10 things advisers need to know about small business

 

Small business

Actually, very few small businesses are shops…

Liz, October 3, 2017 

I’ve been to a few small business events over the last few days – the kind of thing organised by banks, accountants and organisations set up to support small businesses.

I’ve met some lovely people and the events have sparked a few ideas. But more than ever, they’ve left me feeling that many people and organisations whose job is to support and advise small business know absolutely bugger all about what it is to be in small business today.

The problem, I think, is that the way these experts and advisers think about small business is either stuck in the past or adheres to clichés that were maybe never true.

I’m puzzled to still be speaking to advisers who seem to view small business as limited and parochial. The result is that their advice and services are often way off beam. Even worse, the taxpayer is sometimes footing the bill for their services.

So these are the top things I want advisers and experts to know about small business.

Board

Not much use if you’re in South Wales and your clients are in Dubai…

1. “Local” often isn’t a relevant word

To a small business adviser, a local address means a local clientele. I call this the coffee shop assumption. It supposes that your target market is anyone who walks past your office and probably lives within a five-mile radius.

Our reality, on the other hand, is working with clients from the Middle East, the USA, Indonesia, mainland Europe and across the whole UK.

A friend of mine went to a government-sponsored marketing advice session. She too runs a consultancy whose clients could be from anywhere in the world. The marketing advice chappy told her to put an A-board outside her office.

And even if your clients are on your doorstep, in today’s economy there’s a really good chance the only place they’ll ever meet you is online.

A word in the ear of advisers: A local or regional address doesn’t mean a parochial attitude or a limited reach.

2. Small business doesn’t mean small clients

This is an interesting one. We’ve met recent graduates from business schools and marketing degrees who’ve been told that small business is a way down the food chain – and that you can only supply businesses of a similar or smaller size.

Maybe, once upon a time, this may have been more true than it is now. But since the recession, larger businesses are more than willing to work with much smaller suppliers. The old maxim that you’re not going to get fired for hiring IBM is no longer so true – and corporations value the efficiency and flexibility of working with smaller businesses.

We’re a business of six people and 95% of our clients are blue chip organisations. We work with them at strategic brand level.

One of our neighbours is a florist. They have walk-ins, of course. But they also supply huge hotels, corporations and venues. Another is a small coffee shop… that hires out rooms to and caters for corporate clients.

WFH

3. Small business doesn’t mean unsophisticated business

Sometimes when you talk about the size of your business, the word “cosy” comes up. I think some people see a small business as a thing you can do in your jimjams with a dog under your desk.

The truth, however, is that even a one-man-band can’t survive without a high level of professionalism.

Small businesses aren’t doing the “cosy” work. I don’t think cosy work even exists. Often in our (consultancy) world, they’re doing the thinking and innovating for larger organisations. And corporations are looking to emulate the flexibility and enterprise that are common in the small businesses they work with.

So please, government-sponsored adviser, stop sending me invitations to talks on “Why a website is important for your business”. My 71-year-old mum could probably figure out that a website is important for business – but here’s the thing, she’s not taking a salary for advising businesses. If the taxpayer is giving you one to help businesses along, you need to come up with something better – in 2017 – than “get a website”.

4. Just because you’re small doesn’t mean you don’t have overheads

OK, if you’re working off your kitchen table then your overheads may not be ginormous. But you’d still have to pay your professional indemnity insurance. You’d still have to pony up for a certain amount of travel, software and equipment.

And if you have employees and premises, then the threshold for getting worried about bills moves ever-upwards. When I started Wordtree, I was a self-employed consultant. At that stage if I got a bill for – let’s say – £5k I’d think: “HOW much?!” Nowadays I kind of think: “Five grand? OK, could’ve been worse…”

We’re tiny, but our overheads are the same – proportionately – as for any of our corporate clients. Payroll, rent, rates, insurances (sooo many insurances), third-party providers, cloud, phones… and so much more.

Yet advisers often tell small businesses to compete on price. The perception seems to be that if you’re a small business, you have a lower overhead and therefore price is your main advantage.

But to me that’s like saying that couture should cost less than a garment that’s come out of a mass-production factory.

We do have overheads – and they’re significant. More importantly still, we offer quality. So if you’re an adviser, here’s something I’d like you to know: I will never, ever set out to compete on price.

OOH

5. Small business very rarely means a shop

I think deep in the marrow of every adviser’s bones is the notion that small business means Open All Hours. In other words, a shop where local people can buy local things.

