Selling a business for millions of pounds gives you the opportunity to bring financial security to your whole family for the rest of their lives.

Alongside your foreign travel and fine wines, you can ensure that your hard-earned wealth provides your children or grandchildren with stellar education opportunities or help onto the property ladder. But it’s not quite as simple as handing over regular cheques to your eager offspring.

“Some entrepreneurs don’t want to give their children immediate access to lots of money because they want them to make it on their own,” says Tony Müdd, Divisional Director, Development & Technical Consultancy at St. James’s Place. “There may also be nervousness over their children’s choice of spouse and what a divorce would mean to the family wealth. In addition, there is uncertainty about how their children will spend the money. Will it be wasted on fast cars or worse?”

To ensure more control over where the money will go you could consider setting up a trust for your children or grandchildren. These can also help with Inheritance Tax planning as gifts can be exempt if you survive for seven years after making them.

Bare trusts

You could consider a bare trust where the trustees are the legal owners of the assets holding them for the beneficiary. They can take control of these at age 18 in England and Wales or 16 in Scotland. The main benefit is that a transfer into a bare trust is potentially exempt from Inheritance Tax.

“It doesn’t provide much control for older kids because if they want the money then there is nothing you can do to stop them,” says Tony.

Discretionary trusts

Discretionary trusts are another option and the most used in financial services. “It gives you much more control including where the trust money is invested, how any capital or income distribution is made. The beneficiaries don’t have any rights,” Tony explains. 

He adds: “You could set up the trust stating that a beneficiary has a right to an income at 30 and capital at 40 but why tie yourself up? If the child is 28 but needs help with buying property now the trust won’t be able to help for the next two years. You might as well make these financial decisions and help your child when it is right and timely to do so.”
You need to be aware that a gift to a discretionary trust creates a chargeable lifetime transfer at a rate of 20%. However, this will only arise if the gift into the trust exceeds the individual donor's available nil rate band currently £325,000.

Loan trusts

A loan trust and discounted gift trust mainly come in the form of a discretionary trust. “With a loan trust you lend the trust money, say £100,000,” Tony explains. “It is operated and controlled just like a discretionary trust but, unlike a discretionary fund, you can get the original amount of money back. However, you are not entitled to access any growth which has come from investing that £100,000.”

Tony explains that the main advantage of a loan trust is that it provides more flexibility for people who may not necessarily be able to afford to gift assets away.

Discounted gift trusts

“With a discounted gift trust you have to capitalise the value of the income stream to work out the overall loss to your estate,” Tony says. “It allows you to make a substantial gift, retain an income but also have a discount on the amount of money you appear to be giving away*. The main problem with this trust is that your income is fixed at the outset and you can never change it. Although you can turn the income off.”

Entrepreneurs can also use their business to create financially beneficial trusts. Your business qualifies for Business Relief and is not subject to IHT but as soon as the enterprise is sold it is no longer exempt.

“If someone is approaching the sale of their business they could transfer some of the shares into a discretionary trust. They are transferring an exempt asset, so they could put £1m into the trust rather than the £325,000 limit,” Tony says. “It is a major advantage for entrepreneurs.”

To determine which form of trust is best suited Tony recommends seeking professional advice. “It depends on what people are looking for, their total value of wealth and how much flexibility they require,” he says.

 “I’d advise people not to make any quick decisions and to involve all of their children in the process because the worst part of my job is getting involved in family disputes over money. Brits hate talking about money with their children, but they need to know what the trust means for them from the outset. It will certainly cut down on family arguments.”

Launching a business and getting it off the ground against the odds is undeniably an impressive achievement, particularly in a pandemic. At some point, though, every business needs to grow, and this throws up a battery of new challenges to an entrepreneur, requiring personal qualities beyond the self-belief, passion and creativity which first breathed life into the enterprise.

But what are those qualities, and do you have them? Martin Brown of business advisor Elephant’s Child, which helps support entrepreneurs, spells out the key strengths required.

Core qualities you need

Clarity of thought. “This may seem like stating the obvious but, given the complexities of modern business, a vital first step for expansion is for the entrepreneur to actively consider and firmly decide on the company’s strategic direction and future long-term development.”

Good communication skills. “The ability to commit your ‘clear thinking’ to paper as a business plan is an essential next step. Then you must live and breathe that vision yourself for all to see. There are a lot of business plans and mission statements out there that don’t reflect the reality of the companies that produced them. Remember, you’ve other audiences to reach too, including customers, stakeholders and other investors.” 

Ability to win hearts and minds. “Having defined and communicated your strategy,  you need to ensure everyone buys into it and knows what it means for them – how it effects their role, and how it will benefit the company and its employees. You need to be able to build trust around you and your plans, which means being authentic as a leader, so you can have those challenging conversations about what needs to be done to take things forward. It’s about building strong relationships.”

Persistence. “To be persistent, dogmatic and determined is critical for successful expansion. You’re going to get curve balls thrown at you, suffer setbacks and frustrating hold-ups, but you must always focus on your desired outcomes and be resilient if you want to achieve your goals.”

Be prepared to be supportive and self-critical. “Today’s entrepreneurs are smart enough to avoid attempting god-like control of everything. Now it’s much more about coaching and motivating, sharing skills and knowledge with your team and recognising when you need to bring in third parties to support or train them – and yourself. 

“An entrepreneur needs to have the emotional intelligence and courage to assess their own capabilities and, if necessary, have someone assess their abilities,” explains Brown. “If you‘re lacking in a particular skill or quality, don’t be afraid to get the formal, or informal, coaching or training you need. And if you feel you just cannot cut it in one area, bring in somebody else who has the right qualities.”

Shining example

Leaders who are shining examples and have demonstrated all the right qualities over the past few months are those in charge of our Covid-19 hospital wards.

They are not entrepreneurs but they use modern business management techniques and approaches and apply them to their roles. They set out what each member of the clinical staff's role is within the team tackling the crisesd and communicate effectively.

They have motivated sometimes youthful and junior team members to work to the best of their abilities and have shown resilience throught the stress of the pandemic, while all the time coaching junior staff. Equally, they draw on the expertise of other medical professional when it is needed.

Depending on which study you read, and what industry you’re in, acquiring a new customer is anywhere from five to 25 times more expensive than retaining an existing one. And retaining the customers you have could be critical to your success as we emerge from lockdown.

Your company may be starting to grow through new customers, but it's important to maintain the level of service to the existing clients that has got you this far. Growing your work with them could be at least as important as finding new clients, and if your performance starts to slip, as resources and attention are focused on the growing sales funnel, your reputation and your revenues could suffer.

Client retention makes sense: you don’t have to spend time and resources convincing someone new of the value of your product or service – you just have to keep the client you already have happy. According to research done by Frederick Reichheld of global management consultancy Bain & Company, increasing customer retention rates by 5% increases profits by 25% to 95%¹.

So how do you maintain relationship with existing clients and, if possible, grow your business with them?

Rich in opportunity

Martin Brown, chief executive officer of business advisors Elephants Child, has more than 20 years’ experience in business development across a wide range of industry sectors. He says: “The growth and retention of existing clients, through proactive management, is rich in opportunity, low in risk and in cost."

An existing client will often be unaware of other products and services you offer, he says, providing the opportunity for growth. Risk is low because your business already has the client won over and has established points of contact. "Therefore, another piece of business becomes relatively quick, simple and easy to process."

He continues: "It is a relationship that when working well, has your client acting as an advocate and believing that your business is an intrinsic part of their value chain." But the danger, he says, is that clients are "underserved and left to drift", which can result in poor customer experiences and high churn rates.

He suggests regularly surveying customers to understand what they want from your service or product offering. "Establish what you do well and where you can improve. And consider whether your clients would refer and recommend you to other companies."

Not paying attention to what existing customers want could mean opportunities to win new business are needlessly lost. Martin reveals: “So often we see a customer that buys product or service A from a company but would also buy B, C, D and E if only they knew the company offered this."

And he adds: "Be strong on proactively raising your prices – if the client and market can take it – and seek to increase the value and number of transactions. This notion of 'juicing' the client might sound harsh but, in reality, it is a mutually beneficial approach.”

Customer loyalty

Martin believes there is great value in customer loyalty: “Companies seeing that their peers are enjoying great service from you is a key factor in persuading them that they might want to experience the same journey.”

However, he points out that client retention calls for particular talents from your team: "The right skill set is more of the clichéd farming, cultivation approach rather than the new business hunter, so strong on building relations and a desire to deliver excellent customer service."

Serial entrepreneur Chris Sheppardson, CEO at EP Business in Hospitality, who has founded several businesses in the hospitality sector, agrees with Martin: "Service is a key differential if one wants to retain customers. Good business has always been about keeping the customer happy, yet we have lost this focus over recent years.

"Client retention is one of the most overlooked areas today and yet the cost of losing a client is far greater than the cost of recruiting a new one – particularly for smaller businesses."

You’ve grabbed the attention of potential investors and now have the chance to sell your business idea in person. How do you put together a pitch that’ll knock their socks off? Will Gibbs, Principal at Octopus Ventures, knows what it takes to start a business from scratch and shares his expertise in presenting business ideas to others.

1. How long should your initial pitch be?

Keep it brief. Explain your idea and what you intend to prove in the early months. Most initial pitches last around five minutes, with later meetings to secure commitment and action running closer to 45 minutes. If you have an hour slot, be ready to do a 30-minute presentation and then leave plenty of time for discussion. You need time to answer questions and gather their feedback.

2. What should your pitch cover?

With just five minutes to wow your audience, keep focused by talking about who you are and what your business is trying to achieve. Explain why you’re suited to running this business and who else is involved. Close by talking about how much potential you believe the business has. Cut everything down to the essentials. Investors and backers will say ‘tell me more’, or ‘OK, that’s not for me, but you should speak to this person’. Your pitch is really a sales call, so all messages to sell your product apply to your pitch too.

3. What do most start-ups talk about?

Will surveyed more than 60 of Octopus Ventures’ portfolio companies to identify the top ten categories included in their pitches. All mentioned their team and most their product. Many included the problem, business model, company purpose, market size, solution, competition and financials. Fewer than half explained: “why now?”.

Quality pitches contain a clear message about where the company’s competitive advantage comes from, include a “why” or mission statement, and leave the audience engaged and keen to know more. Be transparent and include the challenges and threats to your business idea too and be prepared to talk about them.

4. Things to leave out of your pitch

Pitches often fall flat because the presenter assumes the audience has a lot of background knowledge. Strip out the complexity and jargon and include enough information for your audience to understand the significance of your plans. Be mindful of the language you use to ‘sell’ your business or idea. During an unhealthy number of pitches, the business owner is claiming that any and every market is ‘broken’.

5. Make market data count

Don’t throw broad industry numbers into the presentation. Focus instead on the total addressable market. You can’t predict the future, of course, but a considered approach to your calculations will show potential investors that your team is capable and focused.

6. What supporting data should you bring?

Trying to squeeze everything into your first meeting with a potential investor isn’t going to lead to a quality pitch. But be prepared for the conversation afterwards. A PowerPoint pitch should communicate, very simply, what your business does, what your market is, who you’re selling to, how you’re selling, what the team is, what the plans are for the future, what’s the long-term ambition, etc. Eventually someone will ask you for a business plan and follow up with a bunch more questions.  Appendix slides are useful so you’re ready for every possible direction. Being prepared to talk numbers is simply good salesmanship.

