Valuing People Businesses and Adding Value to People Businesses.

I think it is fair to say that we are experts at valuing and operating people businesses. That is partly because we are a people business, and secondly, because all of our people have significant business experience, which we share with each other for the benefit of our clients.

Of course, all businesses are, to a greater, or lesser extent, people businesses. These days what used to be "pure play" people businesses can be enhanced through the use of technology, and indeed that is what we have done in our own business. So the value of our business not only lies in the great people that we have, but how we harness and magnify our people's efforts through the use of technology. In that way, we add real value for our clients which is something which others struggle to replicate.

In valuing people businesses the size of business is often a factor. The reason is not so much about growth for growth's sake, if we remember the adage "turnover is vanity, profit is sanity and cash is reality", it is more about dependencies. For instance, I have spent a large part of my career buying recruitment companies and marketing services companies, both of which are highly people dependent. A feature of both of those sectors of the market for smaller businesses is both customer concentration and a dependency on key individuals within the business, which increases the risks for a purchaser. The individuals are usually the owner managers themselves who are often the driving force behind the business. How do new owners ensure that the traction that has been created by that owner manager endures into the future? We have a number of models around acquiring people businesses that can be highly beneficial, and tax efficient, for both the vendor and the acquirer.

People businesses are typically valued around a price earnings ratio based on a cash free/debt free balance sheet. We can advise clients on how to build and lock in value to their business and how they can make it attractive to the acquirer. This is not a superficial gloss, but forms part of the overall strategic direction that can be built over time.

To find our more on building value into your business contact Nigel Bacon CEO Secantor

www.secantor.co.uk

The world has changed

It is often said that nothing really changes but in our world but some things have, and  mainly based around technology.

Externally, for some of our clients this has proved very exciting. Particularly new internet retailing businesses. One of our clients has developed an offshoot retailing business which has grown from nothing to £0.5m turnover in less than 12 months. This particular business is breaking new ground. However, there are many examples of web based retailers "disrupting" traditional businesses all of which gives rise to opportunities, since if businesses don't move forwards and embrace change, they will inevitably go into reverse, and eventually fail. It is often helpful for businesses to obtain support with a strategic review of their business, since management are generally very much involved in operational matters, and don't regularly stand back and look at the broader picture and the opportunities that might await.

It often helps to have someone challenge their thinking and this does not necessarily mean that this person should have deep industry knowledge, but a good grasp of strategic thinking. Many of our people have this sort of training that wraps discipline around an "away day" to add structure and outcomes. Management often appreciate having an objective person to challenge their thinking in a constructive way.

Internally, we have seen substantial benefits from the IT revolution, allowing us to develop communication systems and automation of our business, for the benefits of our associates and clients. Of course, it has also enabled our prospective, and new clients, to better conceptualise our particular slant on outsourcing and the fact that someone might not always be on a clients physical location does not mean that they cannot be involved on client work and be accountable for that work.

All of this leads us to a brighter future with our clients benefitting from cost effective expertise as part of their team.
www.secantor.co.uk

Nigel Bacon
CEO Secantor
01564 330677

Join the Secantor LinkedIn Group and become part of our community

Follow the link and become part of our community 
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https://www.linkedin.com/company/458323?trk=tyah&trkInfo=tarId%3A1403887366105%2Ctas%3ASecantor%2Cidx%3A1-1-1 

26 June 2014 Business finance improving, says Cable

The UK is “on the cusp of a very big break through in business finance”, according to the secretary of state for business, Vince Cable Speaking at the launch of a new guide to small business finance, produced by the British Business Bank, ICAEW and 17 other business and finance organisations, Cable outlined a positive picture for the growing army of UK small business owners and entrepreneurs. Pointing out that difficulties accessing finance have been a historic feature of the British business landscape, he said that things were definitely improving. He explained that while early business start-ups are often funded by what he referred to as “friends, families and fools”, and while at the other end of the scale there’s the stock exchange, there’s a huge gap in the middle. “It’s known as the Valley of Death. At least today there are now some oases appearing in this desert. This new guide will help small businesses seeking finance to find those oases.” The Business Finance Guide – a journey from start-up to growth is targeted at anyone running their own business and highlights the wide array of finance types now available to businesses of all size and stage of development. David Petrie, head of the ICAEW’s Corporate Finance Faculty and co-author of the report, said the crucial issue was timing. “What is crucial for business success is to get the right type of funding at the right time. This guide will help businesses achieve that.” Petrie added that because of the unique nature of the partnership behind the report, it would be sure to reach a large proportion of the UK’s 5 million SMEs. “The guide is supported by 19 partner organisations including ICAEW and the British Business Bank. It’s the first time this has happened and together they represent over 1 million members.” Also speaking at the launch, ICAEW’s chief executive Michael Izza highlighted how quickly the finance market in the UK has shifted. “Even since the Breedon Review in 2012, the market has got more complicated. This guide will help people find their way through the complexity. Really this guide is about building on the work done by the Breedon Review. It recognises that if there is not necessarily a shortage of funds, there is a challenge for those running small businesses in being able to be up to date with the new forms of finance.” The guide, which is available free to download here, covers all the various funding and finance options open to small and growing firms as well as pointing readers in the direction of further advice, help and information.

