Monday 12 November 2018

Count the cost of borrowing as you build your business

Problem Solver

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Stock image

Feargal Quinn

Q: Can you advise me on how I might raise funds for a new manufacturing business?

A: Start by chatting with your Local Enterprise Office, which will have lots of information for you on this topic. You may also be eligible for grant assistance and they will talk you through the options here.

Obviously, banks are back lending - and that could be a credible option for you.

If you are struggling to raise funds, Microfinance Ireland is now used by lots of Irish companies as they provide unsecured borrowings for people who may have a difficulty sourcing funds through other channels.

Crowdfunding has also become more popular with several Irish and international operators in this space.

Don't forget, if you are looking at crowdfunding, that you may well be able to market to your investors and use these as brand ambassadors also.

As your business gets a little further down the road, don't forget some of the angel investor groups like HBAN. In many cases, investment by groups like this might be eligible for match funding from Enterprise Ireland depending on how they view your company.

Do make sure you compare and contrast the cost of the borrowings from each of these sources as there can be significant differences over the lifetime of the borrowings.

Q: I lease a premises for my business. Recently the lease expired and I went to renew it for the next 10 years, however the landlord has refused and will only renew until 2020. I suspect he has plans to develop the site that don't include me. How should I proceed?

A: This is a real dilemma for you. You have spent many years building a credible business on this site. From my assessment of the facts, it appears that you will be out of your premises in two years.

If my reading is correct, you have only one choice, which is to start immediately looking for a new site. I know this will not be the advice that you are looking for, but you could spend a further 24 months building your business at this site, only to have to move in two years.

I would much prefer you to put your energy into finding a new site, migrate as many customers as possible, and start building your business from this new location sooner rather than later.

Your landlord is trying to have the best of all worlds, he wants you to take the premises for the next two years as he obviously is not ready to develop it, and then potentially put you out on the street. You must suit yourself and you must suit your business.

You could of course take the risk and hope that you might get a further extension at that point, but I think all the indicators are, that there are plans in place to redevelop the site and therefore you need to take swift action now to prevent problems in the future.

Q: Can you give any advice on whether I should promote managers within the business, or bring new ones in from outside?

A: A lot depends on the size of the business and its ability to upskill new talent to be ready to fill the gaps. In Superquinn, we always prided ourselves in "growing our own managers". We had lots of management development supports, including offering some of the senior team an opportunity to do MBAs in retailing and a whole host of other externally-run courses to help improve skillsets.

We had a total staff base of approximately 3,500 people at our peak, which gave us a great talent pool. We always had new and energetic mangers emerging. While your aspiration might be to promote from within in all instances, you may find that you simply don't have the talent that you require. The danger in these instances is that you promote from within because you feel it is the right thing to do and then end up with managers who are not able for the job and potentially the company starts to underperform as a result.

You also need to think about the danger with 100pc internally-grown talent, which is that everybody starts to think in a similar way and nobody challenges the norms. In some instances, taking managers from outside can be a breath of fresh air and bring new thinking and processes to the business.

In summary, it is about getting the mix right. It will be admirable to have an aspiration to have all your managers come from within, but don't be afraid to look externally if you feel the talent pool is not strong enough to take the business to where you need it to be.

Q: I employ 20 staff in my business. We seem to spend an awful lot of our time firefighting or getting to things at the last minute. I have tended to manage 'on the hoof' and historically have not been a believer in meetings, etc. Am I wrong?

A: It is your business, and you have to run it in the best way that you see fit. From my reading of your email, all of the issues you mention seem to be connected. The fact that you don't have any structured meetings may well be feeding a last-minute culture, and one that misses opportunities.

If you have that many staff, it sounds like you have a reasonable-sized business and with that will come complexity and the need for planning and organisation. To be successful in business, as you know, you need to stay ahead of your competitors and plan well out into the future. You can't do this 'on the hoof' as you describe it, as it is simply too complex and expecting too much of you and your supervisors/managers.

I would make one simple recommendation - and that is that you get structured weekly management meetings into place. Hold them at the same time each week in a place where you wont be disturbed. Set out an agenda in advance and make sure there are clear actions for everybody at the end of the meeting.

What you will find after a while running these meetings is that it will force you and the business to start looking further and further ahead.

This will greatly help you with execution and allow for different ideas to be put into the mix, rather than have to grab hold of the first idea because of time pressures. You will also find that given time and space, you will be able to outsmart your competitors who might not even be thinking about certain milestones, when you have already completed your planning.

It will be difficult for you to step into this space if you are not used to having meetings, and the temptation might be to abandon them after the first few.

You will have to lead these so it is important that you do a little bit of research in order to make the meetings efficient and effective. It will also be important that your team understand the change of direction so that they too embrace this new direction.

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