7. Learn about the panel you’re pitching to

Don’t forget to do your homework on your audience. In the best pitches, presenters reference common connections they have with the panel. They put the effort in to build a bond and show they’ve done their research from the start. Search LinkedIn, company profiles and trawl Google to understand their expertise. This might be your first meeting with someone who’ll be sitting on your board for the next eight or ten years and could be the beginning of an important relationship.

8. Practise makes perfect

The more you practise your pitch, the more polished you’ll be. But what will really pay off is time spent preparing for a robust discussion afterwards. Investors want to see you’re in control and can make the business a success. Be careful who you choose as your test audience though. Friends can be bad at supplying feedback; they’re all too supportive and nice. Find the most commercially-minded people you can and pitch with the understanding you want really constructive feedback to make it better”.

The Octopus approach to getting feedback – asking for three positive things and then three developmental things – can be helpful. Once your practise audience has said nice things about you, they’ll probably have the confidence to talk through some of the less positive ones too.

9. Use stories to draw your audience in

The most persuasive pitches are those that include stories. Whether it’s talking about how you came up with the idea for the business, the vision or purpose of the business, or validation from your early customers, stories can really help to bring your business to life. If you can, include mock-ups and screenshots of your product too. Even if you don’t have many customers yet, if the people you have sold to are enthusiastic, that starts to tell a story you are building something exciting”.

10. You’re a big part of the offer

You are under just as much, if not more, scrutiny. Investors want to know you’ll be able to handle the pressure and challenges of start-up life. Do you have the energy and the passion to convince future customers, suppliers and employees to stay the course? You can’t say ‘there’s a real opportunity here’ without getting excited by it and need to convince people to take on the risks, especially in the venture space. Investors look for entrepreneurs who are energised and articulate about their vision.

11. Spend time listening to others’ pitches

If you haven’t pitched before, or you’re looking to sharpen up your delivery, you can find plenty of inspiration online. You can even pick up some tips from watching episodes of Dragons’ Den. One of the good things about Dragons’ Den is you can tell a bad pitch instantly, and it is pretty obvious when they’re pitching well. See what works and what doesn’t and use it to shape your presentation.

The T’s are crossed and the I’s dotted and the business that you have built up over the last few decades has been sold.

Thoughts might turn to expensive motor cars and, pandemic permitting, sun-kissed beaches but the first thing on the agenda should be to secure your financial future. Simon Martin, Chartered Financial Planner at St. James’s Place, outlines five steps to take for good financial planning post-exit.

1. Creating income in retirement

You have sold your business, which has provided income for you for many years and now you are typically left with the cash proceeds. The questions you should be asking yourself include ‘How can I use that cash to create a retirement income for me and my family?’, ‘Have I got enough?’ and ‘How much can I take from it without eroding the capital?’

In order to help secure the retirement you want, you need to use tax-efficient wrappers such as pensions, an Inheritance Tax (IHT) efficient trust that pays an income, ISAs and other tax wrappers or rental properties.

Depending on your risk appetite and circumstances, there are also other tax-advantaged investments which may be suitable.

Another question to ask alongside this is – ‘How can I do this in a tax-efficient manner using allowances and exemptions?’ You need to think about both current taxes such as income tax and Capital Gains Tax, and future taxes such as IHT.

2. Replacement business relief

A trading business typically qualifies for 100% Business Relief, meaning it won’t be liable for Inheritance Tax on the death of the owner. However, once it is sold the owner holds cash and therefore loses the IHT exemption. Owners have 36 months from the sale to re-invest some or all the proceeds into other Business Relief-qualifying investments and assets and recover the IHT exemption.

3. Trusts for IHT planning

When you sell a business you will have a large amount of money coming into your estate. Subject to individual circumstances, IHT is charged at a rate of 40% on the portion of the estate above £325,000 so reducing the value will reduce your tax bill.

One thing we often see clients look at is making cash gifts as you can give away £3,000 each tax year using their annual gifting exemption.

Clients can also put gifts into trust for beneficiaries and if you survive for seven years after doing so the gift is not liable to IHT. Trusts can also control and protect your wealth from adverse life events. The trusts tend to be discretionary which allow for a wide range of potential beneficiaries such as extended family or even friends. The trustee makes the decisions about what gets paid out and to whom.

Some trusts also offer slightly more bespoke arrangements such as allowing the owner to draw an income from it for themselves.

4. Replacing protection insurance policies

This is more for those who might sell a business when they are a bit younger in life and have a growing family to protect.

Often owners will set themselves up protection through their business such as life or illness insurance. So, if they were to die the policies would then pay out to their family. When they sell up, those policies very often come to an end and therefore, they should think about putting in replacements.

5. Keeping emotions in check

If you have been working 60 hours a week for the last 30 years and it has suddenly gone, it can be a rude awakening. You have gone from thrusting entrepreneur to watching daytime television!

To help protect your wealth from any rash, emotionally led decisions you should start preparing for your post-business life before the exit takes place. What do you want to do with your time and money? Will you do charity work, set up a new business or just play golf all day?

Getting prepared and talking to your family and your St. James’s Place Partner will ensure you are properly organised to enjoy your well-earned rewards.

In a landmark legal case in January, the Supreme Court ruled that many insurance companies have to pay out business interruption insurance to policyholders affected by the Covid-19 pandemic. It has been estimated by the Financial Conduct Authority (FCA) that some 370,000 firms could be affected, with payments totalling approximately £1.2 billion¹. The test case was brought by the FCA, and centres on certain disease and prevention of access clauses in business interruption policies.

But who exactly is affected, and what should you do if you think your business insurance policy is one that has the relevant clauses? “If your policy wording mentions cover for notifiable human disease within a set radius (and without a specified list of diseases), or denial of access/inability to use your premises due to restrictions/mandatory closure as a result of notifiable human disease (again without a specified list of diseases) then you might be able to submit a claim,” explains Peter Blanc, Group CEO of insurance broker Aston Lark. “In the first instance, you should contact your broker, who will check your specific wording. If you do happen to have one of the small number of applicable policies then your broker should help you to submit the claim accordingly.”

Daniel Duckett, owner of Lazy Claire Patisserie in Northern Ireland, one of many small businesses affected by the pandemic, echoes this advice. “I would advise businesses who believe they have appropriate cover to scrutinise their wording (if it wasn’t covered in the FCA test case, which couldn’t address every single wording available) and to partner with their broker closely to determine whether cover exists. If it does, they should continue to fight for indemnity and advance complaints to the Financial Ombudsman Service if necessary.”

However, Peter sounds a note of caution: “Beware though: you’ll still need to prove your loss. If you’re as profitable now as you were before the pandemic, there’ll be no claim payment.”

Making claims

Daniel’s insurer declined his business interruption claim, as a result of which he, along with two other owners of small businesses, Mark Killick from Media Zoo and Simon Ager from the Pinnacle Climbing Centre, formed an action group of companies who had been denied a business interruption payout.

“Our members range from cafes, hair salons and aestheticians to recruitment companies, and there doesn’t seem to be any sector that isn’t represented,” says Daniel. “Nearly every single business was depending on this cover to continue to survive. Many were in dire straits and desperately needed some form of payout.” The group’s legal team at Mishcon guided them through the process, and by compiling information the group itself also became an important source for other affected businesses.

The Supreme Court ruling means that many of these businesses should now receive a payout. Lazy Claire’s policy wording was one of the categories covered specifically by the legislation, meaning its claim should easily be advanced. “The Supreme Court ruling is in principle great, and does provide clarity,” notes Daniel. However, he points out that others have not been so lucky, and that, thus far, his company has not received an interim payment or final settlement offer.

Planning for the future

Although it is impossible to plan for every eventuality, Covid-19 has highlighted for many the importance of getting a strong, comprehensive insurance policy suited to their needs.

“I still see the value in insurance and understand that not every single situation may be covered by a policy,” says Daniel. “This has formed my view that all stakeholders in the insurance industry – policyholders, insurers, the Association of British Insurers and the FCA – must begin strong dialogue to ensure expectations are being met and that policies are written in such a way that it is clear what is covered and excluded.”

“Using a good broker who helps businesses to understand their risks, mitigate them and then transfer the remainder to insurers is always the best advice,” says Peter. “Comprehensive coverage might be the right answer for you, but equally a carefully crafted self-insurance programme could work and prove to be more financially viable. Make sure that your broker is a true risk advice partner to your business and work with them to protect your world.”

But he highlights in particular “early engagement” as being of paramount importance. “The insurance market has been hit by an array of challenges in recent years – Solvency II, Covid, storms/floods – and capacity has reduced dramatically, resulting in a very ‘hard’ insurance market. It is vital that your broker engages early in the market on your behalf to avoid any unpleasant shocks.”

If you’d like to find out more about business insurance, talk to your St. James’s Place partner

Like it or not, Brexit is now a reality, and it is already having an impact on businesses of all sizes. One of the key changes is in the recruitment of talent from abroad: previously, workers could live and work anywhere in the European Union without restrictions, but as of 1 January, staff from outside the UK (excluding the Republic of Ireland) must meet a specific set of requirements in order to obtain a visa.

“In essence, this will mean that all EU nationals and non-EU nationals will be treated equally for the purposes of entering the UK, and will be subject to the same immigration rules,” explains Lisa Alexander, Senior HR Consultant at HR outsourcing consultancy Fitzgerald HR. “This means that EU nationals will be required to pay for and apply for a visa well in advance of their travel.”

Points mean placements

Although there are other routes by which workers can become eligible to live and work in the UK (the Global Talent route for highly skilled workers; the graduate route for international students completing a degree in the UK; intra-company transfers; and specialist visas for those working in start-ups and innovation, health and care, the creative industries, sport and horticulture), the majority of businesses will employ staff through the Skilled Worker route.

“The skilled worker visa is granted to individuals with a job offer, who are required to earn a minimum of 70 points to be eligible,” says Lisa. “There is a two-stage test for those points. For stage one, an applicant must meet all of the criteria, which will gain them a maximum of 50 points, and then for stage two an applicant must earn a minimum of 20 points to make them eligible to apply for the visa. The criteria in stage one are mandatory, whereas those in stage two are interchangeable and can be traded for another.”

The mandatory criteria are as follows:

• The applicant has a job offer from a Home Office licensed sponsor
• The job offer is at the required skill level – RQF 3 or above (A Level and equivalent)
• The applicant speaks English to the required standard

In addition, a salary requirement must be met, which is the higher of either:

• The general salary threshold of £25,600, or
• The specific salary requirement for their occupation, known as the ‘going rate’

If the job offer is less than the minimum salary requirement, but no less than £20,480, an applicant may still be eligible if they have:

• A job offer in a specific shortage occupation
• A PhD relevant to the job
• A PhD in a science, technology, engineering or mathematics (STEM) subject relevant to the job

Obligations for employers

Under the new regulations, employers must apply to become a registered sponsor if they wish to recruit through the Skilled Worker scheme – a process that takes eight weeks. There are also associated costs – for medium and large organisations sponsoring a worker for the maximum five years, this could be as much as £5,000.

A key consideration for businesses, Lisa emphasises, is preparedness. “Sponsorship needs to be in place before you recruit a worker from outside the UK. So, if you don’t currently hold a sponsorship licence, you should consider applying for one,” she advises.