With thanks to Richard Cree of Economia
http://economia.icaew.com/news/june-2014/business-finance-improving-says-cable?utm_source=economianews&utm_medium=articles&utm_content=headlines&utm_campaign=june27

www.secantor.co.uk

The changing world of funding part 3

Asset Based Finance

Following on from Part 2 http://secantorceo.blogspot.co.uk/2014/06/the-changing-world-of-funding-part-2.html we continue to look at Asset Based Finance with a look into the costs. This is very timely with an article in the Times newspaper today
http://www.thetimes.co.uk/tto/business/industries/banking/article4126960.ece?CMP=OTH-gnws-standard-2014_06_22
regarding some of the practices of asset based lenders which remains an unregulated industry. It has to be said that the Asset Based Finance Association www.abfa.org.uk are making moves to clean some of the practices of the industry but the article highlights the fact that there are often hidden charges "in the small print". The article refers particularly to termination charges/penalties. This has long been an issue for buyers of businesses where they want to use their own providers of finance. Often the agreements specify prohibitive costs for transferring title in the debtor book. Having control of the debtor book is seen as important for a purchaser of a business since they do not want a third party being heavy handed with "their customers" and simply collecting in.

The point that the above raises is that the cost of Asset Based Finance is not simply about interest charges. The following ought to be considered when making comparisons between alternative providers of finance and indeed, when comparing with other sources of finance. look out for the following costs and charges and also examine the interest rates;

Arrangement Fees / non-refundable commitment fees
Due Diligence and audit costs / annual maintenance fees
Unutilised facility fees
Covenant compliance fees
Termination fees (referred to above)

Other things to consider are your own company costs of reporting and being compliant with the lending agreements.

Whilst Invoice Discounting or Factoring can be an effective way for a small business to get funding for growth, business owners should be aware that it can increase the complexity of the business. It is critical for businesses to manage their cash effectively whether you have Asset Backed Financing, or not. Secantor www.secantor.co.uk can help with this process through helping to plan the funding requirement and to source the correct mix of funding.

In Part 3 we will continue with the Asset based Finance theme and extend it into other areas, particularly the all important supply chain.

The changing world of funding part 2

Asset Based Lending

In part 1 http://secantorceo.blogspot.co.uk/2014/06/the-changing-world-of-funding-part-1.html we talked about the growing importance of asset backed lending ("ABL" ) and the decline in overdraft lending. We covered ABL facilities against debtors and also touched on stock which is viewed as a more risky lend, due to the greater uncertainty around realisable values. In part 2 we will be discussing ABL facilities in a little more detail starting with a re-visit on debtors.

Debtors often form the largest class of asset against which facilities are provided. These facilities come from all of the clearing banks but also a multitude of specialised lenders. There are a wide variety of sources of debtor finance. So what are the considerations from an SME perspective.

Management need to consider how their businesses debtor book will be viewed by the lender. Factors to consider here are the size and quality of the debtor book. The incidence of bad and doubtful debts and the quality of the  customers from whom payment is due to be received. Customer concentration is also a key consideration, with lenders looking for a good spread to reduce their risk. The nature of the debts is also very important, with debtors looking for a "book" which is easy to collect out in the event that the business gets into trouble. This often precludes businesses who have long term contracts with their customers, or substantially reduces the percentage that lenders are prepared to advance. Warranties that are provided to customers are another factor which might lead to a customer holding back payment if for any reason he felt that the business maybe unable to fulfil a warranty claim. Often SMEs are asked to consider insuring, either in part, or in whole their debts which of course adds to the cost of asset backed lending.

There is now a very sophisticated market in credit insurance with many specialist credit insurance brokers throughout the country. In reality, credit insurers often  have as much interest as suppliers as to whether a business survives or fails and we now see the insolvency, and turnaround professions working very closely with the credit insurers. If a credit insurer withdraws cover then an asset backed lender may refuse to advance funds on that debtor account. This puts the supplier in an invidious position. He can continue to supply but he needs to consider that the withdrawal of  credit insurance means that the risks have significantly increased. If he continues to supply on credit the business not only needs to fund this, probably out of its own resources, but needs to fully understand the business exposure to a possible bad debt. An alternative is for the supplier to demand pro-forma payments but this may not be possible from a customer perspective.

