Been quiet for a while

I’m conscious that it’s been a long time since I’ve posted. Since the New Year I have been very busy working with http://www.chelvertonam.com/ running a light manufacturing business, part of their private equity portfolio. It’s been a fascinating project with lots to learn, from how to speak Geordie to working with an invoice finance facility in a tough market with retail customers in the doldrums. I’ll post more in due course.

A wee snippet from the results of the survey which we conducted last summer: 67% of respondents picked Customer Satisfaction as 1 of their top 3 measures of long-term success for a business. Operating profit was picked by 52% & turnover by 44%. Shareholder value was only rated by 14%.

I’ll be in touch again before too long.

Raising cash in the 21st Century

My latest assignment has taken me back to London and the world of dotcom start-ups.

In the cash-strapped UK and US economies, the quest to make cash available to small businesses and individuals is proving an interesting seedbed for start-ups. Several are harnessing the interconnected communication of the web to form mini-capital markets. These disruptive business models steer around the routes taken by the large established players (i.e. banks) who have dominated the scene for so long and create new ways for money to be lent and borrowed directly between those with the money (high net-worths and hedge funds) and those that need it (small businesses and individuals).

These start-ups include:

1)    www.marketinvoice.com: the business that I am working with. This is the brainchild of Anil Stocker and Charles Delingpole, two bright, young entrepreneurs who have come out of the City into the dynamic world of business start-up. Marketinvoice is taking a similar approach in the UK market to The Receivables Exchange (see below). By using the web, Marketinvoice offers two communities something that they cannot receive in the existing market:

a) Small businesses can raise cash by putting their invoice receivables up for sale via online auctions. Benefits include:

• No long-term deals that force businesses to pay for funding when it is not needed (as offered by whole turnover deals with banks and other traditional providers).
• No requirement for collateral and guarantees.
• Enabling receivables that may not be covered by traditional invoice finance providers (such as international sales, stage payments and professional services) to be financed.

b) Investors can earn good returns (5 to 20+%) by investing in an asset class (invoice receivables) that has not previously been available to them. The creditworthiness of the underlying debtor, together with the trading history of the seller and the actual purchase of the invoice receivable via a secure legal contract (i.e. they own the receivable after the auction) provide them the security they require to advance money to the seller.

Small businesses and investors who would like to learn more about this innovative new model should visit www.marketinvoice.com or contact info@marketinvoice.com.

2)      www.thereceivablesexchange.com is a US-business bringing together similar communities to Marketinvoice: businesses needing cash and individuals/funds with funds to invest. Their model allows small businesses to raise short-term working capital by selling their invoice receivables in e-bay style online auctions to investors. The small businesses benefit by putting cash in the bank without having to wait the 30 or 60 days that their large (and generally creditworthy) customers take to pay. The investors receive returns that they are unable to receive from other sources.

Over US$500m was traded over The Receivables Exchange in their most recent financial year. This begins to show the potential of these new peer-to-peer platforms.

3)      www.thefundingcircle.com brings together the same communities again:

• people with cash who are not happy with the returns for deposits available from banks. In this case these individuals do not have to be quite so flush as those investing via the above exchanges. There is no need for £1m+ to play only a few £1,000 will do.
• small businesses who need funding. Banks will either not lend to them or they do not fancy the security or pound of flesh that the banks take in return for their funds.

The Funding Circle pool investors’ funds to spread risk and provides unsecured loans to small businesses at reasonable rates. No banks, just individual investors put together with the small businesses that need their money. Disruptive internet business model – 1; Dinosaur banks with inefficient admin processes – Nil.

4)      Zopa (http://uk.zopa.com/ZopaWeb/) describes itself as “the human way of getting a low cost loan. Rather than making the fat cats fatter you pay interest to real people.” By cutting out the middle man it is able to offer competitive loans to individuals and allows investors to spread their risk across a range of borrowers. It has been going for a few years and uses a similar model to the Funding Circle with loans being made to individuals rather than businesses.

I note that Zopa charge a £124.50 transaction fee to every borrower. Although I understand that they need to cover their costs, this is a hefty % to add when the loan size is small, as it almost inevitably will be in the consumer market. It must add quite a bit to their advertised headline interest rate of 8.80% for a £5,000 loan to their most secure A* borrower (+c.2.5% if my calculations are right).