In addition, it’s important to be aware that your existing employees who are EU nationals are now obliged to register under the EU Settlement Scheme. “Employers should encourage them and qualifying family members to register under the EU settlement scheme as soon as possible; although they can’t enforce that, they can encourage and promote it. Employers can also consider ramping up internal communications about what the recruitment process will look like in future and reviewing their internal processes to factor in the relevant timelines for going down the sponsorship route,” says Lisa.

1. Failing to understand the purpose of the business

Many entrepreneurs fail to determine the core purpose of their business and pursue ideas they think will be good rather than finding out what customers actually want or need. Every business needs to define its purpose by asking hard questions. What’s the core proposition and why should customers be interested? What are you offering that people will pay for and what demand does it satisfy? Businesses need to set this thinking against a wider social purpose; why do we exist and what does the world lose if we don’t do this?

Asking these ‘what and why’ questions and doing your research will help define your purpose and, armed with that, create a much better chance of reaching your target market.

2. Not having a business plan 

Creating a written business plan seems like a given, yet the vast majority of companies don’t have one. It’s vital to have this formal road map for your company, providing a defined, clear sense of purpose, direction and vision for the business. The plan should outline key objectives, targets and strategies for every aspect of the enterprise, including marketing, sales investment and growth. In this area we see huge contrast from no plan at all, through plans that live in people’s heads to a plan that runs to hundreds of pages, which may feel like more of an ideology than a plan.

Making it work requires a culture that embraces planning and sharing the business plan with staff. By showing people their role in it, the journey you want to take them on and the potential rewards engenders a feeling of belonging, stability, a sense of direction and being valued. Many studies show both a plan and supporting culture are crucial to commercial success.

3. The ‘story in numbers’ is missing

Even more enterprises fail to define their ‘story in numbers’ – the hard, factual figures that underpin the success of a business plan. These might, for example, include determining the value of your market and level of new business needed to make a profit, defining how many staff you need, operating costs, marketing and sales budgets and capital investment levels.

Determining these key ‘numbers’ and being acutely aware of them enables you to know what has to be achieved to keep the lights on. Initially, it’s about defining as much detail as possibleon a sort of trial profit and loss budget basis – essentially, a forecast. However, as more concrete data and results emerge, it becomes easier to refine and change the business to optimise it.

4.  Unclear ideology and values

Businesses frequently feel behaviour and values aren’t really a priority – unless they’re a specific selling point. However, they determine how a company fulfils its purpose and plan, what it will and won’t do as a business and signals that it does things the right way – particularly on ‘hot’ issues like ESG, diversity and inclusion.

In today’s environment, having clarity about behaviours and values is good for business but also for recruiting talent, as people today increasingly take company values and ethics into account when seeking employment. Produce a statement of values and make it available to your staff and externally. Employees should understand what it means to work in the organisation, and your values must be projected externally through your marketing, social media channels and all aspects of your output. Use your values and behaviours to create a business environment that provides psychological safety, something companies tend to get wrong or overlook.

5.  Winning business is not made a priority

A big issue for many start-ups is that, rather than focusing on winning business, they try to create a niche for themselves too quickly, which can actually be self-limiting and make it difficult to generate income.

You need to prioritise winning new business and consider any potential openings that materialise, because all your core objectives, including ideological ones, are much easier to deliver with income. While it’s important to have a purpose, plan and values, you need to be agile and pivot to exploit new opportunities and changing markets as they emerge.

Despite the pandemic, good quality merger and acquisition (M&A) deals are still being done, but buyers are asking searching questions around companies’ responses to Covid-19 and their prospects for success beyond the pandemic, says Andrew Shepperd, Co-Founder of business broker and corporate finance advisory firm Entrepreneurs Hub.

“There are two things you might assume,” he says. “Either that deals aren’t being done or if they are being done, they are opportunistic deals. But actually, what we are finding is that good M&A is happening, good acquirers have still got strong balance sheets and they are acquiring in a very responsible way. The obvious question is, ‘are they cut-price deals that are unfavourable to the vendor?’ And the answer is ‘no’.”

While these acquirers continue to behave in a responsible way, they have three Covid-19-related questions as part of their due diligence: How have you performed through the pandemic? What are the future prospects of the business? To what extent did you leverage Covid support and how have you reported it in your books?

1. How have you performed through the pandemic?

Acquirers are generally very understanding about the challenges companies have faced during the outbreak, says Andrew. In many ways they now feel more confident about the businesses they are buying because those that are still trading have already demonstrated real resilience.

They anticipate contracted revenues through the worst months and so also want to know what business was like beforehand and what it looks like in the months ahead. What they are looking for is a trend line that will enable them to value based on business norms rather than the depressed period of lockdown.

Andrew says: “They will want to understand what the pandemic was like for you. What did it feel like in the business? What did your customers do? What did you do with your staff? They’ll also want to know whether you kept operating fully or closed down, how you maintained customer obligations, what happened to your cash, did your projects pause or get cancelled altogether, did you pick up different kinds of work, and was the size of your orders bigger or smaller than normal?

Overall, they are looking for the colour that will give them a clearer understanding of your business.

2. What are the future prospects for the business?

Inevitably, acquirers will want to understand how you will continue to be successful when the pandemic is over. If your products have been in demand during the crisis, how will you maintain sales, and if you pivoted to produce products like hand sanitisers or perspex masks, will demand remain or how will you return to your previous business model?

But acquirers will also want to understand how you’ve embraced the digital transformation in order to meet the demands of an altered business environment. Andrew is regularly hearing questions from acquirers, particularly in the tech sector, about a target company’s cloud strategy and how they are addressing customers’ problems through the cloud. They want to know about online information, online ordering and ordering support and how online orders are fulfilled.

Andrew says: “I’ve seen a number of businesses that I work with, and these are privately owned SME businesses, whose revenues have gone through the roof by going online. If you went back 10 months ago when Covid was starting and some of their traditional customers and traditional ordering and fulfilment were jeopardised, revenue flows were highly disrupted. By going online not only have they recovered but they have grown more quickly.”

3. To what extent did you leverage Covid support?

Acquirers don’t just want to know whether you took advantage of the Job Retention Scheme, the Coronavirus Business Interruption Loan Scheme or the Bounce Back Loan Scheme. They also want clarity around how these are reported in your books.

Having taken advantage of this support is not seen negatively and it is often viewed as just good business sense, since the loans were offered on extremely favourable terms and could be used to finance expansion. While businesses are generally considered to have demonstrated resilience by continuing to trade through lockdown, acquirers will want to reassure themselves that your success doesn’t rely on government support.

“They are assuming that businesses have taken the support and generally acquirers are very supportive, says Andrew. “They just want it reported clearly. Generally, it is broken out onto a separate line of your profit and loss report and they are fine with it.”

Finally, don’t be surprised if an acquirer asks you how you are with real feeling. Perhaps a positive outcome of the pandemic is that a touch of humanity has returned to mergers and acquisitions, says Andrew. He has seen genuine concern for business owners from acquirers who recognise the pressure they have been under in recent months.

Now the UK has fully transitioned from the EU many SMEs are understandably looking to global export markets to expand and strengthen their businesses as the dust settles on the new trading arrangement with Europe.

Unsurprisingly, much has been made about the necessity of securing trade deals – but this should not be the only factor for entrepreneurs thinking of exporting goods and services overseas, argues Liam Smyth, Director of Trade with the British Chambers of Commerce

“The reality is that we ultimately had trading agreements with 64 countries via the EU, yet in 2019 UK traders actually exported to 192 countries, including the US – one of our biggest markets despite having no trade agreement¹."

Market opportunities

While international agreements help reduce trade barriers, Liam says that when considering exporting to non-EU countries, the starting point is market opportunity. “Having worked out the value proposition for your product or service, you need to identify the best market that will enable you to move fast and grow.

“Part of that is about identifying how easy it will be to sell your products and find a market in a particular country. You need to understand its business culture, local competitors and what makes your product unique and ease of ‘repatriating’ profits and making investments. Other key factors are access to a good supply of local talent with appropriate skills and expertise, effective communications and technology, and rules on ‘local content’.

While opportunities are market and sector dependent, Liam believes there remains great potential for the UK‘s SME exporters in the US under its new more outward-focused administration. Other vibrant markets include an increasingly economically liberal India, and African countries already trading with the UK.

And he predicts there could be strong demand for UK companies operating in food and drink, advanced manufacturing, engineering, technology, and professional and financial services.

Networking and advice

Liam advises: “Before deciding your market, exploit your LinkedIn and other networks to make contacts with business people from the UK, preferably from your sector, for dispassionate advice and inside knowledge about operating ‘on the ground’ in your target geography.

“Consider consulting with professional advisors and utilising the excellent export-related resources and expertise provided by the Department for Trade & Industry (DiT), and organisations like British Chambers of Commerce that can help with tricky trading paperwork.”

Demystifying trading fears

Entrepreneur Nick Devine is founder and Managing Director of JS3 Global, an SME helping businesses across the world to implement Enterprise Resource Planning (ERP) solutions.

For him, the emerging economies of South America, the Gulf States, Indonesia and Vietnam offer great exporting possibilities for UK entrepreneurs, who should take advantage of their nation’s global reputation for knowledge, services and advanced manufacturing expertise.

“However, there’s a need to demystify fears over trading overseas,” he says. “The global market has become much closer and more aligned in its business practices and it’s now easier to work in other countries, that are actually very open to British companies.

“Language doesn’t need to be a barrier – decision makers in most countries tend to speak English or will endeavour to do so. Social media has made international networking with potential overseas business partners possible for even the smallest start-ups. Take advantage of that and visit the potential markets and contacts you’ve made, pandemic restrictions permitting.”

He adds: “Logistically, SMEs should lean on technology to help them establish and manage robust supply chains with new, non-EU trade partners."

Lastly, he advises SMEs to set up a central, international, multilingual website along with ‘local’ websites in each country they operate in.

“This will raise your company’s profile and google ranking, generating more attention from potential clients, customers, suppliers and partners in your overseas markets.”

You must stay at home.” It was these five words from the Prime Minister on 23 March 2020 that transformed the working world. Prior to the pandemic, 87% of people wanted to work flexibly in the hope of achieving benefits including better work-life balance, more job satisfaction, reduced stress and increased productivity. Yet just 11% of jobs were advertised as being flexible, according to the Chartered Institute of Personnel and Development (CIPD)¹. Then overnight the UK became home to a largely remote workforce – a silver lining amid a global crisis for those employees who had been craving more flexibility in their working lives, but whose employers were resistant.

“Companies who previously were not open to such flexibility have had their eyes opened to what’s possible, and a lot of companies are viewing this as an opportunity to change the way they work,” explains Claire Ward, Founder of SME HR consultancy The HR Hub. And that changes business, too. The CIPD says that improved engagement – one of the benefits of flexible working – can account for the generation of 43% more revenue and improves performance by 20%. The normalisation and support of flexible working, moreover, can help reduce an organisation’s gender pay gap and encourages a more diverse workforce, which, according to McKinsey, could add £150 billion annually to the UK economy by 2025². Offering flexible working also means businesses get the best of the bunch. Some 92% of people want to work flexibly, so offering this opens up a business talent pool, not to mention expanding your geographical talent pool too³.