Clearly, the percentage that an ABL facility provider might advance is a key consideration, but this also needs to be considered in light of the "clawback period". Debtor finance will only be in place for a period following submission of an invoice to a customer. The business needs to look at the payment cycle of its customers and to understand any variability and as importantly the reasons for variability in that payment cycle. Whilst and SME will have terms of trade with its customers and these might typically state that an invoice is to be paid 30 days following the month end of submission, the reality is often very different. As a consequence, a lender might have a "clawback provision" for invoices that remain unpaid for a period of anything between say 60 days and 180 days of the month end, following submission of the invoice. Clearly, from  the lenders viewpoint if it has not been paid by then, will it ever be? Sales invoices being time barred from the factoring or discounting facility can have a devastating effect on cashflow. The SME needs to keep on top of its aged debtors and to quickly understand reasons for non-payment and resolve them.

In part 3 we will be looking at further implications for SMEs in deciding whether Asset Backed Lending, is right, or not before moving on to look at other forms of funding that should be considered in different circumstances.

www.secantor.co.uk

Become part of the Secantor community on our Linkedin page

Why not become part of the Secantor community and join us on our LinkedIn company page. Share views on SMEs and the type of help and support required to grow their businesses.

https://www.linkedin.com/company/secantor

The changing world of funding part 1

The striking feature of bank lending over the past few years has been the increase in asset backed lending and the decline in overdraft lending. Arguably, this has not necessarily been to the benefit of the customer who perceives overdraft facilities as flexible, and easy to use. Of course, on of the key reasons for the decline in overdraft lending has been the decline in the security available on overdrafts as a fixed charge over book debts (often the major realisable asset in a business) is no longer available.
Of course there is an argument to say that asset backed lending, particularly in the form of invoice discounting or invoice factoring, is appropriate for growing businesses. Whilst there will be a lending cap, such a facility enables the business to attract more funding as its turnover grows and as its debtor book (outstanding sales invoices) grows. Of course, the opposite is also true in that a decline in turnover will lead to a decline in funding. You may say that is not relevant if you have a young growing business, however, problems can arise if there are temporary dips in trade which may lead to short term losses that require funding, and asset backed lending can be seen as inflexible in such circumstances.
I the late 80's there were a number of American banks that entered the UK market who were not only prepared to fund debtors (at 70% - 90%) but also stock, commonly at around 50%. There were, and still are, a number of issues that surround the funding of stock. Some of the key issues are whether the business actually has title to the stock, since suppliers often have retention of title ROT clauses in their terms and conditions of sale. What these provide for is that the goods supplied remain theirs until such time as they are paid for. Often when one looks at the make up of stock within a business a large part of the raw material stocks will be covered by ROT clauses and these will be eliminated in a funders calculation of what they may be prepared to lend. Another key issue for a lending against stock is its likely realisable value in the event of a forced sale being required. With debtors where the contract has completed, but for payment, realisations should be high in the event of a business failing, since legally the customers would have no reasons for non-payment. However, the situation is very different in relation to stocks where any attempt to shift large quantities of finished goods will often require very significant discounts to be given to customers or other buyers of goods.
Before a business approaches a funder it is very important to understand the "art of the possible" and what is the appropriate funding mix (debt/equity) that is right for your business. Watch out for part 2 where we will discuss this further.
www.secantor.co.uk

The climate is good for scalable investments and disruptive technologies, but what about zombie companies and the threat of interest rate rises?

The tax climate has arguably never been better for investors and particularly those wishing to take advantage of the tax breaks available through EIS and Seed EIS.

Many of these investors are looking to back disruptive technologies that can break new ground and shift the playing field. They are looking for opportunities that can be scaled quickly, on a worldwide basis, through digital marketing channels. At this end of the spectrum, the pace of change is both fast and relentless, driven by the need to retain "first mover advantage", particularly where it is difficult to secure IP on a global basis.

At the other end of the spectrum we have what has become known as the "zombie companies" that remain constrained by both their debt and their often outdated business models. These companies are in a circle which is spiralling the wrong way. Now that the indicators are there for interest rates to rise this could force the position, and these businesses should seek help whilst they still have options.

At Secantor we have the resources and capability to deal with both ends of the spectrum, and everything in between. It is not just about knowledge, although that is hugely important to us as an organisation, where knowledge sharing is a way of life, but also about our connections and credibility with providers of both debt and equity.

Nigel Bacon
Secantor CEO
Fulfilling Business Potential
www.secantor.co.uk

Secantor partners with Fleet Innovations

At Secantor we are not about selling intellectual property we are about knowledge transfer to enable businesses to fulfil their true potential. Much of this comes from our highly experienced and technically accredited people. However, part of it is about understanding some of the latest products that are in the market place that can help our clients become more efficient. An example of this is the PEAK mileage capture product from Fleet Innovations www.peakmiles.com .  Read how you can use GPS technology to take the strain out of mileage expense claims.

http://www.governmentbusiness.co.uk/index.php/company-focus/223-transport/5436-fleet-innovations

www.secantor.co.uk

West Midlands funders getting behind SMEs

2014 can be described as a year when the pendulum is swinging for the West Midlands.