Their own stats show that over £100m of loans have been made via Zopa since it was launched in and that the default rate is only 0.74%. Impressive stuff.

5)      www.wonga.com is another start-up aimed at the consumer market. It offers small, short-term loans online with more speed, convenience and flexibility than banks, high street lenders and other websites. They have completely automated the lending application and assessment process, removing the complexity and inflexibility consumers face whenever they need to borrow some cash in a hurry. Although not peer-to-peer the early success of this service since its launch in 2008, show the appeal of this hassle-free borrowing to consumers needing small amounts of money.

These new online lending start-ups are a financial category of genuine and increasing importance. New sources of liquidity for businesses or individuals have been created.The potential for the peer-to-peer marketplaces being set up by Marketinvoice and their ilk is immense. In theory, any business or individual loan can be priced using efficient peer-to-peer market mechanisms enabled by the web. As Betfair has shown in the betting world, there is money to be made and the established players will embrace these new online exchanges as they realise that they are a more efficient version of their own business models.

Bowled over! Reflections on my first encounter with Tom Peters

I am in the midst of a summer romance of sorts. I have been surprised and beguiled by stolen moments in the company of Tom Peters (as represented virtually in his bestseller, “Re-imagine! Business Excellence in a Disruptive Age” http://bit.ly/dcBe6p ).

I had avoided getting involved with this superstar business guru, imagining that he would be too American, too evangelical and just too goddamned sales-y for my Scottish sensibilities. My mission to learn more….and more…. about the world of business excellence meant that I gave him a go. How wrong was my imagination? Well, ALMOST TOTALLY! This guy is the real deal. I have fallen for him.

He is American (no bad thing). He is evangelical in a non-religious (Phew!), let’s call it a passionate, enthusiastic and entertaining manner. He is not sales-y (more inspiring, thought-provoking, and YES, HE’S ON THE MONEY $£$£!!)[1]

What I love can be summed up in 3 things:

-          THE ENERGY – he uses a “quirky”, non-linear style with *LOTS* of inappropriate punctuation. This would give a traditional English teacher a heart attack but allows his passion and the messages (there are loads of them) to come through.

-          THE AMBITION – Don’t do things by half.  No sorta. Get on the bus or get off. Set out to be a world beater not an also ran.

-          THE KNOWLEDGE – He understands the scale of change that is taking place in this current commercial era. He gets:

• the POWER OF THE WEB and the cultural revolution that is globalisation
• the enormous opportunity provided by the ageing population
• the reality of the age where women are taking charge.

These quotes talked to me:

“If you don’t like change, you’ll like irrelevance even less.”

“The impact of New Technologies…changes everything. Yes…everything!”

“A bureaucrat is an expensive microchip.”

“Reward Excellent Failures! Punish Mediocre Successes!”

“The only way to make a difference is to … Make a Difference.”

“Design = Soul. Believe it.”

“Women are not a niche. Women are the long run!”

These are 3 questions that this book has made me ask myself:

1) Do I continue to totally embrace the transformative potential of new technology and what it can do for a business (and those of its competitors)?[2]

2) Do I restructure organisations to focus on what they are really great at (& outsource the rest)?

3) Am I focusing on a market opportunity that really exists or on what it used to be/I want it to be?

I strongly recommend that if you are not already on board with this stuff either:

-          read this book (if you are a reader)

 OR

-          find someone who has, gets this stuff and pay them to help you apply its lessons to your organisation. (I am more than happy to help you, just get in touch @  http://www.bellevuepartners.co.uk/getintouch.html.)

It applies to every business, whatever sector, whatever size. It is the big stuff. It is the future.

Bellevue Partners will be appearing at Vision, Bristol Media’s conference on 15^th & 16^th September. We will be co-presenting “From Good to Excellent” workshops on both days with Jonathan Bradley of http://www.trimodus.co.uk. See http://visionbristol.com/  for more details.

Can’t come to see us but want to find out more about us, please visit http://www.bellevuepartners.co.uk.

Our blog archive can be found at http://blog.haggisdigital.com/.

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[1] Perhaps I should not be surprised. You don’t become as popular as him without being good at what you do.

[2] I’ve been involved in this interactive internet thing for about 15 years now. It amazes me how much more it still has to deliver.