawn.murden@astongreenlake.com

DESIGN

Paul Christopher Daniels paul.daniels@astongreenlake.com Heather Rugeley heather.rugeley@astongreenlake.com

WEB DEVELOPMENT MANAGER Mitchell Finlay mitchell.finlay@astongreenlake.com

SALES AND MARKETING MANAGER

Scott Hartley scott.hartley@astongreenlake.com

SENIOR ACCOUNT MANAGER Damien Ward damien.ward@astongreenlake.com

ACCOUNT MANAGER

Trystan Hurley trystan.hurley@astongreenlake.com

MANAGING DIRECTOR Jay Boisvert jay@astongreenlake.com

Circulation/subscriptions: UK £40, EUROPE £60, REST OF WORLD £95 Circulation enquiries: Aston Greenlake Publishing Ltd T: 0203 617 4680 Talk Business is published 12 times a year by Aston Greenlake Publishing Ltd. Floor 8, 6 Mitre Passage Peninsula Central Greenwich, London SE10 0ER T:02036174681 ©Copyright 2013. All rights reserved. No part of Talk Business may be reproduced, stored in a retrieval system or transmitted in any form or by any means, without the prior written consent of the editor. Talk Business will make every effort to return picture material, but it is sent at owner’s risk. Due to the nature of the printing process, images can be subject to a variation of up to 15 per cent, therefore Aston Greenlake Publishing Ltd cannot be held responsible for such variation.

The bottom line? Never give up eing an entrepreneur is difficult. There’s so much to combat to keep your business, your dream, thriving. Economy woes, the uphill battle (and cost) of keeping up to date with ever-changing technology, and legal problems are all reported in the media. To be honest, you’d much rather sweep these issues under the carpet, because they seem like mountains, until you’ve devised a plan to tackle them. Once you have, they’re more like a scenic ride on a cable car. But what if the cable car malfunctions? Funding, inflation, hiring, firing... Then there’s your personal life to contend with, juggling kids, getting a mortgage, bereavements. What keeps you going? Our Face on the cover, Charlie Mullins, founder of Pimlico Plumbers, admits on page 18 he never wanted to be an entrepreneur. He wanted to be a plumber, but when demand grew he had the drive to expand and hire. On page 26, we also hear the incredible rags-to-riches story behind Goldgenie. Founder Laban Roomes hated struggling for money, but his

ambition manifested by age 12, by which time he was bringing home more money than his mother. Months back, I felt the sting of the recession when I was made redundant. At first, I was unable to see the light at the end of the unemployment tunnel. But finally, my ambition and drive got me here, editing Talk Business. The bottom line? Never give up. However, when times get really tough everyone needs support, and that’s what we’re here for. If you’re feeling uninspired, turn to page 29 to get your entrepreneurial brain ticking. As you do, you’ll notice a few changes to the mag, but every month we’ll still be supporting SMEs, bringing you the best interviews, tips and advice, for when times get tough. Take care of business for now.

Dawn Murden, editor

@TalkBusinessMag

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Contributors

The talent Elizabeth Smyth is EMEA marketing director of Marketo . She is responsible for driving all aspects of the company’s demand generation, corporate communications, brand awareness, and go-tomarket strategy across the EMEA region. She has more than 15 years’ international experience in B2B marketing, gained in Europe, Asia Pacific and North America. And has previously held diverse marketing roles at mega growth organisations, including salesforce.com, Oracle, and PeopleSoft. She is a frequent blogger and regular contributor to Marketo’s popular blog, Modern B2B Marketing. Read her advice on social marketing on page 73

Stephen Archer is a founding partner of UK business strategy and leadership consultancy, Spring Partnerships. With 30 years of business building, marketing and strategic implementation behind him, he has been described as: ‘The most accurate forecaster of the current recession in the UK.’ He has consulted for CEOs, boards and senior management of FTSE 100 and multinational companies, including Nestle, KPMG and Carlsberg. Stephen is also a regular commentator in the media, providing analysis on breaking news affecting businesses and the latest economic issues and trends.

Becky Patterson is the founder of Sherbet Pip and the director of Making Headlines. She has 20 years’ experience in PR and marketing, working in-house for a leading software company and at an agency before leaving to set up Byline Research. In 2011, Rebecca launched Making Headlines, which uses digital age economies of scale and distribution to bring affordable highquality professional services to start-ups and growing businesses, including workshops to help start-ups promote themselves on a shoestring. When not at work, you’ll find her either on a horse, or possibly in Ireland - buying one.

Read his tips for retaining talent on page 83

Read her business diary on page 90

Peter Boucher is commercial marketing director at Vodafone UK, where he works closely with businesses of all sizes and from all sectors to help them to find new and better ways of working. He originally joined Vodafone in 2002, and has since served in global brand marketing, as head of marketing for Vodafone live! and as marketing director and chief commercial officer at Vodafone Hungary. Prior to this, he worked in the food production and pharmaceuticals sectors, for companies including Unilever, Kraft Foods and GSK. Read his argument for adopting a more flexible approach on page 61

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Letters

If you’d like to send us your thoughts about Talk Business, or anything else that’s happening on the SME scene, just get in touch: email: dawn.murden@astongreenlake.com snail mail: Aston Greenlake, 6 Mitre Passage, 8th floor, Greenwich Peninsula, London SE10 0ER

The Talk Business mailbag was full to the brim with compliments this month – you’re making us blush! Thanks beloved readers, we heart you too

Happy customer

Hi, Talk Business has become my favourite magazine – I actually cannot get enough of it! Warmest Regards, Cheryl Effiom Manager, Jennings & Barrett

@CloudWSeries It's great to be working with @TalkBusinessMag for the #CloudWF on 26-27 June in London!