It is true that much of the growth has been driven by the JLR supply chain, but also the entrepreneurial culture of the region, which is now really starting to flourish. It is really pleasing to see that these innovative companies are securing finance from the likes of the Business Growth Fund,Mercia Fund, Midven, Finance Birmingham, Oxygen Accelerator, and others. it is great to be a part of all of this.

The power of all of this can be seen from the high value sale of Delcam Plc a worldwide 3D software business, principally for the manufacturing industry. It is a great example of how a local business, with good stewardship, can scale into a global business and maintain its market leadership, for the benefit of the region. Well done to Peter Miles and the team, you are to be congratulated.

Nigel Bacon
Secantor CEO
www.secantor.co.uk

Secantor Supports Equity Investments

As we come to the end of our financial year it is very gratifying to see the number of SMEs where we have helped  raise equity funds. From small business angel investments through to organisations such as Oxygen Accelerator www.oxygenaccelerator.com  up to the £4m investment that the Business Growth Fund www.businessgrowthfund.co.uk  made into Palmer Hargreaves www.palmerhargreaves.com .

We are delivering ongoing support to the SME community...help your business to grow.
www.secantor.co.uk

Informed Business Decisions - at the heart of what we do

The intensively competitive marketplace today demands a level and quality of performance measurement unlike any that ever existed. In the not too distant past, making money and winning at business was much easier: Companies could establish a competitive advantage quite easily and keep it for a very long time; market strength was virtually unassailable; customers were much less demanding; and leaders could manage relatively effectively with good-enough strategies and mediocre execution. but today, "good enough" is not good enough.

With thanks to Dean Spitzer

Secantor - supporting businesses to make informed decisions

www.secantor.co.uk

Government's Growth Voucher Scheme

Should you wish to try and gain Government Financial Assistance for some of our services please apply to the Growth Voucher Scheme.

For businesses looking for advice

Businesses looking for advice can apply to the programme online and they will be randomly assigned to an online questionnaire or face-to-face business advice assessment.

Some businesses will be randomly chosen to get a voucher for up to £2,000 to help pay for business support in one of the specialist areas. You’ll have to match the amount with your own funds. You can then find a Growth Voucher adviser to work with on the Enterprise Nation Marketplace.

https://www.gov.uk/apply-growth-vouchers
www.secantor.co.uk

Mentoring

We are not a recruitment company, we are a professional services frim/outsourcer dedicated to providing solutions to the SME community.

We do not believe in a "one size fits all" approach to business. The core of what we do  is providing an "Effective Finance Function", and this can be done in many different ways. Often I am told by prospective clients that they have a great financial controller or financial manager, but the business has got to a size where reliable historic financial information is simply not enough. In order for the business to grasp the opportunities that might lay head there needs to be a firm grip on "planning and control". The easy answer is to overlay a Finance Director. However, mentoring the Financial Controller to step up a level can be the preferred solution. I am often asked "how can I do that when I am already working full on". The answer often lies in helping everyone in financial function to take a step up which then gets us into the area of effective delegation.

For more about mentoring and effective delegation please ring me on 01564 330676.

Nigel Bacon
CEO
Secantor
www.secantor.co.uk

Strategy Days

Our clients fall mainly within the band of £2m t/o to £50m t/o. Many are either family businesses or entrepreneurial businesses run by owner managers.

Many of these clients lack formal management training, but have created successful businesses through hard work, resilience and robustness. These clients want experienced, qualified and commercial people to help them with Strategy and Finance. We are doing a number of roles with clients where I run strategy away days (usually two sessions per annum) and where we might also run their finance function either through a Finance Director or a Financial Controller (depending on the size of business and the requirement these might be part-time roles). This enables me to keep abreast of how the business is doing and "what drives the numbers", so that I can facilitate a strategy day, and, "hit the ground running".

It is amazing what can be gained by taking a step back and having a helicopter view of the business and the market it operates in. This can also help with exit strategies or succession within a business.

To find out more , ring me on 01564 330676

Nigel Bacon

CEO Secantor
www.secantor.co.uk

Vernon George appointed Regional Director for the East Midlands

I am delighted to announce that Vernon George has been appointed Regional Director for Secantor in the East Midlands.
Following a successful career with NatWest and the IoD, Vernon is ideally placed to help our SME clients in the East Midlands.

uk.linkedin.com/pub/vernon-george/6/a17/975

Nigel bacon
CEO
Secantor
www.secantor.co.uk