It was interesting to read in the latest Profit Track 100 report that, in the wake of the credit crunch, strategic alliances are being seen as a strong route to profitable growth.

With the days of cheap debt behind us, companies are looking at alliances and joint-ventures as alternative strategies for rapid expansion.

There are a number examples in the report, including the Virgin credit card, an alliance between Virgin and Bank of America.

Certainly, strategic alliances are a good way of leveraging growth potential. In the case of the Virgin credit card, it now accounts for 5% of all new credit card business in the UK, just 5 years after it's launch.

As the report high-lights, with M&A transactions significantly down on last year and a third of the list having improved their earnings through acquisitions, "next year's tenth anniversary Profit Track 100 may well have a different complexion"

Labels: business development, funding, strategy

I read an interesting article for small businesses in the Sunday Times yesterday, "Think hard before selling a stake".

The article looked at the pros and cons of selling equity in small business. Lots of good points in the article, including a quote from Doug Richard, former Dragon and Chairman of Library House:

Any entrepreneurs who can get by without the cash for as long as possible are doing themselves a favour because whatever they can accomplish increases the value of the business and reduces the risk of the business - and therefore it means that whatever equity they do sell, they can sell less for more.

To me this is a very good point. For example, the other day I was speaking with a potential client who was considering a further round of funding to support sales expansion. We were discussing our proposals to help them get traction in a specific new market.

By bringing in a senior sales manager on a flexible contract, we can add value through testing the new market and establishing a beach-head. The company could then resource appropriately once the stage of the market was validated.

Plus any initial traction we achieve will make for a more attractive (and valuable) funding round.

Labels: entrepreneurs, funding, small businesses, start-ups, venture capital

You've probably seen "Dragon's Den" before. It's the TV programme where entrepreneurs pitch their ideas to secure investment finance from a panel of multi-millionaire business experts — the "Dragons".

It's great television and I'm an avid viewer of the BBC's UK version.

Now, when I say (jokingly) that I could be the next Dragon, it's not because I'm a multi-millionaire business expert (or have a few hundred grand to throw about). No, it's because on a regular basis I get asked by entrepreneurs who want to discuss working with my company on a "success basis", typically that means "commission-only".

In a sense, they are pitching me to risk my time (or the time of my team) to help them sell their product or service.

I read one of the TV Dragons say that only about 10% of the Entrepreneurs they see get funding (and of them, the Dragon's assume that about will 10% actually succeed).

And that's pretty much how I see it.

Only about 10% of the people that ask me to work on a "commission-only" basis have something which I feel either excited about or think has "got the legs" to work. The problem is, though, that if only 10% of those actually take off... where does that leave me?

Investing my time (and money) on high-risk, unproven ventures is not my business model.

I don't mind linking part of our fees to our results, such as a number of qualified appointments; if we don't deliver then we don't get that part of our fees - that's a healthy results-focused model.

But that's a long way from working "for free" on the basis that someone else will make a sale, deliver their (usually unproven) product or service, get paid and then still be solvent to pay us.

No, I think I'll stick to watching the Dragons on the TV.

Labels: entrepreneurs, funding, start-ups

A recent post on the Small Business Trends blog caught my attention with a great quote. It's from a US News article:

'If all you know about starting a business came from reading the financial pages during the 1990s, you might think the process works like this: Think up a killer idea, write a business plan, raise money from venture capitalists, launch the business. "Then you pitch the money on a bonfire and hope there's a company there before you run out," jokes Greg Gianforte, CEO of RightNow Technologies, a business software company he founded in 1997.'

The Small Business Trends blog points out that, for the majority of small businesses, bootstrapping (ie, funding your business from customer revenues) is the right, and often only, option. In fact, studies from the Global Entrepreneurship Monitor say that only 38 out of 10,000 businesses receive venture funding.

From our perspective, most of our startup and small business clients are "bootstrapping" their businesses and our services are a low-cost and low-risk option for them.

Labels: entrepreneurs, funding, new business development, start-ups

I've been a member of the Go BIG Network for some time and find it an excellent tool to tap into the latest deal flow running through the startup business community.

Essentially, Go BIG is an on-line community for start-up companies. Members of Go BIG post a request for what they are looking for, such as investment capital, job opportunities, partners, etc., and the network routes that request to other members who have expressed interest in that type of opportunity. Members can also post their requests publicly so that everyone can see who needs what.

Well worth checking out.

Labels: funding, social networking sites, start-ups, venture capital

Last night I watched Dragon's Den on BBC. They had a follow-up on the businesses that the Dragons had decided to invest in and the results were quite interesting.

A large number of the investments fell through after then show (down to due diligence or just simply people falling out) and quite a few of the entrepreneurs were still trading having found funds elsewhere. The Dragon's would insist that they may be trading but were they profitable, and I'm sure they're right in the main part.

Having recently been following a poll on Ecademy, How did you raise the last round of finance for your business? it seems that the majority of startups and growth business (65%) found their funding from friends, family and other sources (which is predominantly self financing). According to the poll, only 7% financed through Angel Investors, and 1% through VC's.

That certainly ties in with my own personal experience and the results of the Dragon's Den.

Many of the clients we work with on sales outsourcing and venturing projects are self financing.

Typically, we work with clients who are looking to expand from an existing (usually low) revenue base and so they want a low cost, shared-risk way of increasing sales. We don't work with everyone; we also have a selection criteria. In many ways we are similar to angel investors.

Maybe I should have called the firm Dragon Associates? ;-)

Labels: entrepreneurs, funding, sales, start-ups, venture capital