There are of course some limitations, in particular when it comes to businesses that rely on creativity – brainstorming sessions, when done remotely, simply aren’t as effective. But this won’t necessarily be the case for long. “We’re already seeing technology that helps to break those creativity barriers, which have likely had their development accelerated over the past few months,” says Ward. Other disadvantages include increased loneliness and, for some companies, the financial outlay of supporting flexible working – though in the context of the bigger picture this cost is minimal.

“Generally, the advantages outweigh any disadvantages,” explains Claire McCartney, Senior Resourcing and Inclusion Adviser at the CIPD. “Organisations should see a boost in productivity, a more engaged workforce, a diverse workforce and the ability to attract top talent.”

The four-day week

While working from home took the flexible working spotlight in 2020, prior to the pandemic the four-day week – whereby employees work four days instead of five without having their salary reduced – was gaining in popularity.

Henley Business School’s pre-pandemic white paper Four Better or Four Worse delved into the world of the four-day week and revealed that the combined savings to UK businesses that had implemented this was £92 billion⁴. However, Professor James Walker, Director of Research at Henley Business School, points out a notable concern for business owners.

“While 75% believe a less rigid working structure is key to a harmonious and diverse workplace, for some the benefits are either unnecessary or not substantial enough to warrant implementation. The biggest concern for business leaders is customer availability,” says Professor Walker. The white paper reveals that 82% of businesses don’t offer a four-day week as they believe employee availability to the customer outweighs the need for more flexible working, while nearly three quarters feel it would be difficult to implement, particularly in the case of small businesses.

Emerging from the pandemic

Remote working has become the go-to of flexible working, but it’s important to remember that this was forced upon us as the result of a global crisis. As we emerge from this pandemic and businesses reassess their working practices, they must consider all options. “There are many forms of flexible working, from remote, part-time and term-time working, to compressed hours, flexi-time and jobs shares,” says McCartney. “Employers will have to look beyond working from home otherwise risk creating a two-tier workforce of those who have the opportunity to benefit from remote working and flexibility and those who don’t.”

It could be, as Ward believes will be the case for SMEs, that there will be a shift towards businesses implementing core office days, which, as with any alternative that doesn’t require a full-capacity office, offers the bonus of reducing a business’s carbon footprint.

But before any decisions are made, a dialogue needs to happen. “There is an imperative to open up conversations between employers and their employees, to trial and evaluate different forms of flexible employment which best suit the contexts and workplace roles,” advises Professor Walker. After all, shifting an entire sector into a particular form of flexible working is not only what Professor Walker describes as a “drastic step” but, ironically, not very flexible at all.

When PR agency Harvey & Hugo lost a third of its financial sector clients at the start of the first lockdown, owner Charlotte Nichols took to social media for salvation.

“I was panicking,” she says. “But as I sat on my sofa in my pyjamas, I began to rekindle my love for social media. It had helped me build my business after launching in 2009 and once again it was winning new clients.”

Charlotte was social prospecting, using social media and online networks to identify, research and engage with prospective new customers and sales opportunities.

“When we first launched, I followed Twitter hashtags from our region and built up a little community of potential clients. I created website content and shared little snippets on social media,” she explains. “As time went on even though we created good content we became complacent in generating leads. Last March I researched which sectors were doing well and started prospecting again. This is something any start-up can do.

Building up prospects

Phil Hawkins, founder and director of social media agency Colour Me Social, says the first step is determining who you are going to target and which social media channel you will find them on. This includes Facebook, LinkedIn, Instagram, Twitter, YouTube and TikTok, which apart from keeping families entertained over the pandemic with ping-pong videos, has created TikTok For Business, helping SMEs create stories and set up ads on the site.

There are several social prospecting tools entrepreneurs can use, including LinkedIn Premium with its unlimited searches on potential prospects and Ninja Outreach which can find social media influencers. But it is also about just getting on Twitter and LinkedIn and searching for keywords and topics relevant to your business.

“Look through the posts and comments to find conversations that you can join,” advises Phil. “Join LinkedIn groups and share advice. Show yourself as a helpful expert.”

Charlotte says ‘listening’ on social media can also help uncover opportunities such as people asking for recommendations in your sector. “There may be a complaint from a customer giving you an opportunity to approach them,” she explains. “Hopefully, you will soon build up a list of prospects who you follow and who follow you.”

Engaging potential customers

The next stage is engaging the prospects. “Don’t give it the ‘hard sell’. Instead, do it softly through liking their content and putting up your own articles, thought leadership pieces or case studies,” Charlotte explains. “You need to build trust and credibility. Without that it will be hard to progress to sale.”

You need to research where and when your target consumes their media. Typically, Facebook and Instagram are very video and image-led, whilst blogs and whitepapers work best on LinkedIn.

Jonathan Wagstaffe, tech entrepreneur and visiting fellow at Cranfield University, advises following the BBC’s founding principles. “It is about educating, informing and entertaining,” he says. “Think about the 20 questions you get asked a lot as a business and develop content pieces which answer them. This should lead to questions from prospects about what your product is. The key is to get potential customers talking about you.”

Securing the deal

The final stage is turning the prospects into new business. “In the old world I would invite prospects offline to meet up and have a coffee. What are they looking for?” says Charlotte. “They may not want to do business now but if they are the right client then keep trying both on and offline.”

That contact is especially important now that those face-to-face coffees seem a distant memory.

“It’s important to remind people that you are here,” Charlotte says. “Be human, genuine and authentic. Sometimes on social media you can forget you are talking to real people. Alongside our educational content we have also introduced the lockdown diary of my dog Hugo playing scrabble and eating noodles.”

Phil says building such a personal brand is fundamental both now and post-pandemic. “People buy people,” he says. “Be yourself, post regularly and be patient and social prospecting can help your business grow.”

Chancellor Rishi Sunak is considering a report¹ which says that dramatically increasing capital gains tax could make it simpler and fairer. Although no decision has yet been taken, a worst-case scenario for additional rate tax paying entrepreneurs could see some of those who currently qualify for Business Asset Disposal Relief facing a CGT rise from 10% to 45%.

In the face of the report from the Office of Tax Simplification (OTS) it’s important that you begin careful tax planning to ensure you don’t pay more tax than is necessary.  There is a variety of measures you can take, from changing your remuneration strategy to a partial sale but a strategy tailored to your needs requires expert advice.

The report suggests aligning CGT more closely to income tax. Basic-rate taxpayers currently pay 10% CGT on assets and 18% on property, while higher-rate taxpayers are charged 20% on assets and 28% on property. These rates are considerably lower than income tax, which is charged at rates of 20%, 40% and 45%.

Simon Martin, Regional Technical Manager at St. James’s Place, says: “Currently, if you sell a business for £1 million, as long as it qualifies for Business Asset Disposal Relief you pay a maximum £100,000 in CGT. But if you’re an additional rate taxpayer and CGT is aligned with income tax, you’d pay £450,000, so it could be a significant increase.”

Slashing the exemption

The OTS has also suggested reducing the annual CGT exemption from £12,300 to around £5,000 and reassessing Business Asset Disposal Relief and Investors’ Relief, which it says are not working as an incentivise for investment. The report also looks at the way CGT and inheritance tax work together, and in particular the CGT benefit someone receives when they inherit an asset.

Simon says that if you are planning for a business exit in the near term  ensuring you qualify for Business Asset Disposal Relief will help limit your CGT liability. If you’re close to a sale, getting the deal done before any CGT changes would also be prudent, he says. Alternatively,  When you plan to continue your business for the medium to long term, CGT changes alone may not push you to dramatically change your exit timescales. However, other planning such as pension contributions and an efficient remuneration strategy can help the ultimate CGT position by extracting capital from the business over time. 

A St. James's Place Partner will be able to help you develop an overarching  financial plan that encompasses both your personal and business assets. Taking advantage of your annual CGT exemption, which currently stands at £12,300 (£24,600 for a couple), could play an important part in limiting your overall CGT liability. And a St. James's Place Partner could help you use your dividend and savings allowances.

Tax-efficient remuneration

It’s also important to ensure that you have a tax-efficient remuneration structure within your company. This involves more than simply taking the maximum £50,000 a year in dividends to stay within the 7.5% tax bracket. You could, for example, give your spouse a 50% shareholding so that he/she can also withdraw dividends at the lower tax rate and help to reduce your CGT liability over time. Maximising your pension contribution is also a useful way of removing capital from your business.

More fundamental approaches could include simply holding on to your business and growing it further to limit the impact of any tax charge. A share buy-back could also form part of your strategy but this is highly specialised tax planning and you would need expert advice. Alternatively, you could consider a partial sale that could see you taking some money from the business at the current CGT rate and planning longer term for the rest.

Nigel Fox, an adviser at business growth consultants Elephants Child says: “There’s always a middle ground. Do you sell 25% of your business today, take some money off the table, accept the tax that you pay and continue to build either as an executive or just as a shareholder? Ultimately, when you come to retire, you sell the rest, accept that there is some tax to pay but you might have been able to put in some inheritance tax planning or structure around trusts that will minimise it at that point.”

Crystalising losses

Nigel also suggests crystalising any capital losses to offset against your capital gains. For example, if you have shares that have fallen in value you may be able to offset these against your tax charge when you exit.

“How you plan your taxes is entirely down to your personal circumstances, your personal risk appetite, your situation in life and what you want to do,” says Nigel. “What I would say is the devil is in the detail. Until you know the detail of what any legislation says, it’s difficult to make those plans.”

If you would like help with tax planning, talk to your St. James’s Place Partner.

The government has provided many valuable financial support measures to help firms weather the storm of the pandemic, ranging from furlough to CBILs loans. But businesses cannot afford to just take the money, hunker down and wait for pandemic-driven economic uncertainty to pass, argues Martin Brown of leading business growth advisers Elephants Child.

“Enterprises must be pro-active and agile to remain competitive and resilient,“ he says. “One way to start is to take advantage of government-funded training schemes designed to make companies better able to compete within their own markets or pivot to new ones.”

Leading the way

A relatively new and government scheme worth considering is the Small Business Leadership Programme (SBLP), designed for companies with two to 249 employees. Delivered via 20 leading Business Schools, the free 10-week programme is designed to help businesses deal with the impact of Covid-19 while developing their productivity and long-term growth potential.

Two senior managers from each company take part in interactive weekly webinars and peer-to-peer sessions and receive personalised support from a range of business school experts covering areas including HR, operations and supply chains, productivity and profitability, sustainability and how to be more resilient.

Driving performance

Jane Pallister, Entrepreneur in Residence at Staffordshire University Business School, manages the SBLP scheme for Staffordshire and beyond. She says: “The programme removes senior managers' feeling of isolation in dealing with the commercial impact of the pandemic and consolidates steps they’re already taking. 

“We share new marketing, finance, operations and employee engagement models to drive performance and productivity, while also focusing on employee support and wellbeing. We’re currently recruiting for the next cohort, due to start in January 2021.” 

Participant Kevin O’Mara, Managing Director of Staffordshire-based specialist executive chauffeuring business, Advanced Journey Chauffeuring, says the scheme has been a lifeline.

He explains: “We were losing revenue and visibility through the pandemic but the course inspired us to launch a communications exercise to let our customers know we were back in action and the steps we’d taken to ensure Covid-safe travel, and really put ourselves ‘out there’ on social media platforms and virtual business marketing groups. 

