You’re a business owner who has fought off the voodoo and misfortune which has plagued many startups over the past five years or so. You’re turning over a generous profit and you’re looking to expand in the next twelve months. So why on Earth should you be planning your exit strategy?

The truth is that we don’t know what tomorrow will bring for any of us. Should a family crisis render you unable to support the business, should you fall ill and be unable to work, should the economy shift and render you irrelevant, should you receive an incredible offer from a larger player looking to mine your expertise, or should you be faced with an offer to buy out the business entirely, you may need a fool-proof exit route to ensure that the business can succeed and thrive in its new form without you.

There are a great variety of options available when it comes to exit strategies, including:

• Keeping the business in the family
• Liquidation
• Selling the business on an open market
• Selling the business to another business
• Selling the business to employees

Each of these has its merits and advantages, and every business owner will have an instinct which one they’d choose. All investors look for exit strategies, even for businesses with sole proprietorship. They give the business owner control when it comes time for them to move on, and they ensure the continued success of their business once they have left.

Start the planning as early as possible. The entire point of exit strategy and planning is to discover how to optimise a business’ value, and investing time and energy in an exit plan will place the owner in a better financial position when they eventually leave. Those without an exit strategy often find they are selling at a loss, which could easily have been rectified by creating a fool-proof strategy.

There are numerous ways in which owners can hatch a strategy that will suit them. Business mentors and coaches can assist with the process, and other board members and important figures in the business can pitch in. Once an approach has been decided upon, it should be reviewed on a regular basis in order to ensure it’s still appropriate and would still yield great results even years after it was created.

It may be difficult, when starting a business, to think about leaving it behind, but exit strategies are a crucial element of business, and even if you never use it, it is paramount that there is an efficient one in place.

The question of nature or nurture is one that is almost as old as time itself, yet it is still an incredibly relevant one when you place it in a business context. Can you learn to become a great business leader or manager, or is it something that is innately encoded into your genes from the moment you’re born? There are some studies which say that as much as 33% of what makes a good leader can be inherited from parents. However, that leaves two thirds of it up for grabs through training, environmental and societal factors throughout a person’s life.

Let’s break down some of the key traits you need to be a leader, and examine whether they are naturally occurring or learned.

Intelligence

It is certainly true that having smart parents increases the chance of an intelligent offspring, but it is not a hard fact or a rule. Indeed, many talented entrepreneurs and business founders come from backgrounds where their parents worked menial jobs and never showed much interest in academia or intellectual thinking. Regardless of background, elements like critical thinking and developing as an intellectual will all have a bearing on the way someone turns out as an adult; you don’t necessarily have to come from a ‘smart’ background to make a fantastic leader or manager.

Personality

There is a certain image of leadership that evokes the idea of an extrovert, someone who loves to be noticed and be the centre of attention at all times. Whilst this is certainly true in some cases (Richard Branson, for example), there are plenty of other leaders who are from a different mould entirely. Bill Gates still seems more comfortable writing code than interacting on a world stage, and Mark Zuckerberg is famously introverted and private. Leadership takes many guises, and the nature or nurture of any given personality type does not make anyone more or less suited to the world of management.

Problem-Solving

There is no clear evidence to say that the ability to solve problems is a natural skill, but there is undoubtedly evidence to say that early environmental factors like education and schooling will have a bearing on how adept an individual is at problem-solving. It’s thought that those who overcome barriers early on their life will develop the resilience and the attitude needed to be able to solve any problems. Strike one for nurture!

Discipline

One thing you do want in a leader and a manager is discipline, and an element of control. Famous leader Sir Alex Ferguson famously said in his recent autobiography, “Power is useful if you want to use it, but control was my aim”. The famous manager recognises that control and discipline is crucial to managing and leading large groups of people. Research suggests that the ability to be self-controlled and to be disciplined enough to run a business is one which is half nature, half nurture, and is something that can be learned over a period of time.

So, the results are in. Whilst nature does seem to have a hand in certain elements of leadership, many traits associated with being a manager can be learned through hard work and experience. Try out a business mentoring course or employ a coach to help you decipher whether you have what it takes to be a leader in this world of business.

