After more than 50 years in business, I have learned a thing or two about setbacks and, as importantly, how to twist fate in your favour when these occur. The main thing to remember is that no one is defined by their worst days; things will always go wrong.
I learned this lesson the hard way. As anyone who knows me will attest, I love English literature. My love for it started young and was all-consuming so, when I got into Glasgow University, I was set on pursuing English. My first year, however, went so appallingly that the university wouldn’t let me back to do English. While I still had other subjects available as options, for me it was English or nothing, so I dropped out. In doing so I claimed the thorny crown of being both the first person in my immediate family to go to university, and the first person to drop out too.
It wasn’t the ideal start to my career and was absolutely not the path I had expected to set out on, but I quickly marched on and explored alternative options. Following an advert in a local paper, I called a small accountancy firm in the centre of Glasgow, met the senior partner the following day, and threw myself into a new opportunity.
It was only much later that I realised quite how fortuitous this chain of events had been. Not only did it force me to explore jobs I had never realised existed, let alone considered, but it taught me a hugely valuable lesson that I have applied to decisions I’ve since faced: trust yourself, don’t lose your nerve and seek out opportunities to make it work.
Although a personal lesson, it also stands true in a business context. My career has taken me to countless investment decisions, where I have sat across the table from budding entrepreneurs and business owners and made a call on their proposition. It is an exhilarating position to be in because you can often see the passion in the pitch and, when it is a runner, the next steps are exciting for all involved.
Having sat on the investor side of the table for decades, however, I have (hopefully not too often) made the wrong call. A few examples spring to mind – some that have stayed with me to this day – but my original lesson still stands. Making the wrong decision only made me more determined to make the right one next time.
It works on the flipside too. No matter how experienced an investor is, they make mistakes. I know that if you are on the receiving end of that, it can be incredibly tough. But you must remember that the investor has just lost an opportunity to invest in you. He or she hasn’t seen your potential for whatever reason, so – if you really do have a viable idea – you need to pick yourself up, add some more polish, and keep searching for the opportunities that will work for you.
This can be through the more traditional forms of finance or expanding your horizons with alternative sources. I have heard inspiring stories recently of small business owners who have understood this principle and made the finance landscape work for them. We know venture capital is skewed to the south east of England, so you cannot wait for it to come to you – sometimes, you may have to go and seek it out. Likewise, for community initiatives, crowdfunding has had great success. It may even be as simple as managing your cashflow more effectively and being incredibly disciplined in doing so.
I am often asked what my top tips are for businesses looking for investment. As well as ensuring you never accept defeat, and learn from every setback you encounter, I have six tips that I can say from experience hold true:
1. The business plan: have one. This should be a proper outline of how the business will run – from who you will sell to, to a breakdown of pricing (with evidence to prove it) and, critically, who your main competition is.
2. Customer base: know your customers – current or potential – and know them well. You want to know everything about them.
3. Cashflow: I am an accountant, so I am obsessed with accounts. A lack of cash can kill a business, so I am also obsessed with cashflow – and you should you be too.
4. Delegation: Learn. To. Delegate. It is hard but, as you scale up, it is imperative that you do so.
5. Why you? I buy into both an idea and the people behind it. Owning a small business is tough, and growing it is even tougher. Having drive is key to making it work… so I would want to see your drive in bucket loads.
6. Know your options: Preparation in business is incredibly important, and a key part of that is knowing the options you have available to you.
The British Business Bank has recently been encouraging smaller businesses across the UK to ‘reject rejection’ – not to let a ‘no’ from a finance provider mean a business dead-end. If you are serious about your business proposition, there are some amazing resources out there that certainly didn’t exist when I was first getting into the game.
From the government-backed bank referrals to finance platforms scheme, to the Business Finance Guide (www.thebusinessfinanceguide.co.uk), viable businesses at all stages of development have increasing opportunities to find the right sort of finance. For those looking to scale up, the British Business Bank’s newly launched Finance Hub (www.financeyourgrowth.co.uk) has a six step finance finder tool to direct users to the finance options which could be suited to them.
Lord Smith is chair of the British Business Bank and Chancellor of the University of Strathclyde. He was formerly Governor of the BBC and Chair of SSE, the Organising Committee for Glasgow 2014 (Commonwealth Games), the UK Green Investment Bank and the Smith Commission.
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