“As a result, we’ve attracted major new corporate clients who’d lost their incumbent service-providers through Covid-19. We couldn’t have turned things around without the help, expert advice and support we received to navigate us through some critical decision making.”

Peer networks

Another programme designed to strengthen businesses is peernetworks.co.uk, which brings together small groups of SME business owners across the UK to collaboratively develop solutions to common business challenges, such as EU transition, recovering from Covid-19, HR, technology and finance.

Led by the UK’s 38 Local Enterprise Partnerships, Peer Networks is free to join and offers access to one-to-one mentoring, coaching and advice, with each group led by a skilled professional facilitator. Martin says: “It provides the benefits of group learning in a collegiate and non-intimidating environment, offering the benefits of knowledge-sharing and being in a team to examine business, culture and related personal issues in a pragmatic way.”

It’s also worth taking a look at the government-supported Recovery Advice for Business Service run by Enterprise Nation, which gives SMEs access to business advisers and experts on business topics across all sectors to help them bounce back from the pandemic.

Get advice

Summing up, Martin says: “The highlighted examples are just a taste of what is available – but trying to make sense of the bewildering choice of state funded and private options out there is a challenging and time-consuming task.”

Before making any decisions, speak to your St. James’s Place Partner who will work with Entrepreneur Club to find the most appropriate provider for you.

Marketplaces such as Amazon, eBay, or Etsy can be lucrative sales channels for SMEs. Andy Geldman, founder of Web Retailer, a website dedicated to providing information and research about marketplaces, says the primary benefit is the huge number of serious buyers on these websites which provide ‘ready-made’ large audiences to tap into. 

Research by ChannelAdvisor conducted in August 2020 actually shows that since the outbreak of Covid-19, 58% of UK consumers who have purchased online, discovered those products by browsing marketplaces – higher than any other method of finding products (such as brand or retailer websites, search engines or social media) .  

It is also relatively easy for businesses to get up and running, and what Andy has found is that being on a marketplace is often a trigger to start selling internationally. He says: “If businesses start selling on an Amazon or eBay in the UK, they will quickly realise that adding countries to that sales channel – using these same marketplaces – is not that big a leap.”

But, says Andy, it’s not all upside: “With large marketplaces comes lots of competition. This is ultimately why they are so successful. They are pitting sellers against each other to compete on price (primarily), but also on service and quality of information. It can be really difficult and expensive to stand out, particularly if you don’t have a recognised brand.”

Sifting through the options

“There are plenty of online marketplaces, but that doesn’t mean there are plenty of strong marketplaces. And they won’t all be appropriate for your business. It takes a lot of careful thought and planning to select the right one(s) for you.” says Andy. In fact, Web Retailer recently published an article reviewing the top 17 online marketplaces for selling to UK customers.   

He says for most businesses targeting UK customers, Amazon and eBay are the obvious choices, simply because they sell such a wide product range and because of their size. Amazon has more than 20 times, and eBay more than 10 times, the number of website visits than Etsy, the third most popular marketplace in the UK . 

Outside of the ‘big 2’, most marketplaces could be described as semi-niche or niche. Etsy and Notonthehighstreet have an emphasis on arts, crafts, and gifts. Then there are category-specific niche marketplaces such as Wayfair (homewares), Game (e-gaming) or Zalando (fashion).

For businesses interested in exporting, Andy says this is very country specific. In the US and Europe, Amazon is again the market leader. It is also expanding rapidly in other markets such as Australia and Latin America. 

For those looking to China as a market, the Chinese ecommerce giants have marketplaces set up specifically for overseas businesses. The main options would be Alibaba’s TMallGlobal and JD Group’s JD Worldwide. Royal Mail has even set up a ‘store within a store’ for UK businesses to sell through TMallGlobal. Andy recommends businesses considering ‘e-exporting’ look at the UK Department for International Trade's guidance as a starting point. 

Businesses should also not think online marketplaces are only for business to consumer (B2C) markets. For B2B businesses, Amazon is again the dominant player through Amazon Business. According to its website, it has over a million business buyers worldwide.

Taking the plunge (or not)

Izabela Catiru, product marketing manager at ChannelAdvisor, an e-commerce cloud platform used by businesses to manage and streamline their e-commerce operations, says nearly all products can be sold through marketplaces and that there are hardly any unsuitable products. But she does highlight a number of categories that consistently perform the best: clothing, fashion and accessories; health and beauty; and home and garden products.

She says it’s probably easier to say which businesses would not be a good fit – those which operate with very thin margins: “Marketplaces take a percentage of sales, so do the payment providers such as Paypal or Stripe. On top of that, investing in advertising on the larger marketplaces is really a prerequisite for success. These costs add up and can make the channel unviable.”

The other caution she sounds is that businesses should make sure they are able to meet the fulfilment requirements of their chosen marketplaces, which are often quite demanding: “Marketplaces will have minimum standards for things like delivery times. If you persistently fail to meet these or if you run out of stock, you might be removed from the marketplace which can be hugely damaging.”

However, says Izabela, this is precisely the reason that the fulfilment services provided by some of the marketplaces (Amazon in particular) are so popular. For a fee, businesses can have their products collected by Amazon and delivered to customers, or they can ship a bulk pallet to Amazon for it to manage the fulfilment process. 

But she also stresses that the smaller or niche marketplaces shouldn’t be ignored: “Even though they won’t have the volume of sales going through them and they may not have the logistical support offerings of the larger marketplaces, they might be better because it could be easier to generate sales. These niche marketplaces tend to have ‘high intent’ audiences, and the competition might be less too.” 
 

Ian Duffew, a consultant working with business growth advisors Elephants Child, has advised companies as they grappled with the challenges posed by the Covid-19 pandemic. He previously worked at a senior level across industry sectors and has served as a non-executive director on the boards of several SMEs and believes there are some essential lessons that start-ups can learn from those that thrived in 2020. 

1. Stay close to your customers

Start-up companies have enjoyed real success by staying in regular dialogue with their key customers and providing a responsive and supportive service.  As a result, these SMEs were in the right place at the right time to assist clients who needed help. Companies that survived prioritised their key customers, continuing to meet with them on a planned and scheduled basis. Normal service continued. 

Where it was possible, they met in person, obviously taking precautions and sticking to strict social distancing rules, wearing PPE and washing hands regularly. However, where face-to-face meetings were not possible, these companies made maximum use of technology by becoming proficient with Teams, Zoom and other meeting applications. They looked for new and innovative ways to communicate and then adapted quickly.

2. Be prepared to step outside of your comfort zone

In 2020, smart businesses responded to requests for support that were not necessarily part of their original offering. With the pandemic throwing up many different types of challenges, customers needed (and still need) support that probably wasn’t in any initial business plan. Successful SMEs took the risk, stepped outside of their comfort zone, and learned quickly.  

Ian says: “A great example of this is an engineering SME that set up to provide equipment maintenance. They secured an order and started work on a client site, servicing assets.  Within a week, the client came to them and explained that another supplier he regularly used for general site infrastructure maintenance was temporarily unavailable. The client asked if the SME would be prepared to take this work on. After an internal Teams meeting that afternoon, and an assessment of the potential risks, they agreed to take on the extra work. As a result, the original order was extended by 90 days, the SME has a new string to its bow, and a significant amount of goodwill is now stored up with that client.”

3. Look after your cash 

Start-ups that survived 2020 managed their cashflow very carefully. Overheads were kept to an absolute minimum and robust plans were in place to drive down debtor days. Those that are still trading frequently took the opportunity to negotiate better payment terms, both with customers and suppliers. Some moved to pro forma invoicing as standard, significantly reducing the risk of the bad debt that has seen some start-ups fail in the last 12 months.

Making good use of government support, such as the Bounce Back and CBILS loans has also been an important ingredient for success. Ian says: “Many companies have taken these loans in order to survive but some have used this cash injection to grow, looking at ways to invest this money and make it work hard for the business.” 

4. Keep on trading

In the early days of the pandemic, when the furlough scheme first provided the opportunity to get people off the payroll, a lot of start-up SMEs took the decision to ‘mothball’ for three or even six months. Others opted against this, recognising instead that this was an opportunity to grow into competitor space and, whilst some scaling down may have taken place, these businesses took the decision to keep trading and were there to fill in the gaps being created.   

Re-starting any business, having spent months out of action, is always difficult. Many of those re-entering the marketplace faced competition from active and thriving SMEs who had maintained a presence, stayed close to their clients and responded to additional requests as a result of gaps in the supply chain. Ian adds: “If you’re still operating when others aren’t, there will always be more opportunities available. Those that succeeded made sure clients knew they were open for business and were not afraid to ask for the work. The smart start-ups didn’t just assume they would automatically fill the vacuum, they were pro-active and positioned themselves to respond.”

5. Cash in on goodwill

Many customers that were well supported remained loyal to those who stepped up during 2020. In an unprecedented year, the creation of customer goodwill was hugely prevalent for those start-ups that kept going, and in difficult moments, some were able to cash in on the credits they had previously earned, both with customers and suppliers.

Ian recalls: “I was so encouraged recently by the news of a nine-month start-up that was struggling to continue. They had bent over backwards for a major customer throughout the summer but other orders they were expecting had been pushed back to 2021. They approached the customer to ask if there was anything he could do to help. Reflecting on the excellent support he had received from this business, he decided to bring forward and award them a project from his 2021 budget, with favourable payment terms too.” 

Many organisations generate high levels of goodwill.  Those that survived were not afraid to cash in on it. There have been few periods in recent decades that were as difficult for businesses than 2020. Start-ups that want to succeed in the future need only look at those companies that have thrived to find lessons that can underpin their own success long into the future.
 

A photoshoot for the Department for Environment, Food & Rural Affairs on a windy beach in North Wales may not be the place you’d expect a lockdown-beating business idea to be hatched. But with export routes shut down, fisherman Sion Williams and photographer Jude Edginton formed an unlikely alliance to save the lobster season and build a more resilient fisheries business.

Around 90% of the lobsters caught in Welsh waters are exported to China and Europe¹. With Sion unable to reach these markets and Jude finding photographic commissions cancelled as lockdown loomed, the pair agreed on a classic business pivot. Jude promised to use his experience of marketing and storytelling to help sell Sion’s catch directly to consumers in London.

The agreement saw the creation of new business Lockdown Lobsters and demonstrates how seeking out new partnerships and different skills can help businesses to survive and thrive in tough times. While Sion, a proponent of sustainable fisheries, provided the lobsters, London-based Jude set about marketing them on What’s App, building a website and developing a plan to get the lobsters from the Irish Sea to dining tables in the capital within a few hours.

Marketing on What’s App

During an initial three-week period while the lobsters were being caught, Jude, whose regular job involves taking portraits of people ranging from Boris Johnson to Boris Becker and from Little Mix to Gogglebox stars, approached friends and business contacts in a What’s App campaign – some of those contacts were celebrity chefs and food critics. The approach was a success and by the time Jude made his first run from Wales to five drop-off points in London, socially distanced queues were waiting for the deliveries.

