Business brains on panel beat out dents in Scottish start-ups

AN EARLY question often asked by budding entrepreneurs: how do I go about pushing the venture forward? More than 100 business owners gathered for some answers at last week's Scotsman Business Breakfast. The event, sponsored by technology services firm TSG Scotland, was the third in the second series designed to help small businesses with advice on a range of topics.

The latest, entitled Growth for Success, aimed to provide information for entrepreneurs and SMEs to build their businesses successfully.

The panel, chaired by The Scotsman's executive editor Bill Jamieson, comprised John Anderson, chief executive of the Hamilton-based Entrepreneurial Exchange, whose 400 members swap ideas and facts on developing businesses; Geoffrey Thomson, chief executive of Braveheart Investment Group, based in Perth; Gareth Magee, corporate finance partner at accountant Scott Moncrieff; and Paul Renz, head of tax at Scott Moncrieff.

The presentations were split into three parts - the role entrepreneurs play in a developing the economy and how that role has moved on in Scotland; how to take a company to the next level through finance; and other areas that entrepreneurs should consider.

Anderson said, after working in the US, he returned to Scotland in 1989 with the intention of helping entrepreneurs develop their talents - but could find little potential.

"There was no obvious wealth creation or public displays of ambition at that time," he said. "There was a culture where success from growing a business was frowned upon. And if you had failed, you might as well have left the country."

However, now Scottish entrepreneurs are in a position where, in order to transform the Scottish economy, Anderson said, it is up to them.

"Entrepreneurship is about creating a business of substance and scale, not self-employment," he explained. "There are probably relatively few entrepreneurs who have the ambition to grow a business of scale."

Anderson said he believed there were two main sources where businesses could grow - technology companies and non-technology businesses. He said Scotland was well placed on the technology side, with a solid infrastructure and good, innovative companies.

However, he argued there were very few success stories in Scotland and, at the end of the day, successful owners would probably sell out.

Once a company is up and running, obtaining funding to finance its development is the next natural step. According to Thomson, the best time to start looking is "as soon as possible". It can take up to 12 months before the money becomes available.

Magee agreed, adding: "There is a huge amount to be gained in shaping a proposition as early as possible."

There are six key questions that entrepreneurs should ask themselves before facing potential investors: how much money do I need, when do I need it, what do I need it for, when, and how, will I repay it, and what return will I get on the money?

Working out how much is needed can be a lottery. Thomson said entrepreneurs should be realistic but make sure there are sufficient funds for at least a year before trying to raise more.

"When you are in front of an investor, he will usually have a good idea of what your business plan is worth," he said. "Don't go in with silly numbers."

Thomson advised how to write up a business plan. "Don't go into a presentation with a blue sky plan," he warned. "There should be an executive summary of two pages that will convince investors in five minutes to make a decision."

Asking for a meeting at four o'clock on a Friday is not recommended. Most investors are not usually alert at that time. And "death by Powerpoint" should also be avoided.

The audience was given an insight into other ways of taking a company forward once the finance is in place.

Renz started by announcing that there were three great lies - "He's in a meeting", "The cheque's in the post" and "I'm from the government and I'm here to help".

While the last lie raised a laugh, Renz did have a serious point. A number of government-run schemes, he said, such as the enterprise investment schemes, enterprise management incentives and research and development grants,could offer businesses tax breaks.

Both Anderson and Thomson advised companies to get a good non-executive director on board.

Anderson said: "Somebody who has been round the track can help develop and execute plans to take a company on. Good ones are worth their weight in gold."

PANELIST GEOFFREY THOMSON

GEOFFREY Thomson is chief executive and co-founder of Braveheart Investment Group. Thomson is well known as a dealmaker and business angel and has written investment columns for the media.

Thomson started his business life in the 1980s running Avondale, a firm set up with VC funding, subcontracted to Faslane naval base, before it folded because of contract disputes.