High street hopeful

Dear editor, I thoroughly enjoyed the optimism on display in your feature about the British high street last month [Death of the High Street, June]. After so much doom and gloom talk in the media, it was refreshing to hear from industry experts who had a different, more positive perspective on the matter. Personally, as a boutique owner in Bristol, I think the notion of high street retail is far from over. I work hard to offer an experience that it is impossible to replicate online. Of course, the growth of Internet shopping has impacted on my business, just as it has on everyone else’s. But that certainly doesn’t mean I have given up the fight for customers. Good service and great products means people will always come back and buy from me time and time again. Yours faithfully, Gemma Newman

Strength in numbers

ER OF H T T E L MONT THE

Dear TB, I totally identified with Lee McQueen’s recent column [Growing up, June]. I recently had to make a really tough decision about whether or not I was going to take on another member of staff and grow my business – it felt like a huge gamble to take. On the one hand, I couldn’t handle any more business than I was doing, so there was no way to grow without an extra pair of hands. But on the other hand, I wasn’t sure I could guarantee getting in enough work to pay another person’s salary. It was a big financial responsibility, and not a decision to be taken lightly. In the end I took the plunge, but it was great to read that someone else had also been daunted when having to make that call. It’s still early days, but I reckon, on balance, it was worth it. Thanks, Ben

Tweets of the month... @StepUpFinance Succession Planning Strategy – The end is a very good place to begin #business via @TalkBusinessMag @rdwhite49 The White Paper Daily is out! Top stories today via @TalkBusinessMag @Evie_Jank Just about to start a webinar with @ApprenticeKim @TalkBusinessMag #MarketingSolutions #MarketingTrends @Crowdcube Nice feature in @TalkBusinessMag about finance, feat'ing @Crowdcube & @AlexKammAndSons @growthfunders Friday is best day for undertaking troublesome jobs & making bold decisions in business according to @TalkBusinessMag @sales_awards Also a special #FF to our partners @callcentrefocus @SI_MagUK @TheSMPshow @TalkBusinessMag #salesawards @businessawards #FF to all our partners @cranfieldmngmt @Telegraph @SkyNews @GrichanPartners @IHG @TheScotsman @BizMattersmag @TalkBusinessMag @LeeMcQueen Really excited to be part of @sales_awards again! I'm judging the 'Sale of Year' Award! via @TalkBusinessMag

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News & events

Dates for the diary The 5th Future of Wireless International Conference 1-2 July The Møller Centre, Cambridge www.cambridgewireless.co.uk/ futureofwireless The Sterling Integrity Show 5 July The Cheltenham Park Hotel, Cheltenham www.sterlingintegrity.co.uk The Meetings Show UK 9-11 July Olympia, London www.themeetingsshow.com Portsmouth Business Expo 11 July Pyramids Centre, Hampshire www.portsmouthbusinessexpo. co.uk

Base London 11 July UEL, London www.basecities.com/London

ad:tech 11-12 September Olympia, London www.ad-techlondon.co.uk

The Business Show – UK 11 July Venue TBC www.thebusinessshow-uk. co.uk/forthcoming-events

The Sterling Integrity Show 27 September The Future Inn Hotel, Bristol www.sterlingintegrity.co.uk/

The Business Show – UK 18 July Venue TBC www.thebusinessshow-uk. co.uk/forthcoming

eCommerce Expo 2-3 October Olympia, London www.ecommerceexpo.co.uk

Franchise Opportunities Live 6-7 September Radisson Blu Edwardian, London www.thebfa.org

The Spain Start-up and Investor Summit Date & venue TBC www.spain-startup.com

Mobile security worry ACCORDING TO A survey by the security software company, Check Point, 79% of businesses experienced a mobile security incident in the past year. The incidents were found to be common and costly. Even 45% of the smaller businesses, with under 1,000 staff, said the incidents exceeded around £64,000 ($100,000) in costs. Findings suggest there’s a huge surge in personal mobile devices connecting to businesses networks, accessing emails and

customer data, yet just 23% were using security tools on their device. ‘The explosion of BYOD, mobile apps, and cloud services has created a herculean task to protect corporate information for businesses both large and small,’ said Tom Teller, security evangelist and researcher at Check Point Software Technologies. ‘An effective mobile security strategy will focus on protecting corporate information on the multitude of devices, and implementing

proper secure access controls to information and applications on the go. Equally important is educating employees about best practices as [the] majority of businesses are more concerned with careless employees than cybercriminals.’ The report The Impact of Mobile Devises on Information Security surveyed almost 800 IT professionals in the UK, US, Canada, Germany, and Japan. The full report can be viewed on the Check Point website. talkbusinessmagazine.co.uk 15

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News & events

SMEs hit by bank charges

£19m for energy entrepreneurs ENTREPRENEURS WITH INNOVATIVE ideas and products that are energy efficient and low in carbon generation, can now apply for a share of £19m in Government funding from the Department of Energy and Climate Change (DECC). The funding is the second phase of the Energy Entrepreneurs Fund, which has already allocated £16m since autumn 2012, to help bring a range of low carbon products to market. Previous products include energy storage, tidal turbine testing, a thermally-insulating window and an eco power shower. ‘This funding will get ideas off the ground and into the market, create new green jobs, and help the UK get ahead in the innovation global race,’

said Edward Davey, Energy Secretary. ‘An ambitious and driven small business sector can steer the economic recovery in the right direction. ‘I want to see Britain’s brightest and best SMEs sending in their applications.’ The scheme seeks the best ideas from the public and private sector, and particularly wishes to assist SMEs and start-ups. The DECC expects to open calls for projects every four to six months until all of the funding has been allocated. £19m is now available on a completive, rolling basis to support projects up to a maximum of £1m. The deadline for the first call of applications is 12 July. For full information on how to apply visit the GOV.UK website.

HIGH BANK CHARGES are hurting business already struggling with cash flow issues, says new research carried out by the Forum of Private Business (FPB). The study also saw an increase in firms reporting that banks are asking for harmful levels of collateral in return for finance. According to the study, the main concern for SMEs remains the rising cost of doing business, which was cited by 42% of respondents taking part in the FPB’s cash flow and finance study - although this was higher last year, at 54%. Other concerns were cash flow, at 38%, and concern around access to finance, also increased from 17% to 23% this year. ‘As a financial concern, the rising cost of doing business has abated slightly, which perhaps ties in with inflation having fallen recently, but it’s clearly still a real and present issue for small firms,’ said the Forum’s chief executive, Phil Orford.

Business Secretary blasts BBC’s The Apprentice BUSINESS SECRETARY, VINCE Cable expressed his ‘reservations’ about Lord Sugar’s BBC One programme The Apprentice. ‘I know that The Apprentice is designed to be dramatic television viewing, but it has very little to do with apprentices – people who are doing a serious piece of vocational training,’ Vince Cable told The Daily Telegraph.

‘I worry whatever the attractions of the programme as a piece of TV theatre, it gives people a completely false impression about what being an apprentice actually involves.’ However Vince Cable felt differently about BBC Two’s Dragon’s Den, admitting it was “a much more realistic way of assessing the potential of small businesses”.

Secretary Cable’s Department for Business, Innovation and Skills is trying to increase the number of apprenticeships, and wants to promote them as having equal importance to spending three years at a university. It’s hoped the number of people training in apprenticeships will double from 260,000 to 480,000 by 2022.