After the first three weekly deliveries there was a natural break when the lobsters shed their shells and fishing stopped. Jude used the time to develop the website and refine the operation, which now uses Zip cars for rapid delivery across the city. During this period his initial focus on business contacts paid off when a food and wine writer, who had received some of the lobsters, wrote a  three-page article on the experience in the FT magazine – helping them to sell-out the catch for the next six weeks.

Sion explains: “The lockdown due to the virus had a devastating effect on my business. Firstly, the merchants I sell a high percentage of my catch to stopped buying as their markets in Europe and Asia had closed, with no guarantees that they would be buying for the next five weeks, possibly five months. On top of this the local shellfish processor and restaurant closed due to the requirements of the lockdown. 

“Through Lockdown Lobsters I was able to carry on fishing and earning a living. I have also sold all my lobsters within the UK, reducing air miles and carbon footprint. Furthermore, we have established a connection with our customers by selling our story and giving our customers provenance of their seafood. I have learned that there is a market within the UK for our lobsters, it is a matter of making the customer aware of the availability of the high-quality seafood that is on their doorstep and getting it to them.”

Changing business models

Associate Professor and Head of Enterprise Education at Kingston University Martha Mador cited Lockdown Lobsters as an example of how some entrepreneurs were changing their business models to build resilience in the face of challenges such as the Covid-19 pandemic and Brexit. She explains that new relationships, greater use of digital and finding new ways to reach customers are all ingredients of the resilience that is needed for companies to thrive.

To help your business become more resilient, you need to find partnerships and supportive networks where ideas and concerns can be shared, she explains. You should also aim to use digital technology as much as possible, whether that’s how you interface with your customers, how they purchase your products or how you communicate. You can also look for new markets and prospect for clients digitally. New market opportunities can be tested easily with targeted advertising on Facebook and LinkedIn.

And make sure that you are managing your website so that it can easily be found in searches, says Martha. You could also consider developing a marketing app to make it simpler for customers to interact with you and buy your products on their phones. Another way to make your business more resilient is to put your products and services onto platforms which attract more customers, such as Etsy, eBay, Amazon or the many more specialist sites.

Martha explains: “You need to do something new which addresses this online world which we find ourselves in and make something of it. So, you need to redesign your services or your products, reconsider how you are getting to people, how you are reaching your customers and maybe pivot into different businesses or business models which are more heavily digital than previously. And I also think partnering and finding new people to work with and to develop new ideas and services with is important.”

Lockdown Lobsters is going from strength-to-strength and has recently begun delivering lobsters from Bridlington in Yorkshire, while fishermen in Inverness have sent lobsters on the overnight sleeper train to London to be distributed across the city.

While some businesses that have proved resilient in the pandemic have continued to be acquisition targets, for others exit plans were put on hold as Covid-19 disrupted trading. If you’re now thinking that 2021 could be the year for exit, we look ahead to see what to expect from buyers and how you can prepare.

Craig Hewitt-Dutton, Partner, LockDutton Corporate Finance, says: “No one can predict the future, but positive news about the pandemic – like a Covid-19 vaccine – could bring strong market growth in 2021, making it a very good year to sell a business. And it’s always the case that potential buyers will pay a premium price for the right business.”

There’s still demand, says Craig, from private equity investors, and some interest will be motivated by businesses protecting themselves against Covid-19 by diversifying. He also expects a new focus on acquiring UK companies as a reaction to the end of the Brexit transition period.

Whatever the business environment, Crawfurd Walker, Chief Revenue Officer for business growth advisors Elephants Child, says the same basic rules still largely apply if an entrepreneur is looking to exit in 2021. “Potential buyers will want to see a three-year business plan, sound trading figures and a good senior management team. As ever, they want to be confident about what they’re investing in – but even more so in this pandemic era.”

Proof of resilience

Both Craig and Crawfurd agree that how a business has responded to Covid-19 challenges is the new factor in determining how attractive it is to a prospective buyer. Crawfurd explains: “Buyers will want strong management that changed the business model to make it more flexible and resilient to something like Covid happening again and whatever the future business environment will be.”

Pre-sale negotiations and due diligence checks in 2021 could take longer than usual, says Crawfurd, and deals might be delayed until buyers have seen “six months’ of ‘new normal’ trading” so that a business can prove its resilience. “It depends on the company, and the changing pandemic situation, but that could be six months from October 2020, or from 1 January 2021.”

Business owners looking for a 2021 exit should bear in mind that a company saddled with debt will be even more off-putting for buyers than in previous years, says Craig, while the Covid-19 working-from-home revolution has reduced the importance of a company’s property assets. “The need for large, expensive-to-maintain offices is receding and buyers prefer leased property rather than anything owned outright.”

Entrepreneurs who mean to quit their business straight after its sale should also remember buyers need to feel sure the company can thrive without the person who created it. Crawfurd says: “Sometimes, the whole business is based around the owner so, in the nicest possible way, you need to ensure that you’re ‘redundant’. Have structures in place so the board can run it without you. Otherwise, the buyer could insist you stay on for a number of years.”

Contingency plans

A business will also be more attractive to buyers in 2021 if it can show it has contingencies in place for the UK’s new relationship with the EU. Craig says: “That includes ensuring employees who are EU citizens have applied for the right to stay in the UK by the June 2021 deadline.”

But Crawfurd stresses that preparation sooner rather than later is the way to put a business in the best position to sell at a good price: “There are exceptions but preparing properly for sale takes 2-3 years. If you temporarily put exit plans on hold because of the pandemic, review them again as quickly as you can so that you’re ready to sell in 2021.

If any of the issues in this article apply to you, contact your St. James’s Place Partner who can help you explore your options.

UK businesses borrowed five times more from banks between January and August 2020 than in the whole of 2019. According to EY Item Club¹, over that eight-month period, new borrowings (net of repayments) totalled £43.8bn, compared to the £8.8bn of 2019.

Small businesses have increased their debt levels the most. While EY forecasts the total stock of business loans from banks (which includes outstanding balances of loans taken out in prior years) to be up 11% in 2020 (compared to 2% growth in 2019), it reports the jump in SME lending stock at around 20%².

Sanjay Bowry, business growth advisor at Elephants Child, says this isn’t surprising: “SMEs don’t typically operate with large cash buffers and even a small drop in business activity can create a cash crunch very quickly. So, with the large and sudden impact of the pandemic, they have quite rightly been taking up the debt support that has become available – mostly from the government-backed Coronavirus Business Interruption Loan Scheme (CBILS) and Bounce Back Loan Scheme (BBLS)”.

But, says Sanjay, this is presenting owner-managers with new challenges, both psychological and practical.

Psychological challenges

Sanjay says that for many business owners, taking on debt is anathema: “They have financed their businesses successfully from day one without debt and never even considered borrowing money. For business owners with this mindset who have now taken on debt, it can be a time of enormous stress. Others have a diametrically opposite view. Debt isn’t seen as a negative but as an enabler for survival and growth.”

What Sanjay stresses to clients though is that debt isn’t a good or a bad thing, it is simply a business tool that should be used appropriately – be that to survive or to grow. His advice to business owners who have reluctantly taken on debt during this crisis, and whose natural disposition is to worry about it, is that the most effective stress reliever is to plan rigorously for how you will manage that debt and its repayments. He says: “Just knowing exactly what actions you need to take and what scenarios you have planned and prepared for makes the whole situation much more manageable and less stressful.”

Another tip for stressed-out business owners is provided by Rob Warlow, founder of SME loan broker Business Loan Services. He says that one of the things entrepreneurs and business owners are often not so good at is putting their hand up and saying they need help. “It’s just not in their DNA”, says Rob, “but probably the top tip from me is to take some outside advice. Good advisers will act as a sounding board, will bring ideas to the table you may not have thought of, and will be supportive from an emotional point of view.”

Practical tips

Miguel Calabrese, managing director of Blue Rocket Accounting, gets into the nitty-gritty of Sanjay’s point about rigorous planning. He suggests doing detailed cash flow projections for a 13-week period (90 days).

He says: “We like 13 weeks as a timeframe because if you do spot a cash crunch, there is enough time for you to do something which will have an impact on the cash position at the end of this period, such as finding more funding or cutting costs. And it is a short enough timeframe to make the cash flow projections fairly easy and accurate.”

Miguel recommends making this a ‘rolling’ forecast. At the end of week one, add week 14 to the forecast and update the intermediate weeks’ forecasts. Cash flow planning then becomes a weekly exercise for business owners who quickly build up a very detailed knowledge of their short-term cash position and get more and more comfortable because there is less uncertainty.

His suggestion for starting the forecast is to begin with outgoings. These should be fairly predictable for the next 13 weeks. Revenues are likely to be less certain, so Miguel suggests looking at scenarios. Look at a best-case scenario, where the Covid recovery really takes off and how you might capitalise on that. Then look at a worst-case scenario where revenues are badly affected and make sure you have a contingency plan so that that cash crunch can be survived.

His other top tip is around credit control. Miguel says: “Many people went a little bit soft on their credit terms in the first lockdown which is understandable but that can’t go on. Put a proper credit control system in place and make it consistent. People tend to be scared off by having to chase for money but don’t be, if payments are due to you, chase them up. That’s just normal business.”

Managing payment terms is also a point stressed by Rob Warlow. He says: “Are you maximising your creditor terms – if someone is giving you 45 days are you taking it? In this case there’s no need to pay in 15 days. Yes, you need to keep good relationships with suppliers, but you have to look after number one, and as long as you don’t go over your payment deadline, there’s nothing wrong with that.”

A last tip from Rob is about communication. He says: “Keep your suppliers and lenders in the loop if there is a problem on the horizon. If you see a cash crunch coming, sometimes the natural reaction is to keep it quiet. But you actually get much more credibility and deepen your relationship with suppliers and lenders by engaging early in the event of a problem. Remember they will also be wanting to know where their cash flow position stands. The last thing they want is a call from the blue saying I can’t pay you this month. Their reaction will probably be ‘why didn’t you tell me earlier?’.”

The number of businesses starting up has increased dramatically during the pandemic. Latest government figures show 51,269 new UK businesses launched in Quarter Three this year – 30.2% more than in the same period last year.¹

Take husband and wife team Guy and Abi Fennell who, in June, launched Pura, an online-based company direct-selling their own brand of affordable, eco-friendly, plastic-free, compostable baby wipes and nappies via mail order and subscription.

In their first week of trading they took 27,000 orders, and have since seen sales growth of between 150% and 200% week-on-week and their subscription base expand by 70% weekly, and now employ 30 people. Passionate advocates of the green agenda, they’re expanding into Germany this year and will launch in France, Spain and Italy early in 2021 with long-term plans to enter the US and Canadian markets.

Formidable challenges

Having identified a huge hole in the baby care products market three years ago, they set about developing eco-friendly products and finding reliable, capable manufacturers with a reliable supply chain to make them, aiming to launch in 2020. Then Covid struck; yet despite the formidable challenges it posed, they pressed ahead anyway.

“Extensive research and preparation is important, but you need to set out to be a serious market disruptor from the outset. Our decision to adopt an online, direct-sales model, cutting out retailers so we can control our prices and margins to compete against big players, has been critical to our success,” explains Guy.

Furthermore, any successful start-up in the current environment needs to be as flexible, nimble, agile and as resilient as possible to meet rapidly changing consumer demands, he argues.

