As the economic cycle moves towards a downturn, it’s easy to be nervous about
what the coming months and years will bring. True entrepreneurial spirit has
never been quashed by mere circumstances, however, and the best companies
will use any situation to their advantage.
The ideal business climate of the past decade is definitely history according
to Professor Andrew Burke, head of the Bettany Centre for Entrepreneurial
Performance and Economics. “The combination of buoyant consumer demand,
growing economies, access to new international markets, cheap imports, the
ability to outsource and the availability of cheap money was extraordinary
but we’re seeing most of these factors working in reverse now,” he says.
It’s time, then, for smart company bosses and managers to reassess their
businesses, tighten them up, revisit their assumptions and challenge their
existing ways of doing business, says Burke, whose centre is part of
Cranfield School of Management.
“Going through a business cycle can be a healthy thing,” he says. “In quieter
times growing businesses, usually so focused on increasing market share and
sales, have an opportunity to think about trading a bit of sales growth for
attention to the efficiency of their internal procedures. A less frantic
market will give businesses the breathing space to do this and so keep costs
down.
“But they should not stop innovating – and if that means evolving and
specialising, they should not be afraid to do it. There’s less risk in doing
this than in making the same sorts of things as everyone else and getting
involved in price wars.
“The more innovative and enterprising a business, the better its chances of
surviving and flourishing. Copycats are more likely to be affected by a
downturn.”
Last year’s Entrepreneur Challenge inspired hundreds of British businesses
with turnover in excess of £2m to apply for interest-free finance from a pot
of £25m. Each application required a detailed business plan, which entailed
just the kind of reappraisal Burke advises – preparing the businesses to
weather any financial storms while sticking as closely as possible to their
growth plans.
The ambition, tenacity and good business plans so many of them demonstrated
should position them to succeed, whatever the outlook, according to Adrian
Grace, managing director of Bank of Scotland Corporate. “Last year’s entries
demonstrated that the spirit of entrepreneurialism is alive and well,” he
says.
“We were impressed by the response. We probably had five times more
applications than we had anticipated. The standard of the entries was also
outstanding.”
The entries revealed some interesting information about the types of
businesses flourishing in Britain – and where they were operating. Almost
20% of applications came from manufacturing companies. And 24% were from
northern England, outstripping the 18% from London, which had been expected
to have the highest proportion.
The size of the businesses applying was also heartening, according to James
Farrar, head of marketing at Bank of Scotland Corporate. “We were surprised
to see more than 50% of the entries had sales of more than £5m. These are
substantial businesses that are looking to the future. On the downside, the
number of entries from female entrepreneurs, at about 7%, was low – however,
two of those did make it to the finals.”
The variety of entrepreneurial traits on display in the competition
presentations was also striking, Grace says. “We spoke to many types of
entrepreneurs in different situations and at different stages, from people
with inherited family businesses to people who had started businesses from
scratch.
“How they ran their businesses was also very varied. Some were run by a
demanding, controlling head man or woman who took an interest in the
smallest minutiae. Others were far more team oriented. But both types could
do equally well.”
While there are many different types of entrepreneur, they share certain
essential qualities, as was well demonstrated by last year’s contest. Grace
says: “Entrepreneurs do have common traits. They can spot a gap in the
market that others have not. They also understand risks and how to manage
them. They take complex business situations and simplify them in a way their
staff and customers understand. They also know when to bring in people who
can do the things they can’t.”
The best entries also shared the qualities that are markers of companies worth
backing during all phases of the business cycle, Grace adds. “They have a
clear idea of what their proposition is, they run their day-to-day
operations hard, keep their costs under control and inspire loyalty in
customers by offering good value. Cash flow and management teams are the key
drivers of a business.”
Dolphin Music
ENTERING the 2007 Entrepreneur Challenge made Jason Tavaria and Rob Williams
reassess the priorities for their fast-growing business, Liverpool-based
Dolphin Music.
They launched the online musical equipment and instrument retailer in 1999,
when they were 19. By year four, turnover had reached £1.25m, and from then
on growth soared. Last year the business, which employs 65, turned over
£9.3m.
In the course of entering the Entrepreneur Challenge they reevaluated the
needs of the business and decided to check their rapid growth. Consquently
Dolphin expects sales of £10m this year.
There are now three shops as well as the online business. While Williams and
Tavaria, above, have ambitious plans to expand nationally and into Europe,
entering the competition made them realise they had to do things properly.
Tavaria says: “We’ve really slowed the rate of growth and concentrated on
our profitability. The competition made us think more about recruitment vand
made us look again at things such as finance, marketing, the training we
offer staff and our operations.”