16 July 2013

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Focus on success FACE ON THE COVER

Reaching that pipe dream He’s nicknamed “plumber to the stars”, is worth an estimated £55m and was grilled by Peter Jones on BBC Two last month, but once upon a time, everything almost went down the plughole. Charlie Mullins, founder of Pimlico Plumbers tells Dawn Murden how his business made a U-bend hen I think of plumbers, I think of scruffy men with their, ahem, bums hanging out from old faded jeans and big boxes of dirty wrenches. I can’t help it. Funnily enough, Charlie Mullins, founder of Pimlico Plumbers, actually agreed with me on this. Although, sporting a rather smart blue suit and Pimlico Plumbers branded tie combo I

could see Charlie couldn’t be further away from this grubby plumber stigma. ‘You wouldn’t want a dirty plumber coming into your house,’ he told me. ‘Appearance is extremely important to us.’ Charlie Mullins started off as your regular local plumber, but when demand for his services grew, he founded Pimlico Plumbers in 1979 and started employing. The company grew organically from a dingy

You wouldn’t want a dirty plumber coming into your house

basement location, and today turns over £18m a year, has a workforce of 200, and 160 branded vehicles on the road. Charlie said that grubby stigma is exactly the opposite of his company. So much so, he has an extensive bible of dos and don’ts for staff, and his Pimlico HQ is spotless – something Peter Jones couldn’t help commenting on when Charlie appeared on his BBC Two programme, Peter Jones meets… last month.

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SUCCESS ‘This plumbers yard is more like a showroom,’ Jones said, utterly astounded by how clean it was. On first glance his cleanliness may seem a little OCD, but there’s a good reason why Charlie runs such a tight ship. During the recession of the early 1990’s the premises Charlie owned lost three quarters of it’s value, Pimlico Plumbers sprung a leak, and was almost forced into liquidation. But he didn’t give up on his pipe dream. ‘Every member of staff that was with us at the time went, and I came up with our working guidelines,’ he said. ‘I changed everything.’ I always imagined if anyone boasted to me about having an annual £1m salary and two large properties in Kent and Marbella, I might feel a little resentful, but this was not the case when Charlie told me this. Why? Because underneath that dapper suit lies a normal bloke, and a boy who grew up in the poverty-stricken Rockingham Estate in London’s Elephant and Castle. He is a truly self-made millionaire, who went from fixing toilets to rubbing shoulders with the likes of Simon Cowell and Richard Branson, who are both customers of Pimlico Plumbers. Charlie is not afraid of hard graft, he works closely with two charities and is currently badgering Prime Minister David Cameron to accept his proposal on apprenticeships, to help tackle the unemployment rate of young people in the UK. Even though Charlie hasn’t changed a U-bend for his customers in 30 years, he’s constantly inspecting the plumbing wherever he goes. ‘I always check hotels,’ he told me. ‘I’m a bit of an odd ball, ain’t I?’ Not at all. Under the layers of success, after all, he is a plumber, and says it’s all he ever wanted to be.

When did you decide to become a plumber and why? When I was nine years old I saw Bill, the local plumber. He had a nice car, a nice house and a good lifestyle. I wanted that. I spoke to him and he told me if I became a plumber I’d have a job for life, so I started bunking off school to work with him. At first I was just digging holes to get pipes out of the ground or organising his tools, but soon I became an apprentice. My mind was made up, the seeds were sown and I knew it’s what I wanted to do.

Every member of staff that was with us at the time went, and I came up with our working guidelines

You left school at 15. Do you ever regret that decision? Yes, I should have left at 14. By that time I’d gotten everything I needed from school. I had no qualifications but I wanted to work. When you started as an apprentice, did you ever expect to, one day, own your own company? Never. I just wanted to be a plumber, I never thought I’d become an employer. When the demand for my services grew, I had to employ others, I couldn’t be everywhere at once. It was the only way forward.

How did you get your start-up cash? I just put everything I earned back into the company. After I employed a few people, I soon rented a room in a basement in Pimlico, then two rooms, then the whole basement. It grew organically. Was your success instant or hard won? Hard. For many years I struggled and it took a while before I started making any profit. Then when things started to pick up, the recession of the early 1990’s hit and I almost went bust. Many times I thought about packing it in, but every mistake made me learn something. The changes - like the Pimlico Bible containing strict employee guidelines about cleanliness - I put in place, made us evolve. What is your top tip for getting through tough times? You can’t do everything, and you can’t run a business on your own; you need to delegate. I learnt I had to get other people on board to help me.

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25/06/2013 14:39

Focus on Success FACE ON THE COVER

How did you market your business back then, and how do you continue to do so? At first it was word of mouth, and I still think there’s no better form of advertisement. If you do a good job, customers will recommend you, and they’ll come back. Around 80% of our customers have used us before. Next was the branded vehicles, when people see them driving around London they recognise them. Today I’d say the Internet is our biggest advertising cost. What would your advice be to first-time businesses that are experiencing difficulties in the current economic climate? If you feel you’re on a winning horse; don’t get off. Cut costs accordingly while you can, adapt your price and always put the customer first. Existing customers get you through the tough times, so whatever they need, a specific engineer, day, or time; we give it to them. What would you be if you weren’t an entrepreneur? A plumber, plain and simple. I don’t know anything about anything else. I came off the tools 30 years ago; I couldn’t be the orchestra and play the drum. I miss plumbing, and often check the pipes in hotels and look at plumbing for my family and friends when they ask. You’ve featured in several TV documentaries, including Channel 4’s The Secret Millionaire, BBC One’s Posh Plumbers, and most recently BBC Two’s Peter Jones meets…. Has TV helped or hindered your reputation? The first time I went on telly I was very nervous, but now I enjoy it. I’ve had tons of comments about my appearances from people of all ages, saying they find me inspirational. It’s built my profile and Peter Jones meets… was worth £3m in advertising for me.