ABP’s first book was released this month, and to celebrate it’s publication, authors Daryl Woodhouse and Garry Smith have come up with some more of their most helpful tips in an info graphic to give you a sneak peak of what you can expect from ‘Creating Business Advantage – Setting Up and Running a Successful Business’. Part 1 can be found here.

Long-term, consistent, sustainable business growth…guaranteed.

That’s what everyone wants for their business, right? However, it can be tricky to navigate when 50% of new businesses fail in the first year, and 90% will close before five years are up.

Whether you are just dusting off the plans for your very own brand new start-up or you are the owner of a small business looking to grow – in fact whatever stage you are in your business development – this book will help you to:

* Understand and create your competitive advantage

* Get more from your sales and marketing

* Become a strong leader and manage your employees

* Build partnerships both within and outside your company

* Plus many more insights

To discover more ways to creating business growth, read our ‘First Look’ preview chapter today and get your business moving forward.

FREE CHAPTER

BUY IT NOW

Published earlier this month through Amazon and already scoring some fantastic customer reviews, Creating Business Advantage – Setting Up and Running a Successful Business is the first book to be published by Advantage Business Partnerships. Its mission: to get businesses thinking about those simple steps to business success that can be so easily forgotten. Here, co-author and ABP founder, Daryl Woodhouse talks to us about the importance of giving business owners the right advice on growth and why ‘now’ is always the perfect time to be thinking about the basics to business success.

Tell us about the title? How did you come to that decision?

We wanted a name connected to our business and what we do, but which also resonated with the high number of businesses that don’t spend enough time focusing on the needs of their ideal customers and differentiating themselves from the rest.

Why did you decide to write this book now?

Business makes the world go round, but there isn’t enough support out there to ensure businesses succeed and fulfill their potential. Very few business directors have been there and done it, or had formal training in how to start, grow and sustain a successful business – no wonder 90% fall by the wayside within the first few years, and no wonder much more established businesses flop too. Look at Woolworths, HMV, RBS and many more big ones. I feel that the business world needs help to be more aware of these statistics, and get focused back on the basics required to succeed.

There is a huge market of business-help books out there. What makes yours stand out? Why should people buys yours?

Many of the other books we’ve dipped into take a whole, long chapter to make one point. We’ve tried to get straight to the point with our book, packing many points into shorter chapters, with practical examples and advice that can be applied easily on a day to day basis for instant business improvements.

How did you come to write with Garry Smith? 

I chose Garry as my writing partner because I always believe that two heads are better than one, and also because he and I are very different in a complementary way. Hopefully that means the output is less opinionated, so should appeal to a wider audience and add even more value than that of other books.

What self-help books have you read? 

One minute manager

How to win friends and influence people

Interested in learning more? Click on the image for a free chapter.

Who inspires you in business? 

All those who weren’t given any favours or inheritance. My business heroes are those who had to build from scratch, graft and create their own luck to make it.

What’s been your proudest/most successful moment as a coach?

It has to be one of the distressed turnaround cases I have previously taken on. Given the highly sensitive nature of those situations, we cannot always name the companies as having been in financial difficulty. I can share though, that there have been 3 businesses in the last 18 months that have come to me where they feared there wouldn’t be enough cash at the end of the month to pay the staff. They were expecting to close the doors. The owners of each of these businesses were all really nice, hard working and smart people, so it is a good feeling that within 6 months of consulting them, the doors were still open, they were happier, employing staff, growing and making more money!

Did you find the process of writing a book difficult whilst running a coaching business as well? 

Initially, as it was hard finding the time. Having Garry to share the workload in writing, and then my business partners at ABP to help get the book to market made all the difference – I couldn’t have done it without them due to time pressures.

Some people write because the goal is to write and complete a book. Others write because they feel they have advice or a story that has to be told or put out there. What was your goal at the start of this project?

My goal was to use the book to reach a wider net of aspiring successful business owners and their management teams more easily and cost effectively to spread the word on the high odds of business failure, but to educate them on the key, simple measures they can take to get practical tangible results.

Has that changed?

Yes – it has been more than that, it seems to be a door opener into other conversations and has actually been a fun experience to go through. I am now an author as well as an owner-director of two businesses and father to 3 young children. That’s a lot of work, but it feels good as far as achievements go.