He then spent five years working as a company doctor, specialising in restructuring and refinancing of SMEs, where the balance sheet was in a mess. This, he says, was the "art of turning the possible into the probable".

Thomson, who lives in Strathmore, Sutherland, helped establish Braveheart in 1997, which, he says, has grown "phenomenally" and was listed on AIM in March this year.

One of the highlights over the last decade was the successful funding of Edinburgh-based chip developer Wolfson Microelectronics, which is now valued at 357 million.

Always give a clear message about your needs

Make sure you deliver your promises

Know where you want to go and how

Show tenacity in dealing with investors

Know your strengths and weaknesses

PANELIST PAUL RENZ

PAUL Renz is head of Scott-Moncrieff's tax group, which provides corporate tax, personal tax, employer tax, VAT and indirect taxation advice and services to businesses, public sector bodies, charitable organisations and high net worth individuals.

From solving tax problems to helping to implement tax-efficient planning strategies, and from ensuring compliance to helping his clients to maximise their returns from transactions and investments, Renz aims to ensure his clients do not pay a penny more in tax than they need to and not a day sooner than they must.

Renz has been with Scott-Moncrieff for almost 14 years. Prior to this, he joined HMIT on leaving St Andrews University, and was appointed district inspector five years later before joining Arthur Anderson where he qualified as a CA.

He also worked for Price Waterhouse and another independent accountancy firm before joining Scott-Moncrieff as a tax partner.

Identify your big idea and value proposition

Surround yourself with motivated and energetic people

Use astute administration to take advantage of tax breaks

Use R&D tax credits to improve profits

Ensure you have services to meet customer demand

PANELIST GARETH MAGEE

GARETH Magee heads up Scott-Moncrieff's corporate finance team in Edinburgh. He provides growing businesses with strategic advice, support and a range of services, including business planning, funding negotiations, deal structuring, MBOs, IPOs and corporate restructuring.

He also regularly undertakes due diligence and financial appraisal work on behalf of clients, banks, venture capitalists and private investors. He recently led Scotland's largest ever community buy-out, the purchase of South Uist, Benebecula, and Eriskay.

Magee, chairman of Business Forum Scotland, has also lectured on entrepreneurship, commercialisation and financing business start-ups at Edinburgh University.

He has been with Scott-Moncrieff for 17 years and became a partner in 2000.He has also been seconded to Scottish Enterprise.

Be realistic at the outset of your venture

Keep your powder dry until you are absolutely ready to pitch

Focus on the business, not the business plan

Surround yourself with good advisers

If you only do one thing, be sure to make your business cash generative

PANELIST JOHN ANDERSON

JOHN Anderson is a well-known specialist in entrepreneurship and new venture creation in Scotland. He brings considerable experience of emerging and high-growth firms to his role as chief executive of the Entrepreneurial Exchange.

A founder member of the exchange, Anderson was a shareholding director of a young, venture-backed hi-tech firm, engaged in the design, manufacture and distribution of lab equipment. He co-founded a firm that provided pre-hospital emergency care and healthcare industry training and also founded a new media business.

As a chartered accountant in professional practice, he has worked with many of the country's most exciting growth companies after returning to Scotland from Chicago in 1989.

Anderson is a regular contributor to the media on issues facing emerging and high-growth firms and was instrumental in setting up the Scottish Enterprise Local Heroes project, based in part on his MBA thesis Local Heroes - Scotland's Entrepreneurial Role Models.

He is an experienced non-executive director in growth firms, currently with three appointments; a founding GlobalScot member; a board memberof PSYBT and Stirling University Innovation Park; and an honorary senior lecturer at the University of Strathclyde's Hunter Centre for Entrepreneurship.

Surround yourself with outstanding people who can identify problems

Identify what you are good at and stick to it

Start fundraising as early as possible

Never lose sight of costs - don't get too fat

Don't be afraid to get rid of people who can't keep up with your drive