I miss plumbing, and often check the pipes in hotels and look at plumbing for my family and friends when they ask

We portray ourselves as the best in London, so to be on these shows is fantastic; everyone knows us. What was your favourite programme? Definitely The Secret Millionaire. I had a tough life, but it made me realise just how unfortunate some people are. It was difficult to be on the show, but it was so rewarding. I got to work with these people and help them. The programme helped hundreds of people and had a real knock-on effect. Your nickname is “plumber to the stars” with celebrities like Daniel Craig and Simon Cowell on your books and dozens of celeb snaps on your website. What’s it like rubbing shoulders with stars? A few call into the office, but I’ve spoken to others on the phone or bump into them at events. I’ve met George Best,

Jonathon Ross and Simon Cowell in the past. It was a pleasure to meet Peter Jones recently, and to be honest I’m a little in awe of him. He’s a true star, he believes in investing in young people and I’d love to see him on BBC One’s The Apprentice in place of Alan Sugar. You believe in investing in young people too; is this partly due to your background? My apprenticeship was the best thing I ever did and I want to give something back. At the moment I’m working hard to get my Pimlico Common Sense Apprenticeship Proposal implemented by the Government. The scheme suggests the Government pay Job Seekers’ Allowance (JSA) directly to the employer of an apprentice. It costs employers about £45,000 to employ an apprentice for three years, so paying the JSA to them

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Focus on success FACE ON THE COVER

I want to take more of the share of London plumbing

will help towards those costs and the apprentice’s salary. I believe this is the way to reduce youth unemployment. I think Boris Johnson and David Cameron are sick of me, but I’m determined to get our proposal through. We already have 1000 signatures. I do a lot of charity work too; I’m the patron for The Prince’s Trust and sponsor and fundraise for The Rhys Daniels Trust. What’s the best and worst thing about being an entrepreneur? The worst is that people are quick to criticise and judge you. A lot of people want to shoot you down. The best; me and my family have a great lifestyle and good comments prevail the bad. To be honest 98% is good, and only 2% is bad.

Do you find it difficult to balance your work and personal life? Yes, but I’m lucky that my family are happy to be involved in the business. Over 10 of them work at Pimlico Plumbers, including my wife, kids and grandkids. What’s in the pipeline for Pimlico Plumbers? We want to expand geographically into more parts of London, further out to the M25, in places like Richmond and Wimbledon. I want to take more of the share of London plumbing.

Contact: pimlicoplumbers.com

My Life I’m watching: I’m not a huge telly fan but I’m loving Peter Jones meets… on BBC Two right now, and not just because I was on it! I’m reading: I read a lot of business books. I really enjoyed Purple Cow by Seth Godin. I’m listening to: I’m not much of a music man either – I sound boring, don’t I? I’ll say something cheesy like Cliff Richard for now. I’m surfing: I’m always looking up new start-up businesses.

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all for

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visit www.recruitmentgenius.com

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SPONSORED ARTICLE

HR Elites Top 3 HR Tips for July 2013 1. Know your legal obligations Changes to employment law are taking place all the time. The average award for a successful unfair dismissal claim is ÂŁ9,133 for 2011/2012 (HR Expert). Keeping abreast with changes to employment legislation will ensure that your business remains compliant and that your staff are being managed fairly and consistently. 2. Rewards do not just involve money! Financial rewards are only one way of rewarding and motivating your staff. Small businesses should make the most of non financial rewards. The most commonly cited non financial rewards are increased flexible working arrangements, changes to the working environment and the creation of interesting job roles.

induction, holding regular management and team meetings, performing regular appraisals and performance reviews and providing them with all the necessary information on how to perform their role adequately and information on the business go a long way in making an employee feel valued. Pop into the office for a chat and a cup of coffee or contact us by telephone or e mail at info@hrelite.co.uk and our friendly team will help you with any of your HR issues. HR Elite Limited will be a regular feature of Connected and will be providing regular HR tips and advice in this magazine over the coming year.

3. Value your employees If your staff feel valued they are more likely to perform their jobs well and stay loyal to the business. Providing your staff with a robust

Contact: Tel: 01206 848459 info@hrelite.co.uk | www.hrelite.co.uk

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Vital statistics

Focus on marketing TAKE ONE COMPANY

Company founded: January 1995 Start up capital: £1,500 Turnover: £1m Profit: £700,000 Growth rate: When we first went online I made about £1,000 a week, now it’s around £80,000 a month. Biggest achievement: It will always be paying off my Mum’s mortgage, because it spurred me on in business.

It’s a goldrush! Everyone loves a rags-to-riches story, and Laban Roomes’ tale is pure gold. His company, Goldgenie customises and sells gold-plated luxury items, popular with celebrities such as the Beckhams and Elton John – a far cry from his modest east London roots

ife is all about playing the hand you’re dealt, something Laban Roomes knows well. His Jamaican parents split when he was four years old and his mother brought Laban and his sister up single-handedly in Leytonstone. Life was tough, but at age nine, Laban refused to sit back and accept a life of free school dinners and missed opportunities. ‘Despite Mum working three jobs, we never had enough money – I was determined to change that. ‘One day I went out and brought some shears and knocked on our neighbours’ doors offering my services.’ Cutting hedges, washing cars – Laban did everything he could for money, and by age 12 he was bringing home more money than his mum. As he grew up, he started buying cars in the UK and selling them in Jamaica for a

profit. This venture was doing so well, that by age 19 he’d paid off his mum’s mortgage. A few years later he moved to Jamaica to concentrate on his business, but on arrival disaster struck. His business partner had sold all his assets behind his back and in England his mother was taken ill. ‘I returned to the UK with nothing but £80 in my pocket,’ says Laban. ‘I’d tried my hand at social work but was sick of that. ‘I knew I was good at selling.’ That’s when he remembered a man he’d seen gold-plating cars in America. ‘He gold-plated wheels and emblems and made $2,000 a day,’ Laban says. ‘I wanted to do this, but make more money.’ So Laban borrowed £1,500 from a friend, designed a portable 24ct. gold-plating machine, and Goldgenie was born. Determined to secure a big deal, and fed up with car dealerships ignoring his letters, he turned up at a

One of the biggest challenges was that my company grew too fast

Lexus car convention and gave a demonstration on gold-plating. ‘Overnight I had deals with 11 Lexus car dealerships and spent the next five years goldplating thousands of emblems,’ Laban says. ‘But one of the biggest challenges was that my company grew too fast. ‘I drove to every inch of the UK dressed in a boiler suit trying to meet demands. Then one day my van blew up on the way to Bristol. ‘I could have been inside it, by this time I had a wife and two sons to think about. It was time for the business to evolve.’ Laban decided to offer business opportunities, helping others set up on their own, while spreading the Goldgenie name and ultimately taking some of the work load off himself. ‘We gave entrepreneurs a plating machine and trained them – I felt like I was giving something back,’ Laban says.