Embrace e-commerce

“With people increasingly turning to online for their purchasing, it’s essential to embrace e-commerce and utilise the growing power of social media for your marketing as well as conventional advertising,” explains Guy. “It’s relatively cheap and you can use it to attract celebrities and influencers to become ambassadors for your business. 

“Good communication is key but obviously difficult with social distancing issues. However, our team has trained and operated virtually right from the outset, using tech such as Zoom and Microsoft Teams and mobile video and we’ve successfully built team spirit and forged a company identity. Of course, you have to have personal passion and belief in the business you are trying to create.”

Rebel rouser

Fellow entrepreneur Cordelia Kate wholeheartedly shares that self-belief philosophy, having successfully founded Rebellious Business Network after lockdown in March to help entrepreneurs running small, service-based businesses make more money.

A mother of three, she’d been running her own freelance affiliate marketing business since 2017, but with the onset of the pandemic, decided to rapidly redefine her enterprise for the new environment and launched Rebellious from her home with a simple virtual networking event. Nine months later, her brainchild has mushroomed, generating six-figure sales and acquiring two employees by providing free networking and additional paid-for support services to a 500-strong – and growing – community of small businesses.

Passionate

One-to-one coaching, expert talks and virtual business boot camps are offered, along with a training and coaching programme to help clients achieve six figure incomes, and the company’s first virtual networking conference took place in November. This time next year Cordelia expects sales income to treble.

“If you’re planning to start a service-focused business, you need to feel passionate about what you do because, ultimately, ‘you are your business’ and remember, operating online is the new normal for enterprises, thanks to the pandemic.”

She adds: “It’s vital to understand where your clients stand in this rapidly evolving market and what they need. So, before spending on marketing and advertising campaigns, work ‘organically’ by leveraging your existing social media networks and contacts and converse with other businesses and your potential customers.”

The question of why, in the start-up capital of Europe, female entrepreneurs have so much difficulty getting access to funding to start and scale their businesses is the subject of Government reports and ongoing debate. The Government-commissioned Alison Rose Review of Female Entrepreneurship (March 2019) found that while UK companies attracted more venture capital than those in any other European nation, just 1% went to all-female founding teams.

It is a complex problem that affects the whole of the UK economy, not just those women seeking to grow their enterprises. Rose points out that up to £250 billion of new value could be added to the UK economy if women started and scaled new businesses at the same rate as men. So why does the disparity exist and how can female entrepreneurs go about levelling the playing field and attracting the investment they need?

According to businesswomen who have successfully scaled and sold companies, women often face (mostly) unconscious sexism from largely male investment teams. Only 13% of senior people on UK funding teams are women, according to Rose. Sue Nelson, who founded niche SME tax firm Breakthrough Funding five years ago and sold it to EY in March, says these investors often fail to recognise the value of opportunities being presented by female founders.

Focus on finance

She explains that while men are often very confident in a pitch and paint an extravagant picture of the opportunity, women are sometimes less comfortable in a pitch environment and that can make their presentations less compelling. Female entrepreneurs , therefore, not only need to have all the figures at their fingertips and know exactly what they want from the investor, but they may also need to work hard to develop a more confident presenting style. This could mean seeking out the support of a business advisor or mentor and your St. James’s Place Partner can help you find the right support.

There are many ways to get over your nerves before a pitch – Sue gets “pumped up” by listening to The Prodigy loudly in the car on the way there – but practicing your presentation ahead of the meeting is critical. “And when you get there you have to take up all the visual cues of what that person or that panel is looking for,” she explains. “Are they very formal? Are they quite informal? Are they chatty? Are they in listening mode? And then you need to go with it. Don’t be rigid about presenting. You know it all, you’ve practiced it and practiced it and when you get there it’s time to relax and do whatever it is that you think they want at that time.” 

She adds that it’s essential for women to focus on the finance and not to  overly emphasise the other important topics such as social purpose and community benefit. “Investors primarily want to make money,” she says.. If they are investing £100,000, they want to know when they are going to get their £100,000 back and when they are going to get more than the £100,000, they put in. They want to know whether they will double their money in five years or in two years, and they want a compelling story that convinces them that will happen.”

Lacking confidence

Emmie Faust, an entrepreneur turned business growth consultant, won £200,000 in funding on the TV show Dragon’s Den at the age of 25 with a male business partner. Although that venture was unsuccessful, she has since sold two businesses for seven figure sums and has never had difficulty attracting funding. 

She says: “What I say to my clients is that in order to secure funding, you need to start networking. I’m part of loads of female networks but it doesn’t have to be just female networks, you just need to start networking and you need to start getting out there. That’s one thing that I believe is massive. You’ve got to be incredibly proactive. It’s very hard to get funding, it doesn’t just land in your lap.” 

As a mother-of-four Emmie says that another issue holding businesswomen back is that they often take on the lion’s share of responsibilities in the home and take time out to have children. She says that when she had each of her children, she returned to work lacking in confidence and it took time to build that up again.

Sue and Emmie now mentor female entrepreneurs and help them to win funding. Sue explains: “I think I have spent quite a lot of my career with men not listening to me and talking over me or across me. What I do now is help women get into business, make sure they are getting into it for the right reasons and that they know what they are doing. I think as a successful female founder it’s your job, as they say in America, to send that elevator down and try and help other women.”

The Job Retention Scheme, which has seen the government paying for 80% of furloughed workers’ salaries for months, has now been extended until the beginning of December. Its replacement, the somewhat less generous Job Support Scheme, will then take its place.

Through the new scheme the government aims to protect viable jobs – those where employees are working at least 20% of their normal hours. The cost of hours not worked will be split between the employer (5%), the government (62%) and the employee, through wage reduction. There are slightly more generous arrangements for businesses forced to close because of local restrictions.

Chloe Carey, who last year sold the human resources consultancy she founded in 2003, now works with business growth consultants Elephants Child to help SMEs tackle the HR challenges of the pandemic. She says that those who have been on furlough may have to be reintegrated into a business that is very different, having pivoted rapidly and developed new products and services during the Covid-19 crisis.

At the same time, she adds, there is evidence of increased mental health concerns among those who have been furloughed for long periods. And Chloe warns that there is the potential for resentment among staff who have been forced to work through the crisis, often with increased workloads and responsibilities, while their colleagues have effectively been on paid leave.

Hold appraisals

While many SMEs don’t have a formal appraisal process, planning in a one-to-one discussion with all employees can be a good first step towards reintegrating staff. This provides a useful opportunity to focus on training, align the goals and responsibilities of returning staff to the new business priorities, and even to encourage them to volunteer during the hours that they aren’t working to improve their mental health.

Chloe explains: “I think it would be a good time for such a discussion even though people aren’t at work for their full working hours because it’s a great opportunity to focus on their learning and development. Create a plan which they could begin during this period of reduced hours. The priority really is to ensure the staff feel supported and valued whichever camp they are in and that their health and safety, and wellbeing, is the priority of the company.

“You can find out so much about someone’s aspirations, fears and anxieties from having a discussion like that. But you should make it a more formal, structured process rather than just a bit of a catch-up about Covid or furlough. They will still have a number of issues going on around them while they are trying to hold down a job where they feel disconnected and they are not really sure what is going to happen next.

“You might take the opportunity to reset objectives because the actual focus of the business may have changed and the product set may have changed. The businesses that are doing well are pivoting quickly and making changes to their direction and that’s a really good opportunity to make sure all your employees are on the same journey and to tweak what your requirements of them are.”

Individual plans

A formal discussion is also a good opportunity to find out more about each individual. Some may be fearful of infection, or social isolation, while others may also be struggling to juggle childcare if schools close. Those who have been on reduced salaries may have financial worries, while some may have underlying health issues that make them vulnerable or may have suffered a bereavement during the pandemic. Chloe explains that understanding these issues can help employers put together a plan which is specific to the individual.

One thing that all companies are doing at the moment is planning and forecasting and ensuring they can see the affordability of staff. However, Chloe points out that many staff are reconsidering their priorities during the pandemic and may be open to more flexible or part-time working that would both meet their aspirations and the company’s cash flow needs. The discussion would also provide an opportunity to gently investigate such options.

“The discussion could be couched in such a way that it’s not just about what the business goals and objectives are and where the company’s focus is,” says Chloe. “It’s also about what the employee’s objectives are, their personal objectives, their aspirations, and their career plans. How can you marry those two things together to make sure it works for you and your employee?”

Despite the challenges of Covid-19 and the continuing uncertainty around Brexit, there are still buyers who are ready and willing to snap up the right business.

As Martin Brown, founder of business advisors Elephants Child, says: “There’s still an awful lot of money to be invested – and we’re working with buyers that want to do progressive things around purchasing to grow.”

Julian Goulding, of legal firm Blake Morgan, agrees. “I’ve seen more activity in recent weeks than I’ve seen in the previous six months with plenty of buyers out there. Of course, it depends on the industry sector – some are doing better than others. Some buyers are looking for bargains, some are looking to expand their business and some are looking to buy as a strategy to help their business survive.”

It’s clear, whatever their motivation, that there are buyers in the marketplace – but as a business owner, are you ready to sell? Here are five common signs that it might be time to exit.

1. Aspiration 

One tell-tale indication is the realisation that you’ve achieved your business ambitions, or that you expect to hit those targets in the next 12 months to three years. “Those aspirations could be defined by time, the owner’s age or the monetary value of the business,” says Martin, “but if they’re coming to fruition, it’s time to at least consider your exit options.”

2. Passion

Another sign you should step away is finding you’ve lost the passion – the energy and drive – that helped you launch the business. Julian says: “It can happen any time, but in the current circumstances, for example, it can’t be underestimated how draining it has all been and some people are concluding they can’t and don’t want to run a business anymore.”
He adds: “Other business owners realise there’s no-one in the family to take on the reins, so sale is there only alternative if they want to step down and realise the value of what they’ve put into the company.”

3. Glass ceiling 

Building a company is a journey with very different phases of growth – or “glass ceilings” as Martin calls them – along the way. He explains: “We often see entrepreneurs or business leaders who take the business through two or three of these ceilings but then find the next stage unattractive because the commitment required isn’t justified by the rewards it will bring.” 
Julian adds: “A business owner may find they’re reluctant or unable to put funds in or make hard decisions like making long-standing staff redundant as part of a restructuring. So maybe it’s time to hand over to someone else to do these things.”

4. Market cycle 

Martin sums this up by saying: “This is about not ending up being the guy who’s selling Filofaxes when the iPhone is launched!” He continues: “You want to be selling when you can maximise the value of your company. That could rest on the state of economy, a change in legislation or the relevance of your technology in the marketplace. 
“Timing – and a bit of luck – are key. We’ve all read about the start-ups that aren’t even making profit but then get bought for big bucks by a giant like Microsoft because their technology is the hot property at that moment.” 

5. Forced

Sometimes the sign you should sell is that matters in your personal life simply become more pressing than your business. Martin says: “It’s a horrible place to be when you’ve toiled for years but, sadly, sale can simply be forced on you by death, divorce or illness.”

With plenty of buyers and finance still in circulation in the UK economy, if any of the above is relevant to you, perhaps it’s time put up the ‘for sale’ sign.

Bank of England chief economist Andy Haldane is urging entrepreneurs to invest in their businesses now to be in a strong position for when the Covid-19 crisis passes.

