Last week saw the launch of 500 Limited’s Business Networking Forum. The meeting was held at the Blue Anchor in St Albans, with 12 members attending. The group was extremely fortunate to have Anthony McKay as its guest speaker and Anthony’s chosen subject was: “Achieving Business Growth – the barriers and how to jump them.”
Anthony modestly introduced himself by outlining how he had taken his company, Telephonetics plc, from a small private company in the early 1990s, through flotation on AIM in July 2005 through to its sale to Netcall plc in 2010. Anthony’s presentation provided many tips and techniques on how to grow a business both organically and via acquisition. The key tips are reported below:
Cash flow. Anthony’s simple clear message was to spend money on productivity; buying the right tools for the job prudently. Telephonetics were very disciplined about managing their finances, using spreadsheets and simple cash forecasting during their early years. Key to managing cash flow was the management of payment terms, not accepting anything other than 30 days and chasing down all late payments. Delightfully, Anthony gave an interesting example of invoking late payment penalty terms on a large company – which in the end they honoured, always sticking to agreed schedules thereafter. Not for the faint hearted for sure – but demonstrated a determination to manage cash flow.
Cost control. Again during the early years, before employing a financial controller, Telephonetics’ directors used to carefully control expenditure; continuously reviewing costs and suppliers; signing every cheque themselves. They also created formal audited accounts before the law required them to and these were very useful when valuing the business at a later date and when demonstrating financial stability.
Recruitment. Only recruit high quality people based on rigorous assessment of capabilities and if the quality isn’t there don’t compromise. When in the situation of – considering a candidate who has all of the right qualifications but your gut instinct feels something is wrong – trust your gut!
Productivity. Anthony felt strongly that it was important for the business to provide the motivators, which don’t have to be money / salary / bonuses. Instead they could be as simple as free tea and coffee or as complicated as share options (really good to give people even a small stake) or perhaps group team building activities. The key elements are communications, involvement and creating an ethos.
Retention. Everyone should have performance reviews rather than pay reviews and under-performance shouldn’t get rewarded. The key element to retention is to facilitate everyone in the team to be productive. Removal of frustrating barriers to productivity is crucial. If you help make them productive you will reward their performance which will mean the grass isn’t greener on the other side of the fence. Have an open door policy, listen to your people and help solve their problems.
Size. Anthony answered the question about does size matter(!) when selling to the big players in the market place. Size doesn’t matter if you have a ‘must have’ product or service the prospect wants; size does matter if the customer gets nervous of your ability to look after them. The key therefore is to avoid that question in the first place by giving the perception of size and ability from the outset. For example have a phone system that channels callers to the relevant department; even if the call is eventually answered by one person! or, have lots of case studies of happy customers; perception is everything!
Marketing. Anthony identified that in line with traditional marketing strategies Telephonetics simply adopted the tactics: understand who you want to sell to, identify what their problems are, and then tell them how you can solve them. They targeted specific markets, with specific solutions, focusing on valuable USPs. Anthony’s advice was: think solutions not products, benefits not features, add extra services to differentiate and aim to provide the whole solution – be the One Stop Shop! It was essential to provide a ‘really good service’ – organise and train for it.
Growth. Anthony spoke on how they tried to grow both organically and by acquisition. The key element of organic growth was to align all the stakeholders’ objectives and have an exit strategy for the business with milestones / targets along the route. With these in place it was then easier to understand the barriers to organic growth – cash, expertise, fear, market conditions and so forth, these could then be tackled systematically.
Acquisition. Anthony spoke with real experience, obviously hard won, when discussing acquisitions. The fundamental starting position is to ensure that the home team have common objectives and agreement on the roles of everyone in the new organisation. Due diligence was essential and mergers don’t work, inevitably one party will be stronger. Anthony emphasized it was “always a take over, never a merger”. In addition you will need to determine which culture you will adopt, if necessary department by department. Anthony also said to be wary of the ‘skirt lifters’, companies making compelling offers to buy, who turn out to be time wasters just trying to look at your private parts to gain a competitive edge! If you are considering selling your business Anthony recommended a staged information exchange to avoid these time wasters.
Earn outs. Anthony recommended against earn outs if possible – sadly personal interests to earn more would undoubtedly conflict with the new managements team’s aims and objectives and therefore end up being counter-productive. After a short handover, gardening leave and structured payments are preferable.
Advisors. Whilst a necessity to employ an expert, it is sensible to cap the fees if at all possible. Certainly an experienced advisor should be able to provide a fee ceiling and a structured spend model.
Benefits of flotation. In 2005 Anthony successfully floated Telephonetics on AIM, cleverly retaining control (51% shareholding) of the company. He described the key benefits as: it gave a source of money to spread their wings and it gave paper (share certificates) to fund acquisitions. It also increased the motivation of the staff as their share options were now real! However it was expensive; they then had to report to the shareholders, particularly on the profitability of the company,.
Sale. The three key elements of selling the business, which was successfully achieved in 2010, were: a) know why you are selling – get shareholder agreement aligned and signed off, avoiding u-turns; b) become valuable to a buyer, possibly by being a competitive nuisance and c) be capable of demonstrating value to the buyer (back to those accounts – to value the company they had to accurately predict profits – not always an easy thing to do!).
Anthony concluded with the thought of how he had avoided the earn-out(!); giving him time to enter local politics by being successfully elected as a Councillor for Hemel Hempstead – for which we congratulate him.
Following Anthony’s excellent talk the debate opened up to the floor and this led nicely into a networking session over a light gastro-pub lunch.
The next meeting will be held on Tuesday 12th July – details to follow – please enter this in your diary!
…in asking yourself this question given the recent Skype news. And you’re definitely not alone if you think most telecommunications advice is full of jargon and is too complex. So we, at 500 Limited, are producing a series of non-technical articles about maximising business benefits from your phone system. No acronyms or jargon. Guaranteed!