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Focus on success TAKE ONE COMPANY

However, it wasn’t long before this gave something back to him. ‘One of our business opportunities had to close due family illness, so he asked me to take over,’ Laban says. ‘One of the first orders I picked up was gold-plating a Nokia 8800. ‘I saw a market in this, and I was right. I had to pitch a tent in the garden and recruit my wife and sons to deal with demands!’ Laban embraced this goldrush like an astute miner. Especially when he received an email from the organisers of the Emmy Awards in Los Angeles asking him to gold-plate 55 mobile phones to be given to the awards winners, which included Denzel Washington and Dame Helen Mirren. ‘My business was evolving like I’d hoped,’ Laban says. The business continued to grow, and in 2007 Laban agreed to go on BBC’s Dragons’ Den. ‘I’d been asked to go on the show twice before, but I’d refused out of fear. ‘I was terrified they’d ridicule me – then a good friend of mine passed away; I realised I had nothing to lose.’ None of the Dragons seemed interested, but when Laban gave his final plea he saw a sparkle in James Caan’s eyes before he agreed to invest £60,000. ‘It wasn’t about the money,’ says Laban. ‘It was about having him as a mentor, and he was worth his weight in gold – literally!’ Goldgenie began to offer international master franchises as well as low entry business opportunities in the UK. The product line also expanded, introducing iPhones and iPads, which Laban and his team embellished with Swarovski crystals and gold. ‘Soon our items were on the shelves in Harrods and Selfridges,’ Laban says. ‘James’ influence gave us the boost we needed.’

I had to grow up pretty quickly and I missed out on some things, but now life is in my hands

A number of celebrities, including Victoria and David Beckham, Elton John and Usain Bolt bought their own Goldgenie gold-plated BlackBerrys and iPhones too. ‘We gave David a gold iPod as a present when he got his 100th cap for England – it felt good to treat a fellow Leytonstone boy, plus Victoria has bought a number of our items.’ In 2011, Laban bought James’ share of the business, and as Caan once helped him, he now invests his time and money in aspiring entrepreneurs. ‘We’re always helping launch new business opportunities and franchises,’ Laban says. ‘We’re also looking to invest in new start-ups in a scheme we call “Online Dragon”.’ As well as investing in people, Goldgenie believes in guilt-free luxury and uses gold suppliers who share their values that human rights of miners must be respected and that the environmental impact must be kept to a minimum. Laban is ambitious and unstoppable, so it comes as no surprise he’s not starstruck

by his celebrity customers or blinded by success. ‘Of course my upbringing spurred me on, but I can’t imagine not being where I am today,’ Laban says. ‘I had to grow up pretty quickly and I missed out on some things, but now life is in my hands.’ Laban may not have had the best start in life, but it seems in business he dealt himself a royal flush, and now everything he touches turns to gold… Contact: goldgenie.com

My Life I’m watching: I love Lost, The Apprentice and Spartacus (there’s lots of gold in it!). I’m reading: Anything philisophical and inspirational. I loved the The Richest Man in Babylon by George S.Clason. I’m listening to: Everything from classical to hip hop – it depends on my mood. I’m surfing: I’m pretty nosey and find myself a little addicted to Facebook. I’ve been getting to grips with Twitter in the last few months too.

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Focus on success UP-AND-COMING

Introducing…

Bryn Powell

Eco-warrior and charity hero; just two of the things that come to mind while interviewing Shell LiveWIRE winner, Bryn Powell, co-founder of revolutionary business, Containers Hostels ryn Powell, co-founder of Containers Hostels, is one third of the talented trio that launched the world’s first eco-hostel made from converted shipping containers, in the heart of London. The hostel also has a charity programme that works with local and international charities to provide containers to areas in need.

Where did the idea come from? The idea was born about a year ago with my business partners, Nick and Tom. The initial idea was to create temporary, low cost accommodation in time for the London 2012 Olympics. We didn’t have the opportunity to implement the concept in time, but realised that the business was going to be viable in the long term. What’s your advice to young entrepreneurs trying to get an idea off the ground? On numerous occasions I’ve felt so out of my depth. I got by, by surrounding myself and seeking help from some very clever people. Combine that with an amazing business plan that has all the variables and virtually everything to do with your business covered, and you are onto a winner. A great business plan is the foundation of a great business, but keep updating it. I think the Containers team are on their 30th draft, and it won’t stop there.

If you weren’t an entrepreneur, what would you be doing today? Most probably teaching. I love kids, and aiding in the development of future generations seems a pretty worthwhile job. What was your worst job? Probably being a painter and decorator. I always, somehow, managed to get paint on important items, often involving deductions from my wages. I got better though. As with everything - even business practice makes perfect. The learning curve at the beginning is steeper than a cliff face, but it levels off and soon you get the hang of it. What’s top of your bucket list? To complete a triathlon to the level of Ironman. That’s a 2.4 mile swim, followed by a 112 mile bike ride, and finally a marathon. What have been the biggest challenges you’ve faced as a young entrepreneur? Credibility. Some people don’t take you seriously when you’re young.

My Life > I’m watching: I’m always at the cinema. > I’m reading: Everything on Wikipedia. > I’m listening to: Anyone at Glastonbury Festival this year as I’m going. My guilty pleasure is BBC Radio 4. > I’m surfing: www.stumbleupon.com is perfect for procrastinating, but I do stumble across a lot of travel and tourism stuff, which I tweet about, or use for work ideas. almost unhealthily at times, motivates me to make it work, no matter what. What gets you out of bed in the morning? The excitement of being my own boss. What’s your vision for the future of Containers Hostels? To become the future blueprint of sustainable accommodation. Not only with a hostel chain in Europe and beyond, but also to expand into other areaas of ecofriendly accommodation. Contact: containershostels.com

How much does money motivate you? Not much, but both my business partners are money motivated. I hate losing, and the thought of losing my business, something I dote on

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Focus on success THE ENTREPRENEUR MIND

Awake your inner entrepreneur Entrepreneur and author, Daniel Priestley sets seven challenges to wake up your entrepreneurial brain

eing an entrepreneur is about having the entrepreneur’s mindset. It’s about seeing a problem and recognising the opportunity that it creates. It’s about connecting the dots when you meet a new person who could be a perfect strategic partner. It’s about dealing with the stress of endless possibilities and being able to decide what deserves your focus the most. I want to give you some real life challenges that will automatically start to enhance your entrepreneurial brain so you can tune into the choices that will make your business a success. These challenges might not seem to relate to your industry or your business, but I promise you; they will wake up the part of you that is responsible for driving forward. I’ve recommended these challenges to numerous friends, and consistently the feedback is nothing short of transformational.