As latest figures from the Office for National Statistics reveal, business investment fell by 26.5% in the quarter to June 2020, Haldane argued in The Times that it is counter-productive for business leaders to hold back on investing in their enterprises.

His concerns are echoed in the report Post-Pandemic Economic Growth, compiled by Continuous Improvement Projects in collaboration with Middlesex University and Brunel University London and published on 8 October by the Government’s Business, Energy and Industrial Strategy Committee. 

Based on a July 2020 survey of 122 businesses of different sizes from 16 different sectors, the report found business investment fell during the course of the pandemic. 

One of the authors, Dr Monomita Nandy, Associate Professor of Accounting & Finance at Brunel Business School, says: “Judging by the responses, most organisations appear to be looking at ways to recover and manage what they already have.” 

Many have been somewhat short-sighted and failed to “turn fear into opportunity” by investing in their own organisations, she explains. Instead, they passively rely on the government for direction, implement short-term fixes and stockpile cash, and often don’t take advantage of government financial help and low interest rates.

Best strategy

Surprisingly, 82% of businesses surveyed say they’re confident they’ll grow within the next two years, with digital solutions and extending flexible working cited as top post-Covid priorities. Dr Nandy says: “That’s encouraging of course, but the best strategy for surviving and achieving growth after Covid isn’t waiting until things get better but investing in your business now. 

“That includes improving business operating systems, securing your supply chain and introducing new technology. Revise your business plan and operating model if necessary, ensure you have a development strategy in place and perhaps consider expanding internationally or even making acquisitions. This will put you ahead of reactive-only competitors.”

Dr Nandy adds: “Customer expectations are rapidly evolving in the crisis, so companies must be flexible to meet them. That involves much more than just implementing digital solutions though. It also means investing in people – retaining and hiring the right employees and training them to help deliver agile responses to customers’ changing needs.” 

Meeting the challenge

One person who believes in investing in his business now is Steve Witt, co-founder of franchise travel company Not Just Travel, which has expanded its network of self-employed online travel advisers across the UK.

During the pandemic the company has been reinvesting business revenue into recruiting, training and supporting up to 15 new advisers every month, and now has more 750 advisers and more forward bookings on its books than ever before.

Steve explains: “We’ve remained very pro-active throughout the pandemic. We revisited our business plan, put a survival plan in place, set aside money to keep things going and, critically, determined changes we needed to make to meet the challenge.

To help the business grow during Covid, the company doubled its marketing budget and expanded its leadership team with two new positions – Chief Business Development Officer and Head of Operations and Experience. 

“Given face-to-face interaction isn’t possible, we invested in new, high-quality technology to deliver virtual training and redirected support staff to assist our corporate training team,” says Steve. 

Not Just Travel also brought in mind and business coaches to support employees, recognising the importance, and business value, of maintaining people’s wellbeing and mental health during this stressful time.

Pole position

Steve concludes: “Since lockdown, high street travel businesses have suffered, and self-booking holidaymakers found themselves dealing with frustrating and time-consuming rebookings, refunds and cancellations. 

“That puts our customer-friendly online model in pole position for the recovery – and we’re investing hard now to exploit that.”

If you are considering investing in your business or need support with any other business issues, contact your St. James’s Place Partner, who can help you explore your options.

If your employees have been working at home for months the isolation and new ways of working could be taking a toll on their mental health, which may lead to personal difficulties for them and to a fall in performance at work. As a remote leader it can be more difficult to spot the signs that someone is struggling when they are working from home but there are signals to look out for.

Julie Brophy, a business psychologist and Principal Consultant at Cambridge-based business management consultancy OE Cam says that at some businesses the structures that were put in place at the start of lockdown to support social cohesion and enable regular informal contact with employees have fallen away over time. Owners need to reassert these and put in place reminders for individuals to be contacted to see how they are. There are red flags that can alert you of a remote employee who is struggling mentally, if you take the time to look.

• One indicator is a decline in the quality or speed of their work. That’s got to be balanced, however, with whether they are busy because there’s a lot of anecdotal evidence that people are going from video conference to video conference and so their days are absolutely packed, says Julie. It could be that an employee who isn’t working as well as they were before lockdown is just very busy and this may be compounded if they are taking on extra work because you have fewer people in the business.
   
• When your people are on calls you should look out for a change in the use of language, tone of voice and manner. Do they seem quieter and more subdued and are they using fewer positive adjectives than you would expect? Again, this has to be balanced against other factors. They may not be responding in the same way in a video conference just because that’s not the way they are used to holding meetings.
   
• Is an employee making less of a contribution in discussions than you would expect? One of the more difficult things about being on a video conference rather than being in a room is that it’s harder to read body language. The non-verbal cues are harder to pick up but you need to look out for things like whether they are sitting back more or coming forward into conversations. How are they compared to how they would normally be? Once more the employee could just be responding differently to a different medium, sitting back to reflect before getting involved.

So, it’s up to business owners and line mangers to look out for these warning signs and decide, on balance, whether someone is struggling in the ‘new norm’. Julie explains: “If you are seeing that someone isn’t contributing as much in a meeting, that’s the kind of discussion to take offline. Reach out to them one-to-one and just ask how they are doing. It shouldn’t be a performance-related conversation, just ask them how they are doing and how things are at home.”

Not everything has changed

Part of the leadership role is to reassure the team. Point out that not everything has changed, highlight what they are good at and give them anchors by explaining what in their life is the same. Leaders should be role models when it comes to behaviours in a remote environment. “Perhaps at the end of a call you should say, yourself, ‘I’m just going to take half an hour and go out for a walk because I’ve been on calls all day and I just need to clear my head’,” says Julie. “You should model that kind of behaviour.

“We’re working with one company that has actually started to have meetings that you attend while you are out for a walk. It’s nothing confidential but it’s that kind of checking-in conversation that they have while they are walking so they can make sure that everyone is getting away from their desks and taking time to relax a bit and get outside.” This idea was echoed in a previous Entrepreneur Club article in which Kristen McNamara, Senior Director of Staff Development and Talent Acquisition at recruitment agency Robert Half, explained that she took the time to speak to some of her remote staff while walking as part of an informal dog walking group.

Video conference overload

OE Cam has also been talking to companies about how they use video conferencing, which many assume is the way forwards. The challenge with such technology, however, is that it’s much more intense than a simple telephone call because you’re forced to keep eye contact all the time. Taking turns in the conversation also becomes more difficult, it’s easy to end up talking over each other and you often end up with gaps in the conversation. So, considering more carefully how often you use different kinds of technologies, including the telephone, could help employees cope more easily with new ways of working.

OE Cam is currently carrying out pan-European research into agile organisations, looking at dimensions such as leadership, innovation, and the mobility mindset needed by people so they can thrive in an agile environment. Among the insights to emerge that are particularly important while people are working remotely is the authenticity of communication; don’t pretend to know something that you don’t. Focus, perspective and autonomy are also key. “Your people will cope better if they can say: 'I feel part of something, I know where I’m going and I have control over how I achieve it',” says Julie.

As an entrepreneur it is important to continually reach out to your people not just to see how work is progressing but also to see how they feeling and coping with the situation.

Government advice is now for people to work from home if it’s possible to do so. It has been the norm for many staff to stay away from the office since March, when businesses were forced to make rapid decisions about a shift to remote working. As the pandemic spread at speed, compliance with the law and the safety of employees was paramount, and business continuity plans were formulated almost on a day-to-day basis.

In fact, home working has become so much part of the ‘new norm’ that even before the threat of a second wave loomed large, 50 big employers surveyed by the BBC in August said they had no plans to return their staff to the office until at least the new year. But many business leaders and their employees are eager to get back as soon as conditions allow, craving face-to-face collaboration with colleagues and clients, the separation of work and home, and even that Pret-a-Manger baguette.

Business as usual?

When you are able to open up the office again, the safety of staff will be the top priority and it will be vital that businesses make their workplaces Covid-secure. The Chartered Institute of Personnel Development (CIPD) offers comprehensive guidance on the steps business leaders should take to make their workplaces safe, and the advantages and disadvantages of a full return to the office, continuing with remote working, and the stages in between. It urges businesses to consider three key questions before bringing people back into the office: is it essential, is it sufficiently safe, and is it mutually agreed?

“The response businesses will get from their staff will vary,” notes Lianne Lambert, MD of human resources consultancy Lighter HR. “It will depend on how they have been finding home working and what their personal experience of Covid has been. Some people have been hit quite hard, perhaps they’ve lost a relative or been particularly ill themselves. And they’re going to be more fearful of returning to an office than others, who might be quite blasé about the whole thing. You need to engage with your staff and understand how they’re feeling and what reaction you’re likely to get when you ask them to return.”

One business that successfully brought all its 35 staff members back to work after the initial lockdown was eased is London-based design agency Blacksheep, which undertook a three-phase return beginning in July. The Entrepreneur Club spoke to them before the latest Government advice on home working.

“One thing I didn’t understand when we entered lockdown was the issues working from home presented for some people,” says founder Tim Mutton. “The average age here is around 27 and as much as they live very close to the studio, they might be in a bed-sit that’s not even big enough to get a desk in. We were telling people they could take their computers home and they said, ‘You don’t understand. All I’ve got is a bed.’ I had a massive epiphany at that point: they absolutely love the studio because it offers them more than they have at home. They’ve got the internet, a desk, a kitchen, somewhere where they can sit and eat. I empathise more with our people and understand their circumstances a lot better now than I did before.”

Listen and learn

However, some businesses may have a different experience. Even once risk assessments have been carried out and your business premises made Covid-safe, some staff might be reluctant to come back.

“First, you will need to understand their reasons,” says Lianne. “Have a look at their contract and see if they’re contractually obliged to return. If they refuse, you can go down the disciplinary route. But that should be a last resort. What we've seen is there may be quite a lot of push-back initially, but once you begin bringing people back and they see that the workplace is safe, they feel differently.”

Tim foresaw one significant barrier to business as usual: the limited availability of Covid testing.

“In all the time we’ve been back in, we had one case of someone who tested positive for Covid in the studio. That was something I had to manage – I knew the risk was there. Luckily at that point we were able to get everyone tested, and they all came back negative. If it happened now, we’d have a different issue, because the test stations aren’t available,” he says, citing their only staff member who hasn’t been able to get back into the office because a relative has contracted Covid and she has been unable to obtain a test.

Lianne agrees that a Covid-positive team member shouldn’t be every manager’s worst nightmare. “We have had a couple of clients go into a flat spin at that point, shut the office and send everybody home. By doing that, what you’re in effect saying is that you have not provided people with a Covid-secure workplace. The idea is to make the workplace safe if someone comes in with Covid, not only as long as no one does,” she says.

Creating a safe workplace

The Government offers some key advice on making your workplace Covid-secure, including: 

• Complete a Covid-19 risk assessment and share it with staff.
• Clean more often and ask staff and visitors to use hand sanitiser.
• Ask visitors to wear face coverings.
• Make sure everyone is social distancing. Make it easy by putting up signs or introducing a one-way system.
• Increase ventilation by keeping doors and windows open and running ventilation systems.
• Turn people with coronavirus symptoms away.

In addition, workspaces should be arranged to keep people apart, the number of face-to-face meetings should be reduced, you should consider booking systems for desks and rooms to avoid overcrowding, and make sure that all staff and visitors are kept up to date with your safety measures.