Creating Business Advantage – Setting Up and Running a Successful Business by Daryl Woodhouse and Garry Smith is available here

The survival statistics for startups has never been overly positive, but that hasn’t stopped many budding entrepreneurs from setting up their own businesses and attempting to go it alone. How can they ensure that they will go the distance? Well, strictly speaking, they can’t. The markets can be highly volatile and with things like poor money management, lack of strategy and not enough hours put in, business owners can quickly find their venture going down the pan. What’s needed is a strong and effective business growth strategy. Follow these tips to give your business its best possible shot at success.

1. Find your position.

Find your place in the market and own it. Know it back to front and inside-out, understand exactly what you offer that others don’t and get to grips with the things that you need to change in order to cement your niche. Define your USP, solve performance gaps, offer proof for any and all claims you make and, most importantly, deliver. There is no point in having a USP and making bold claims unless you can deliver on them. Your startup will have a fighting chance if you understand your position and do everything you can to improve.

2. Learn how to sell.

Put simply, a startup is either building things or selling things. There is no other space for a startup to occupy. If you aren’t the person who is doing the building, the coding and the creating, you’d better be good at the hard-sell. Being able to sell will obviously be much easier once you’ve got to grips with the points made in the first point here, and it is crucial that you learn to combine the two.

3. Ask for help.

If you’re new to the business scene, don’t be afraid to ask for help. There is nothing more daunting than setting up on your own, with no experience, knowing the financial security of yourself and potentially your family depends on your success. That’s why business mentors and coaches are available; to help businesses and SMEs to learn the skills they need to succeed and thrive in their new role.

4. Be fastidious.

If you’re looking for new staff, it can be tempting to simply pick the cheapest or the person who shows up first for your interview. If you’re looking for premises, it can be tempting to pick the first one that looks like it would comfortably house your laptop and isn’t out of your price range. It is important to be fastidious and picky about the people, the products and the premises that you are linked with. Get these things right in the right instance and you will be setting yourself up for more success in the long term.

5. A little faith goes a long way.

If you don’t believe your business will succeed, no one will. You must have faith that whatever you are creating, whether it is a product or a service, it will be useful for people and it will convince them to part with their cash. However, don’t become so blindsided by your confidence in your business that you can’t see what is staring you in the face. Ensure there are people outside of the business, such as mentors or coaches, who will be able to see what you can’t.

Booker Prize candidates, be afraid – ABP’s first book was released yesterday, and to celebrate it’s publication, authors Daryl Woodhouse and Garry Smith have come up with some of their most helpful tips to give you a sneak peak of what you can expect from ‘Creating Business Advantage – Setting Up and Running a Successful Business’. 

1. Do not plan for ultimate perfection.

Plan for near perfection.  The time you take to get your product or service from 85% perfect to 100% perfect could be the timeframe someone else uses to take a similar concept to market at 80% perfection.

2. Being the best is not purely about beating your competition.

It is about being as good as you possibly can be. Compare, learn from them and get better yourself.

3. Adaptability should not be under-estimated.

What we need to remind ourselves is that change is continuous and ever quickening.

4. A successful leader rolls up their sleeves showing and teaching his or her team how to do what is required.

Helping them along the way, encourages them to innovate by bringing their own personalities, ideas and style to the business. An average performing manager, often tells their team what to do, using strict processes, manuals and protocols, perhaps from a hands off approach or perhaps a controlling micro management style.

5. Remain relevant to your customers.

Be very aware of not only your Product Life Cycle, but your Business Environment. Know which of your product lines are the most popular and sell like hotcakes; but also know those that have passed their “Best Before” date and those new lines that show all the promise to be the best thing since sliced bread.

6. Prioritise.

Whilst your time is precious as a small business owner, you need to prioritise the matters that will move your business forward. Effective performance management is one of those most important matters.

Long-term, consistent, sustainable business growth…guaranteed.

That’s what everyone wants for their business, right? However, it can be tricky to navigate when 50% of new businesses fail in the first year, and 90% will close before five years are up.

Whether you are just dusting off the plans for your very own brand new start-up or you are the owner of a small business looking to grow – in fact whatever stage you are in your business development – this book will help you to:

* Understand and create your competitive advantage

* Get more from your sales and marketing

* Become a strong leader and manage your employees

* Build partnerships both within and outside your company

* Plus many more insights

To discover more ways to creating business growth, read our ‘First Look’ preview chapter today and get your business moving forward.