You probably started the business to have more freedom, so stop being a slave

Challenge 1: make three big calls Pick up the phone and call a person or an organisation who could take everything to the next level. Maybe it’s a dream customer that could triple your profits at a stroke, maybe it’s a celebrity that could endorse you,

or maybe it’s a distributor who could sell truck loads of your products. Don’t just do this once, do this every week. Sometimes the long shot comes off, but too often we learn to play small and never attempt to go big; it all starts with a phone call. Challenge 2: carry £500 on you at all times Sometimes we entrepreneurs feel like we’re in “survival mode”, and it makes us feel threatened, scared and alone. These emotions make us feel like we can’t take a risk or play big. When you carry £500 in cash, it’s hard to feel like you’re only just surviving, so your brain can relax and focus on the bigger picture. When you carry £500 in your pocket, you start to feel like £500 is, quite literally, “pocket money” and you feel more comfortable charging what you’re really worth. Challenge 3: put your prices up It’s been four years since the economy went into recession and most small businesses

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Focus on success THE ENTREPRENEUR MIND

haven’t put their prices up since. It’s time to bump things up a level. When you put your prices up a little, you feel better and it forces you to think about how you’re adding more value to your clients. When you’re cheap, you begin to think that it’s OK to do an average job; putting your prices up keeps you on your toes and makes you commit to being more remarkable. Challenge 4: tune out from the news It’s good to be up to date and informed on world events, but when you watch the news every day, it adds more stress to your life that you really don’t need. Not only do you have your own business to worry about, but now you’re also worried about wars, disasters and politics as well. Far better to give your brain some downtime by going for a walk, cooking or listening to some music. While you’re at it, you might also want to cut back on TV dramas as well. I’m sure as an entrepreneur you have plenty of dramas of your own making.

Too often we learn to play small and never attempt to go big

Challenge 5: get your finances in order Be sure to have your business bank accounts separate to your personal accounts, and make sure your business pays you every month. In your personal banking, set up a few accounts for holidays, for investing, for predictable expenses and for charity. As soon as you pay yourself each month, split the money up into the different accounts. It will help you to get what you really want each year, rather than being random and reactive with money. Challenge 6: take holidays When you run a business, you can feel as if it’s your baby and you can’t leave it alone for a minute, let alone a week or two. If you don’t take holidays however, you will burn yourself out and begin to resent your business. You probably started the business to have more freedom, so stop being a slave and start taking some fun breaks. I promise you your best ideas will hit you when you’re relaxing by the seaside with a suitable drink in hand.

Challenge 7: hire someone The UK has 4.8 million smalland medium-sized businesses; if each hired one more person, the country would have full employment. Hiring someone feels risky when you’re small, but the key to becoming bigger is recognising you can’t do everything on your own. Find a person who can assist in making sales, get a bookkeeper, an executive assistant. Figure out who could help you to do more high value activities and get them on your team. At the very least, get a cleaner and use that time to work on your business so you can hire someone full-time. Use apprentice schemes and flexible workforce websites like Elance, so there’s no excuse not to recruit people who can help you to do a better job. With these seven challenges in place, you’ll start to wake up your entrepreneur brain and achieve more of the success you deserve. Good luck!

Daniel Priestley is a successful entrepreneur who’s built and sold businesses in the US, UK, Australia and Singapore. His latest book Entrepreneur Revolution is full of exciting and practical strategies for building a successful small business. Contact: danielpriestley.wordpress.com

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25/06/2013 14:00

Focus on success BOOK REVIEWS

ENTRECODE® UNLOCKING THE ENTREPRENEURIAL DNA How to start, grow and revitalise your business By David Hall What makes entrepreneurs unique? Well, that’s the question author, consultant and BAFTA broadcaster, David Hall has been striving to answer for the last 25 years. Hall says he’s finally cracked the code – or Entrecode, as he calls it – uncovering the traits and mindsets that distinguish entrepreneurs from mere mortals. No two entrepreneurs are the same, but Hall has uncovered the code which all successful entrepreneurs share.

He says: ‘By researching and working with hundreds of entrepreneurs we are able to present the inner secrets of the entrepreneurial mind, to unlock their code for creating successful businesses. The Entrecode findings will challenge and change your views on what entrepreneurs do to create a successful business. If you want your business to be a success, then read this book and learn from the best.’

We say: ‘David Hall is a well known author, consultant and entrepreneur who has lectured around the world on the subject of entrepreneurship, and won a BAFTA Award for his BBC1 business series, Winning. In his fourth book, Entrecode, Hall tackles entrepreneur streotypes head on – there’s not a Del Boy or Alan Sugar in sight. This book provides a rare insight and could be a game changer for any business.’

Our verdict: Entrecode is published by Management Books 2000, priced at £14.99 in paperback

THE MILLIONAIRE DROPOUT: Fire your boss. Do what you love. Reclaim your life! By Vince Stanzione Based on the author’s first-hand experience of bootstrapping himself out of failure, self-made millionaire Vince Stanzione’s The Millionaire Dropout is for anyone who wants to learn the secrets of increasing income and standard of living. Through a series of practical steps, Stanzione explores making money from virtually anywhere; using technology, automation and outsourcing to create an income without a conventional job. The book also explores money saving tips.

He says: ‘I love this quote from Confucius: “Choose a job you love, and you will never have to work a day in your life.” If like millions of others, you know deep down that you deserve to do better than where you are today, then this book is for you. Not based on oldfashioned theories or textbook scenarios, The Millionaire Dropout is based on tried and tested methods of increasing personal skills, increasing your wealth, and improving your lifestyle. These proven methods can help anyone.’

We say: ‘Vince Stanzione is active in telecommunications and financial trading, and former CEO of TV Commerce Holdings, a media and entertainment company, specialising in TV and mobile entertainment. The first few chapters of the book go back to basics as Stanzione concentrates on points like making good eye contact. This book would benefit someone at the start of their entrepreneurial journey, or a failing businessperson who needs a confidence boosting pep talk.’

Our verdict: The Millionaire Dropout is published by Wiley, priced at £12.99 in paperback and e-book We’ve got one of each book to give away for FREE. Be the first to follow and tweet us, quoting the book name @TalkBusinessMag & we’ll send you a free copy!

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26/06/2013 17:14

MONEY

Do you take card?

now so many options, it can be a challenge for SMEs to identify the option that is best suited to their company.