Honestly, kudos to people who run independent shops… as I have no idea how they make money (have you seen what business rates cost?).

But the vast majority of small businesses are not shops.

According to government figures, half of Britain’s 278,630 shops in 2015 were managed by sole traders. So out of the 5.5 million private sector small businesses in the UK (according to the FSB), only 150,000 ish are shops.

Yet advisers seem all geared up to talk to every small business as though they work in B2C – and specifically, in retail.

6. The term “small business” covers a very, very wide spectrum

I was once told – a bit sniffily, I thought – “You don’t even have a small business. It’s a micro-business.”

The bank adviser who told me this had only asked one question: “How many people do you employ?” And in her head did a quick calculation of what kind of turnover we must have. When it turned out our turnover was larger than she thought, she warmed up somewhat.

But the point is, the size of a business is no indication of turnover, of activity… of anything.

Small businesses operate in every sector and at every point in the B2B2B2B2C chain.

You simply can’t make assumptions based on a “small business” classification.

Arthur Daley

7. Small business owners aren’t Arthur Daley

For anyone too young to remember Arthur, he was a wheeler-dealer spiv of a businessman in a TV drama comedy in the 80s called Minder. He was dodgy. He lived the high life. He never paid his VAT and he drove a flashy car.

I guess this observation is levelled more at government – and the opposition – than at advisers.

But as a business owner, I work like an ant. I pay every last penny, dot every i and cross every t. I don’t exploit my team. I don’t smoke cigars. I don’t belong to a gentleman’s club. I don’t play golf and I don’t drive a flashy car.

It would be really nice if a government – any government – acknowledged that this is the truth for the majority of small business owners.

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8. You might be surprised at the levels of due diligence small businesses are subject to

OK, so we may be a small (or even a micro) business. But we have to go through the same procurement processes as the largest multinational.

Before we can start work with a new client, we have to show our insurance certificates (though what we’ll ever need £10m of cover for, I can’t quite fathom), provide outlines on our policies on everything from harassment to modern slavery, certificates of incorporation and VAT registration, proof of banking facilities, accreditations… We need to provide project management frameworks and methodologies.

This isn’t back-of-a-fag-packet stuff. We work with corporations, so we play by exactly the same rules as any of their larger suppliers. (Which, by the way, can also involve accepting 90-day payment terms.)

There’s an Apprentice-style small business myth, I think, that if you’re “hungry enough” you’ll start off as a barrow boy on a market stall, make some dosh and make your way up. And maybe when Sir Alan Sugar was a boy this was exactly the thing to do. But rules, regulations and strictly enforced taxation are the norm now. So a start-up market stall holder who doesn’t intend to employ anyone will still have to have apply for a licence, comply with health and safety legislation, register for tax, get your public liability insurance and – if they’re selling food – register with the Foods Standards Agency.

So please, small business adviser, be aware of this. Don’t assume that because we’re small, we somehow bypass all the paperwork – or that we work on a cash-in-hand basis.

9. We can work at scale

I had a really interesting chat with a lady who runs a chef’s shop recently. Her bricks and mortar business breaks even – and she’s thinking of closing it down. Her online business, on the other hand, is thriving. It supplies catering colleges as well as individuals and she has great relationships with her suppliers because she’s shifting a lot more product than shop owners usually do.

She’s not just dealing with local people buying bits and pieces. She’s supplying large organisations with hundreds and thousands of items.

Your size doesn’t necessarily correspond to the amount of business you can do or the turnover you can generate.

10. A small business isn’t a hobby

Be warned – I’m likely to smash the next adviser who asks me if Wordtree is a “lifestyle business” in the teeth.

There is a patronising – and I think often sexist – assumption that you must be doing what you’re doing for pin money. Or that there’s a rich hubby in the wings picking up the tab for you to live out some kind of demented fantasy involving brainachey projects and spreadsheets.

Advisers often start by asking this question. I’m guessing as a way to weed out the men from the boys. “Are you interested in growth, or are you a lifestyle business?”

To be brutally honest, I think this question comes from people who’ve chosen to advise businesses because they don’t quite have the stones to set one up themselves. They take the public sector salary and benefits and then pretend to know what having a small business entails. It’s nonsense.

I’m sure there are people who start their business as an offshoot of having a hobby – but then professionalise quite quickly. Or who very quickly realise how much stress is involved and think: “Sod that for a game of soldiers.”

So my final piece of advice to advisers: Don’t start by asking a potential contact or client if they’re just playing at it. Listen and you might have your eyes opened to lots of interesting new ideas.

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