FREE CHAPTER

BUY IT NOW

So, as an Angel you have found a potential investment that really excites you. What happens next?

Nothing much?

Sometimes deals are just done on the basis of a stock transfer form or a share certificate in exchange for a payment. Even wealthy angels are sometimes far more casual about the terms of their investments then they would ever have been about spending money in the ventures which made them successful. This can be a mistake. It’s not just as simple as A,B,C. As we shall see there are a number of issues that ought to be covered off in any agreement of this kind. How many of these have you covered in your own investment agreements?

Payment

First things first. Let’s have a clear expression of what is being paid, when is it being paid, and how it is being paid. Is the money being paid all at once or in tranches? Are there conditions attached to some of the payments (e.g. performance milestones). If so are those milestones clear, measurable and objective? Everyone benefits from that kind of clarity.

Okay but once we sort out the payment that’s it isn’t it?

Not really, what is the payment in return for?

Is the payment being made as a loan? If so let’s have some clarity on when the loan is repayable, how much interest the loan carries, and what happens if it isn’t repaid. Often investor agreements will provide that in the event of non-payment of loan or interest the loan converts into shares in the company. This creates a need to be clear about the valuation of the overall company in order to work out how many shares the unpaid loan plus interest should convert into (see below). There will also be a debate about whether the loan is “secured” against the company’s assets in some way (eg through a charge on those assets). Secured loans will carry a lower rate of interest than unsecured loans because the investor’s position is slightly less risky, but they may affect the company’s ability to borrow future sums, because future investors will take into account the security holder’s protection.

Alternatively the payment may be in return for shares in the company. If that is the case how many shares in the company is the investor acquiring? This will often be a function of valuation (see below).

Valuation is easy – it’s just a haggle?

To a certain extent that’s true. What’s the company worth is one of those pieces of string which it is very difficult to measure. Especially if the company has low or no revenues so that objective criteria are hard to come by. A willing but careful investor and a passionately committed company owner may have very different perceptions of the current worth of the company, but it is essential that they reach agreement on this point. Sometimes valuation debates can be resolved through “ratchets” – performance milestones which enable an entrepreneur to claw back shares in the company that would otherwise remain owned by the investor if the company hits certain performance milestones which increase its value to the overall benefit of the investor.

For the investor their views on valuation may also be influenced by whether they are able to obtain tax benefits such as EIS or SEIS, which make the whole investment less risky. You need an accountant to help you decide whether you are eligible for either of these tax benefits. If you are then as an investor EIS may enable you to claim 30% income tax relief, capital gains tax relief, income tax loss relief if the investment fails and inheritance tax relief on your investment. SEIS is even more generous and may let you claim up to 50% income tax relief and capital gains reinvestment relief if you have previously paid capital gains on money you subsequently invest via an SEIS investment. Most angels will know about these schemes and the many conditions which must be complied with. There is a brief summary here;

http://www.whatinvestment.co.uk/investment-decisions/isas-and-tax-planning/2381293/eis-and-seis-tax-breaks-explained.thtml

Once agreement on valuation is achieved it’s possible to work out what 100% of the shares in the company are currently worth and then to work out what the investor’s contribution is worth. Normally an investor will get new shares in the company. So if the company currently has 900 shares and is worth, say, £900,000 pre-investment, and the investor is investing £100,000, then after the investor has made his investment the company is worth £1 million and the investor (having contributed one tenth of that amount) should have one tenth of the new shareholding (ie 100 shares out of 1,000).

Okay so we know what is being paid and what the deal structure is and the value of the company is – that’s it isn’t it?

Nope. It’s now worth considering what kind of shares does the investor get?

This is where it starts to get more complicated. Firstly, the shares may be “ordinary” shares – but companies can have more than one class of ordinary shares. They may have “A” shares or “B” shares with different rights (e.g. maybe the “A” shares carry voting rights but the “B” shares don’t). Which type is the investor getting?