Chip and PIN A whole decade has now passed since the introduction of Chip and PIN, a technology that revolutionised the in-store payment process. Since replacing the swipe and sign method of customer identification, there has been a significant improvement in payment security; counterfeit Clive Kahn, CEO of CardSave, explores the demise of cash and card fraud has seen a drop of the payment technologies that have sprung up in its wake 63%. In 2004, this type of fraud accounted for 25% of all card fraud on UK-issued cards, but by 2010, it was just 13%. It has also led to improved transaction speeds. Faster transactions mean shorter queues, and n the last few years we this, coupled with the greater have seen a decline in security that Chip and PIN Innovative the popularity of cash; offers, has greatly improved SMEs can the days of carrying large overall customer experience. benefit from numbers of notes around Chip and PIN terminals this form of are apparently no more. are available in either fixed payment by The evidence for this or portable format. The assertion comes from a YouGov producing latter allows for even greater survey conducted last year. their own apps flexibility (important for It revealed that nearly three mobile businesses) and is made quarters of the British public possible through Bluetooth, carry £30 or less, on them General Packet Radio Service on average, yet almost all (GPRS) and Internet Protocol (93%) carry a credit or debit (IP) communications. card. And the respondents’ confidence in the future of Contactless payments cash is low, with more than half Contactless is a high speed believing it will become extinct payment technology that is at some point. quick and easy to use. In order For the small and mediumto make a payment, customers sized business owner, this data simply tap their contactless shows that it is crucial to offer card against a terminal without customers a range of payment the need to type in a pin solutions. If you don’t, then number. you risk losing customers. Contactless payment cards Almost 20% of people walked bring many benefits, the main out of a shop last year without one being speed. Faster even making their intended purchase than Chip and PIN, contactless because the retailer did not can also serve to further reduce accept cards. queue times. Despite the Following a flurry of benefits, an obvious concern technological innovation in is card fraud, so to protect recent years, there are now consumers against the use of a wide variety of payment stolen cards, customers are solutions for businesses to limited to a maximum number choose from. In fact, there are of daily uses. [head]

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Focus on money PAYMENT OPTIONS

After this they have to validate transactions using Chip and PIN. Additionally, contactless can only be used for purchases of £20 or less. Contactless was initially slow to take off; however, it has recently received a boost in popularity. As a result, RBS and NatWest have distributed two million contactless cards to their customers, adding to the estimated 26 million already in circulation. Near field communication Near field communication (NFC) technology takes advantage of the growth in smartphone popularity. To pay, the consumer places their NFC-enabled phone over a compatible device, which then sends their payment information wirelessly using electromagnetic radio fields. Aside from the benefits afforded by the speed of such transactions, NFC is also considered highly secure. When a credit card is linked to an NFC smartphone, data is stored on the phone in an encrypted format. If the phone is stolen then the individual can freeze or disable the payment account very easily. Consumers are also able to record payments on their phone, checking these against their bill, negating the need for paper receipts. Innovative SMEs can benefit from this form of payment by producing their own apps for loyalty schemes, promotions and discount vouchers, which in turn create a positive customer experience and drive consumer loyalty. Benefits aside, this type of payment has not yet proved as popular as Chip and PIN or contactless. The technology depends entirely on the smartphone having the capability to accept NFC, and it is interesting that Apple chose to leave the technology off its latest iPhone.

Consumers love technology and they jump on every new innovation that comes their way

Card reader Payment via card reader is also dependent on smartphones, as the technology works by connecting the card reader to a mobile device. The card reader connects to the smartphone, and the customer then inserts their card. Authorisation for the payment is made via a signature on the phone’s screen or by a Chip and PIN pad. This form of technology is particularly beneficial to micro-merchants and those who traditionally take cash payments for goods or services. Using the card reader, the merchant can accept payments of any size, with only small transaction fees, and they are not tied into a contract with the supplier. Mobile card readers can have a great impact on a business’ cash flow by preventing scenarios where the merchant has to spend time chasing customers to pay their debts. The options for customer payment are growing rapidly. What was a limited market just 10 years ago has now grown to a stage where customers and merchants are spoilt for choice; maybe this is why the popularity of cash is waning.

In their everyday lives, consumers love technology and they jump on every new innovation that comes their way. Some prove successful and others do not. Businesses should bear this in mind and consider all options when investing in payment technologies – principally whether there is adequate customer demand. When agreeing terms with new payment providers, it is important that merchants ensure they are futureproofed, and that the new payment provider agrees to upgrade the equipment to the latest technology at no cost to the merchant. At the very least, every merchant should offer Chip and PIN, as it is one payment technology that has more than proved its worth. With so many customers expecting cash to eventually die out, businesses can’t afford to ignore the different payment options. Clive Kahn is CEO of CardSave, provider of card payment solutions for small businesses Contact: cardsave.net

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21/06/2013 19:06

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26/06/2013 15:16

Focus on money PE VS VC

Strange bedfellows… Can private equity and venture capital work together? Nick Hazell and Simon Walker, partners at international law firm, Taylor Wessing discussed how they make the perfect partners, post credit crunch istorically, the paths of private equity and venture capital investors rarely crossed. They worked in parallel spheres, targeting different companies in different sectors and at different stages in their development. However, one of the consequences of the global financial crisis for the investment community has been the real possibility of private equity and venture capital investors becoming direct competitors, or perhaps even co-investing in the growth capital space.

Before the world changed The typical target for venture capital investment has traditionally been an earlystage or start-up company with the potential for significant growth, but where revenues are not sufficient to support working capital needs. By investing the money (typically £15-£20m over two to three rounds) at an early stage, where the operating company’s valuation is relatively low, VCs hope

that their investments will grow rapidly and deliver large gains on ultimate exit. As a result, VC investments have tended to be concentrated in the technology, cleantech or life sciences sectors – areas with the most potential for dramatic growth. By contrast, private equity investment has tended to focus on mature companies. The PE business model, typically investing more than £25m for majority control, had, prior to the crisis, traditionally relied on the availability of large amounts of debt. Greater leverage means a smaller proportion of a fund’s own money is needed to acquire the operating target. The importance of high levels of leverage has meant that PE targets have to be mature operating companies with solid trading histories, regular cash flow and sufficient assets to persuade a bank to lend. As a result, there has generally been minimal focus among PE funds on the technology, cleantech or life sciences sectors to date.

There are new advantages opening up to VC and PE investors willing to work together

Then and now Compared to a start-up company that has the potential for growth in the long run, but is currently generating little or no profit during a recession, businesses with strong revenue growth are perceived to be a lot less of a risk. Therefore, even though backing such companies requires a higher initial investment, it is, in a sense, money better employed thanks to the greatly reduced risk. As a result, the venture capital community has been moving towards a preference for late, or at least later stage, deals. On the other hand, barriers that have traditionally stopped PE funds from investing in predominantly VC-backed sectors, such as technology, are gradually being removed. It is increasingly apparent that there are a number of technology companies now maturing beyond their earlier, riskier development stages,

