Focus on strategy BUSINESS GROWTH
Peter’s top tips: • If you have a business idea, work out its commercial potential at the outset • If people are prepared to pay for your product or service, you need to be able to quickly deliver; this is where your focus should lie as you start out • Research your finance options, as whichever you choose can have a significant impact on how your business functions • Utilise your own knowledge and skills in the right ways as your business grows – and think carefully before ceding too much control customers – you don’t really have a company without people paying for your wares. Fourteen years ago, I was selling to a small number of customers from my bedroom. I successfully identified a niche audience and exploited my skills to give Gradwell dot com Ltd an advantage in the market. From its inception in 1998, Gradwell grew by at least 30% year on year; this meant that as demand grew, the need for more facilities and manpower to assist in meeting this demand needed to grow simultaneously. In order for me to be in a viable financial position, which would allow for a move out of the bedroom into the boardroom, I sold Gradwell’s domain name registration business and moved into telephony and VoIP services.
Finance for expansion
When looking for finance, the first option I would always recommend is to go to the bank. I sought a bank loan for Gradwell initially but was turned down, wanting to do too much too quickly, but this didn’t deter me – rather it made me focus on my business plan and forced me to work through those elements that represented the greatest risk. Of course banks don’t turn every new enterprise down, but the message is this: if your business plan contains significant elements of risk, you need to be prepared for rejection and to adjust things accordingly. An important element of growing is also around control
– and this has implications for which finance route you seek. When you’re starting out and looking to grow, you want to retain control of the strategy of the company, and this is a very healthy thing. A regular bank loan isn’t intrusive, and unless you have a very unsound business proposal is unlikely to have a major impact on exactly how your business develops, especially in the early years.
Funding: the alternatives
We’re all hearing more and more about angel investors and crowdsourcing right now – both of which certainly offer advantages. But any growing business needs to understand the ins and outs of either form of investment carefully. Crowdsourcing your funding is a really interesting new approach. It’s ideal where you need a fairly small amount, you have a business idea that is simple for investors to grasp, and the concept is proven. You need to do your homework when it comes to investors – there are lots of options out there and it’s worth spending the time to work out which one is right for you. You could end up securing an investment that means you gain a high level of involvement from the investor, and this may not be the best fit for your company. If SMEs are looking for a substantial sum, then it obviously makes sense to seek professional advice to discuss the available options – this is where a corporate finance
advisor can help. Good advice can be pivotal in financial decision-making because these people do speak a different language, and the structures are complicated. Finally, timing is an important consideration – attract investment too soon and your business idea might end up going down a quite different path to the one you originally envisaged. Ideally you want to get established and lay the right ground work first.
“An important element of growing is around control – and this has implications for which finance route you seek”
Acquiring knowledge
Funding is nothing without the right knowledge. I’ve always had a natural interest in technology and developing solutions for people where these haven’t before existed. Yet as Gradwell developed, my focus has been on being a good managing director – running the business, rather than just developing the technology. I’ve always been very clear here though, and maintained my technical knowledge at the edge of my field; I am of the firm opinion that having the technological knowledge, rather than purely the business experience, is what helps my company grow and be successful.
“Ideally you want to get established and lay the right ground work first”
Contact: www.gradwell.com
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