There may also be other categories of share available to an investor. Some investors like to get “preference shares”. These are shares which carry a guaranteed return or “dividend” each year out of profits. They may not carry voting rights but at least the investor knows that they are definitely going to get a return ahead of ordinary shareholders if there are profits (perhaps with their dividend accumulating in any years where there are not sufficient dividends to pay it). Preference shares also enable the holder to get preferential treatment if the worst comes to the worst and the company goes under – the preference shareholders will rank ahead of ordinary shareholders in dividing up any available assets of the company if that happens. However, preference shares do not qualify for tax benefits like EIS because they are less risky than investments in ordinary shares. The entrepreneur may be okay with preference shares initially, since they may give him or her more freedom to run the company without the investor having voting rights.

Of course any investor worth their salt normally wants to have their cake and eat it. So some investors like to have “convertible” preference shares which they can convert into ordinary shares after a certain date so as to protect their position if the company starts doing well. At what price would a preference share convert into an ordinary share? You may well ask. Normally a “conversion ratio” is established at the outset which sets out how many ordinary shares can be acquired for each preference share. As the share price becomes more valuable, it encourages the preference shareholder to convert at his or her pre-agreed conversion ratio.

The company may in turn protect itself by making these preference shares (or any other type of share) “redeemable” – meaning the company can buy the shares back at a fixed price after a certain period of time. The pre-agreed price agreed for the buy-back gives the investor some potential measure of reassurance (particularly if the buy-back is mandatory) and the company some protection if the value of the shares gallops ahead.
Okay, finally we can now sign this piece of paper and forget about it…

Well, it’s also important to think about not just the immediate terms of the deal, but what might happen in the future – for example in relation to dilution..

Normally if there is a subsequent investment round the investor will have the right to invest more money first so as to ensure that they acquire extra shares and so their overall ownership percentage is not diluted. Pre-emption rights are normally dealt with in the Company’s Articles. They will often apply to transfers between shareholders and by Statute must apply to the issue of new shares unless dis-applied by the company (e.g. by passing the appropriate resolution). So, the investor will want to make sure that they have pre-emption rights in place. If they don’t exercise those rights then they will be diluted by a subsequent round. However, some investors ask for Anti-Dilution provisions. These are sometimes called “ratchets” as well. They may prescribe that if there is a subsequent investment round (especially if that is at a lower price than the price at which the investor initially invested) then the investor automatically gets extra shares so that overall they own the same percentage of the company as they did before the “down round”. This is helpful for those investors, but may make it harder for the company to raise subsequent investment as it is a disincentive to new investors.

So, as long as dilution is sorted out that takes care of the future then?

Not really. As well as protecting themselves through the type of shares they acquire and the rights which attach to those shares, investors will normally carry out some sort of due diligence on the company before they invest. This may involve a whole raft of investigations including checking of the following;

• the company’s share capital
• the company’s accounts
• its IP
• its trading agreements
• its employment agreements
• the status of its debts
• whether there are any ongoing disputes
• its tax position
• its insurance position
• its assets
• its property

These investigations will result in contractual promises (or “warranties”) by the company/the entrepreneur about the status of these matters. The company and the entrepreneur will try to limit these warranties in a number of ways. Firstly they may “disclose” against the warranties in a disclosure letter. This means disclosing information up-front which shows that certain warranties are not correct and cannot apply in this instance. (E.g. the warranty may state that there are no outstanding legal claims against the company and the company may disclose against this the existence of an ongoing claim). Once the company has disclosed against those particular warranties, the investor cannot hold the company liable for breach of those warranties later, since the investor is on notice that those warranties cannot apply, but has still gone on to invest. So, investors must be careful about what disclosures they allow. Companies and entrepreneurs will also try to cap the extent of their liability under the warranties, either by time, or total amount, or by setting a minimum amount of liability for breach of a warranty beneath which the liability doesn’t count. So, this is another area where investors must exercise caution.

Finally, we’re all done aren’t we?