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Focus on money PE VS VC

generating good revenues, consistent cash flow and delivering on proven business models, that still offer room for significant growth. In the light of continuing limitations on the availability of debt, these companies may offer the potential for generating returns that may no longer be available from traditional PE industry sectors. In fact, a recent report by accounting firm Grant Thornton found that more than half (58%) of UK private equity and venture capitalists anticipate that the volume of private equity investment in the technology sector is likely to increase over the next two years, with cloud and managed services seen as the most attractive sub sectors.Â Working together Converging on similar sectors, and forced by economic imperatives to seek out companies at a similar stage of development, VC and PE funds suddenly find themselves in competition with each other. However, there is scope for cooperation as well as competition. Established VC and PE business models may differ greatly on a number of fronts: sector focus, transaction

There is scope for cooperation as well as competition

structures, management incentives and levels of control. However, there are also some similarities. For example, levels of control required by VC and PE investors seem a lot more different at first glance than they tend to be in practice. VC transactions will usually be structured so that the founders of the business retain, initially at least, a significant, and sometimes the majority, shareholding. As a rule, a PE fund acquiring an operating company will almost always require a majority shareholding stake so that it has shareholder control. In reality though, despite the difference in the percentage of the target company held by VC and PE funds, the level of control is not that different; both will typically have the benefit of veto rights over any material decisions by the target company or its management. The continuing credit squeeze means that there are new advantages opening up to VC and PE investors willing to work together. From a private equity perspective, now that acquisition finance is significantly harder to come by

and risk management is a prime consideration for everyone, co-investing with VC funds offers the ability to spread risk through syndication. Meanwhile, VC funds looking to invest in late-stage deals may find a shortage of VC partners available. Conclusions The differences between VC and PE investment models are undeniable, yet it is evident that they are converging due to the changes imposed by the ongoing recession. As investors are forced to reconsider their strategies, to select the safest investments, private equity looks at sectors previously dominated by venture capital, whereas the VC community gravitates towards late-stage deals. A number of funds that worked in parallel realities until recently now find themselves in direct competition with each other. Competition, however, is not the only possibility. In some cases there are also advantages to VC and PE funds co-investing, and a mutual interest in that area is certainly noticeable. Nick Hazell heads the private equity team at Taylor Wessing LLP. He has represented a number of turnaround and buyout funds on their investments in the UK and internationally. Simon Walker is a partner at Taylor Wessing LLP. He specialises in advising those involved in the technology, cleantech and life sciences sectors, and has advised on a broad range of venture capital investments and M&A transactions. Contact: taylorwessing.com

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22/06/2013 15:34 26/06/2013 16:07

Focus on money SHARE OPTIONS

Share the wealth Join us as we take a tour through the confusing realm of tax efficient employee option schemes with John Leyden, director of Carbon Accountancy

elcome to the minefield of share options. The information below is based on tax rates effective from 6 April 2013 – that way it is hopefully relevant to you. If you have options, which you think may be affected by tax before then, you should consult a tax adviser just in case. I shall start by asking you a question – would you rather pay tax at a rate of 10%, 28% or 53.4%? Stupid question I know, but how your share options are structured will dictate the rate of tax you pay – you probably won’t be given a choice.

What are share options? A share option is simply an option to acquire a share at a future point in time, at a price that is set now. Share options relating to employment are granted to employees, say, after their first year of employment (when they have proved themselves), but they won’t be exercisable until some point later – maybe 25% of the options will be exercisable each year for the following four years. Provided the option exercise price is at least market price when the option was issued, you do not pay tax when you exercise the option – you pay tax when you sell the shares after exercising them. How are options structured? The tax will depend on how the share options are structured when they are granted. There

are basically two types of structure – approved and unapproved share options. Unapproved share options are options, which have been granted where HMRC has not approved them at the time of the grant of the options. These will generally be options in large quoted companies – FTSE 100 companies often incentivise their staff with large option awards. Approved share options are options which have been granted where HMRC has approved them at the time of the grant. These will generally be issued under an enterprise management incentive (EMI) scheme. There are restrictions on the size and type of companies that can obtain approval – typically small trading companies will qualify, while large companies and companies that operate in the financial services, investment and property sectors will generally not qualify.

from the resulting net profit. Example (assuming a higher rate tax payer), you make a profit of £113,800 on the sale of the shares after exercising the options.

Proceeds Less employers’ NI Net profit Income tax at 45% Employees’ National Insurance at 2% After tax profit Effective tax rate

How are options taxed? There are three possible tax regimes that apply to the majority of people with options: • Unapproved share options The profit you make on unapproved share options is taxed as income. Usually the company granting the option will require the employee to pay the employers’ National Insurance from the profit and then deduct income tax and employee’s National Insurance

Ensure you issue EMI scheme options if you can – putting a scheme in place is highly tax efficient

£ 113800 -‐13800 -‐-‐-‐-‐-‐-‐-‐-‐-‐ 100000 -‐45000 -‐2000 -‐-‐-‐-‐-‐-‐-‐-‐-‐ 53000 ===== 0.534

• Approved EMI options in a former employer company The profit you make on approved share options is taxed as a capital gain. If you have left the company, then you will pay tax at 28% on all profits above your annual tax free amount. Assuming the taxpayer has used up the tax free allowance, the tax on a profit of £113,800 will be £31,864, leaving £81,936 after tax – he is £28,936 better off with approved share options. • Approved EMI options in your current employer company The profit you make on unapproved share options is taxed as a capital gain. If you are still in the employment of

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Focus on money SHARE OPTIONS

the company, then you will pay tax at 10% on all profits above your annual tax free amount – you can claim entrepreneur’s relief providing you were granted the options at least one year before you sell the shares. Assuming the taxpayer has used up the tax free allowance, the tax on a profit of £113,800 will be £11,380, leaving £102,420 after tax – he is £49,420 better off with approved share options.

How does this affect me? If your company is considering offering employees share options, then ensure you issue EMI scheme options if you can – putting a scheme in place is highly tax efficient for your employees. If you are an employee being offered share options, then find out if they are EMI scheme options and, if not, ask whether the company has considered them.

Would you rather pay tax at a rate of 10%, 28% or 53.4%?

John Leyden is director of Carbon Accountancy, a company that offers a full accountancy service, including bookkeeping, audits, company accounts and tax services, VAT advice and more. It works with small businesses as well as major international corporations, and makes sure that its clients receive straightforward language and easy to understand advice. Contact: carbonaccountancy.co.uk talkbusinessmagazine.co.uk 45

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24/06/2013 09:16

Focus on money START-UP LOANS

A day in the life …

am Amrani, 22, is the co-founder of TAMOCO. He and partner, Max Birner received a StartUp Loan to develop their international business, which brings previously inanimate adverts to life with NFC

Dear diary… When I’m up and ready I check my emails, and catch up on news while eating breakfast. On my journey to the office I prepare for meetings and check my schedule. I also make time for Twitter updates and have a flick through the LinkedIn feed.