“You don’t know what you don’t know”
It’s a favourite cliché for those of us fortunate enough to have been members of the New Entrepreneurs Foundation that “You Don’t Know What You Don’t Know”. Just in case those of us who have flown the NEF nest were at risk of getting cocky now we can call ourselves NEF Alumni, the recurring relevance of this mantra was hammered home beautifully last week at the first Alumni event of the academic year.
This incredibly useful event, centred on offering us guidance and advice on all things relating to the finances of start-ups, was extremely kindly hosted by Haysmacintyre, an accountancy firm who offer services specifically targeted at the specialist demands of entrepreneurs. This formed part of their contribution to Global Entrepreneurship Week 2013 (a fantastic initiative which deserves more attention than I could do justice to here), and was a great example of the invaluable support which larger organisations can provide start-ups, entrepreneurs and small businesses.
Before getting stuck into the main event of the evening, we were fortunate enough that Graham Palfery-Smith, a successful entrepreneur in the recruitment industry, was kind enough to give up some of his time to share his words of wisdom which were as informative as they were entertainingly delivered. If I can try and condense his thoughts into what I deemed the three key take-aways:
1) Above all, you must believe in what you’re doing; both what you’re doing, and how you’re doing it. If you don’t, how on earth will you convince someone else to do the same?
2) Make sure you have a plan elucidating said belief; ideas and passion are one thing, but mean nothing without execution. Most interestingly for me, Graham made the point that when showing this plan to investors and the like, it’s not the facts and the figures that are important. Indeed, to use his own words, “The only guarantee is that they won’t be right!” Instead, it’s the intellectual process that’s important – if you can show you’ve done your research and constructed your plan in an intelligent and thoughtful manner, crucially to the point at which you can justify your claims, that often means more than whether they’re empirically right or wrong.
3) Keep a record of anything and everything, (particularly appropriate given the nature of the offices in which we were sitting!), advice he backed up with some striking cautionary tales of entrepreneurs who have learned the importance of this the hard way…
As ever, the opportunity to learn from someone who has been there and done it was invaluable to those of us at the beginning of our entrepreneurial journey. After imparting a final mantra which I think embodies the persistence that has to be a key trait of all entrepreneurs – “No is merely a request for further information”, Graham departed, leaving us to kick on with the second part of the evening, the Finance Clinic.
This allowed us to pick the brains of a wide array of the Haysmacintyre team, including some Senior Partners, who had all extremely kindly given up their evening to support us. Condensing the plethora of topics which can be encompassed by the theme of “Start-up Finance” so well into a 90 minute event is no mean feat, and we’re greatly indebted to the effort which had clearly gone into its preparation from the team there.
As tempted as I am to simply pass on my key learning “Accountants can be worth every penny” and move on, for me the “things-I-didn’t-know-I-didn’t-know that now I-know-or-at-least know-I-don’t know” fall into two categories. While again I cannot remotely do justice to the expert advice we were given in a blog, in summarising my key points from the two categories I’ll hopefully highlight some of the areas I’d strongly advise any aspiring entrepreneur to consider!
Things you might not know that can come back to bite you
• Incorporation; sole trader, partnership, LLP, Limited Company – each with their pros and cons, but making the wrong choice can cause numerous problems for you down the line. For instance, with anything other than an LLP / LTD you are personally liable for any debts or legal issues your company may encounter. Certainly one to consider…
• Share Schemes; it’s very tempting for entrepreneurs to be so quick to jump at any potential investment that you forget to think of the long-term consequences of what can be a complicated series of legal and financial arrangements. For instance, did you know that the difference between ownership of 5% and 4.9% when it comes to selling your company can lead to an 18% difference in how much money you’ll take home? Didn’t think so.
• Forecasting / Modelling: As Graham said above, nothing scuppers your credibility like an unsubstantiated or unprofessional forecast or financial model. Take the time to get it right and it will pay off in the long run.
Opportunities that you’re missing because you might not know they’re there
• SEIS & EIS: Investors in high growth companies don’t want to miss the opportunity to make their investment tax efficiently, with SEIS (Seed Enterprise Investment Scheme) and EIS being the two best examples of this. By not doing your research and taking the time to ensure your investment proposition is fully SEIS & EIS eligible, you could be missing out on a valuable edge to finally push that interested investor over the line.
• Research and Development Tax Relief: Quite rightly in my view, the government are offering some very valuable support to companies that are truly innovating in the form of R&D Tax Relief. This offers an additional 125% tax deduction for qualifying expenditure incurred by an SME; an opportunity which can be absolutely invaluable for an early stage company. Some things which you really might not expect can be counted as R&D, so make sure you don’t miss out on what can be an extremely valuable opportunity.
A huge thanks again to Haysmacintyre, the NEF team and Nima from the NEF’s Alumni Council for laying on such a valuable and useful event.