There is one other area to shine a light on, namely operational controls. The way that the company organises its meetings and manages itself will be set out in the Company’s Articles (or in a shareholders agreement – whether that is a new one or an existing one to which the investor is asked to adhere). The Articles (or shareholder agreement) may also say whether an investor can insist that they are allowed to sell their own shares (at the same time and price) as part of any sale by the majority of shareholders (“Tag Rights”). This should all be checked and if necessary any changes to the Articles or the shareholder agreement made before the investment agreement is signed. Depending on how much money they are putting in, investors may also try to insist that they must sit on the Board of the Company so that they have plenty of visibility. They may also seek to ensure that certain matters cannot be decided without their consent. These are sometimes called “Minority shareholder protections”. Consent may be required for matters such as;

Creating any charge on all or part of the company’s business, property or assets;

Borrowing or raising any further funding;

Creating or issuing any additional share capital; or altering the rights attaching to share capital;

Selling the whole or a significant part of the business;

Significantly changing the nature of the business carried on by the company.

The entrepreneur is likely to resist these kinds of control if he or she feels that they will inhibit the way that the business is run, but may have to balance their desire for operational freedom with the need to inject cash into the company…

So, as you can see funding agreements are not really as simple as A,B,C. It’s more like A to Z with the Z standing for “zero” if the investor and the entrepreneur don’t take the time to work through the issues properly…

Clive Rich- Founder and Chairman of LawBite

Networking can play a key part in your business growth strategy. In Part 2 we cover how to tackle the actual event and the all important follow-up. You can read PART 1 here

Networking and Interaction

2. DURING THE EVENT

Having made an effort to prepare for an event will make it a better experience for you and those you’ll interact with.

When initially walking into a room it can be tempting to approach people we already know or hang around by the bar or refreshments table. Of course it’s important to connect with existing contacts – that’s part of maintaining those relationships. However it’s also about meeting new people. A good place to start is small groups of two or even people standing on their own.

If the group you approach is in mid conversation then wait to be invited in. You can actually begin building rapport using non-verbal body language – making eye contact, smiling and nodding. We’re never not communicating. Even without saying a word our body language speaks volumes.

Think about how you’ll introduce yourself – rather than just stating your job title or role, how about framing it in a way that tells the other person who you help or what types of projects you get involved in? Once you have introduced yourself, listen carefully so that you can tailor your response. Having spent some time in preparation you’ll also have some interesting questions or topics ready to keep the conversation flowing. Keeping the focus on the other person, shows you’re interested.

All good things come to an end. You’re there to network so you need a good exit strategy once you’ve spent some time with a group. This doesn’t need to be awkward – just involves a little planning. Here are a couple of suggestions: Ask if there is anyone you can introduce your new contact to and offer to take them over to another group or ask them to suggest who you should speak to next and then excuse yourself.

Before you do, it may be appropriate to exchange business cards – it might be easier to connect on LinkedIn/Twitter etc. there and then. Most people don’t do anything with cards they collect other than put them in a drawer in the office. However, you could write down something as a reminder of the conversation you just had that helps you remember the person and/or if you offered to help in some way such as sending a link or article you can jot it down on the card. It shows you’ve paid attention.

3. AFTER THE EVENT – THE MOST IMPORTANT PART…

This is the step that without doubt many people fail to do effectively. Connecting with your new contacts the next day or as soon as possible afterwards is so important. It can be via an invite through LinkedIn or email. Send a personal message referring to your conversation – you can do this within your LinkedIn invite too. Rather than just clicking the default “please accept my invitation” button, edit the text and add a short message – it’s so much more personal and helps you stand out from the crowd, creating a good impression.

Already, very few people do the step above and even less carry on from there! Building lasting relationships takes time and effort – not necessarily a huge amount but some. Momentum is key. Think about a follow up strategy. Would it be appropriate to set up a coffee meeting soon? Could you be a connector and introduce your new contact to someone else in your network? At some point they may return the favour. We all have great intentions and mean to check in with contacts but time slips away and priorities take over. Diarise a follow-up in a few weeks to help you keep on track.

Social media is a part of our lives in some form or other. Why not use it for business and networking? Every time you comment on a post or publish one, people see it – they may not always like or post a comment in return but that doesn’t mean you’re not being seen. Think about getting involved – it helps you stay top of mind.

Networking is so much more than turning up to an event. It starts long before the event and continues long after – through email, social media and face-to-face contacts.

Business Growth Partner Jay Surti is a Speaker, Author of Authentic Business Presenter and an NLP Trainer who works with Business Leaders helping them improve their presentation and speaking skills. Connect with Jay: @authenticspeak @Advantage_BP