SBT and NatWest came together for a third time on Friday 13th May to discuss entrepreneurship in the community, discussing how we can support and collaborate with start up businesses, educate young people on enterprise and finally how we can create the best environment for successful entrepreneurs.
Fiona Anderson: There’s quite a lot that falls under the banner of enterprise. It’s actually RBS’ year of enterprise within the bank and what this covers for us is, firstly entrepreneurship, the key focus of which is of course Entrepreneurial Spark. Another is Women in Business – we have over 300 accredited women in business specialists in the bank who have actually gone through a recognised accreditation through the chartered banker institute and we are one of the only banks who do that in the market. We also have a long and ongoing partnership with the Prince’s Trust: RBS has been one of the longest standing sponsors of the Prince’s Trust, with over 30 year’s worth of sponsorship. It’s quite appropriate that this is the 40th anniversary of the Trust, so this is a key focus this year also.
If I could open the floor to Tim Boag, our Regional Managing Director, who will give us a little bit of context around the businesses that we’ve helped.
Tim Boag: Of course. Enterprise is obviously a key theme for the bank – there are some very interesting statistics around this topic. Something like 50% of the people when asked in this country say they’d like to run their own business, but over half of them don’t take the plunge. Mainly because of the fear of failure. In addition, and this thankfully doesn’t reflect our own bank, only around 1 in 10 would go to their banks for advice when wanting to set up or run a business. For us as an organisation, and for the banking industry as a whole, we have a big job to do in terms of building trust and being more active in the community; both employees of the banks and our customers. If those communities are successful then we are all beneficiaries of that success also.
There’s a whole range of ways we can help, and our relationship with Entrepreneurial Spark and KPMG is just one of those ways. The success rate of the businesses who have gone through the program is huge: about 80% of them not only survive but succeed. That’s much higher than the national average, which tells us that it’s working. Of the businesses we’ve supported, 2000 jobs have been created, there’s an £86 million turnover from those businesses, and they’ve attracted around £45 million of investment. Again, these are small enterprises that are starting to grow and become successful.
Fiona Anderson: George, with regards to the university, is SME, innovation and enterprise a large focus for you there? What role has the university played in this?
George Tsekouras: Our university has a philosophy of trying to support enterprises in the region as actively as possible. We have proven that through a number of initiatives. Some of you may be aware of our Profitnet program, run by Judith Badger, that supports more than 1,500 businesses, so far with solid results. Also, we are very keen to support these small enterprises in the region through a number of other initiatives, such as student placements, training etc. We also have an integral element of our strategy, which is called ‘closing the loop’. Primarily, as an academic institution, we teach our students and do academic research at international standards. However, there are different strategies for academic research which can be followed. We use research in order to improve the lives of the people and companies that have participated in our research. We do research into peer-to-peer learning – how you can bring people on the same task together by sharing things between them without having the fear of losing information or others not being supportive of them. We saw this happening in different parts of the world, then we initiated a number of processes, jobs and systems around that, bringing people to speak to each other and benefit. We are continuing this adventure and keen to see small businesses come to our door for help. Contrary to the common perception of a lot of small businesses that universities aren’t interested in their affairs, we are really keen to give aid wherever we can and continue to aspire to bring the outcome of our research to inform those small businesses. We’re translating this aspiration into action every day.
Fiona Anderson: Gayle, you’ve worked for a number of years with Entrepreneurial Spark and you’ve been in for over 4 years, so have seen a number of statistics about the increase in entrepreneurship across the country, haven’t you?
Gayle Mann: We started the Entrepreneurial Spark program in Scotland with an agenda to be positively disruptive, and shake up the country with a mission to start up a revolution. It’s safe to say that we did exactly that in a short period of time. Our mission has changed slightly to enabling social change through the action of entrepreneurship. Tim touched on a lot of the statistics from the 660 businesses that we’ve supported so far and, for us, the big one is the 88% survival rate. That really turns the national average on its head. Our mindset is completely on the entrepreneurs, so when you speak about trends, we see Brighton as this amazing digital hub – there are so many creative businesses, but there are also a lot of other amazing businesses, in particular in the food and drink sector. Our tech startups know about tech, so they don’t need to know more about that sector, they just want to be around other entrepreneurs, and we facilitate that. Brighton has been a real experience for us.
Fiona Anderson: Brighton is so diverse. Tim, you head up the enterprise division within KPMG. What have you seen trend wise over the past couple of years?
Tim Rush: A lot of people are surprised when they see KPMG in the enterprise space. If we are looking at it, we have always worked in the mid-market space but we haven’t shouted about it. We have now made a conscious decision that this is an area that we want to focus on. Companies are growing so quickly, and if we’re not involved at an early stage with companies, we are not going to work with them when they grow further. Especially with entrepreneurs, there are lots of people who support them when they start who go all the way through with them. We want to go on a journey with clients. It’s about working with companies throughout their journey and really enhancing it. The other thing is that, we as a firm benefit from programs like Entrepreneurial Spark; we’re up-skilling our staff so that when they’re talking to other businesses, they’ve got a different mindset. We’re also seeing big and small businesses change the dynamic of how they work. There are so many more partnerships now: people learn from entrepreneurs. So we want to be introducing people to others as it helps our established companies as well as start ups. Yes, it’s a business need but it’s exceedingly exciting too!
Isaac Howie Brewerton: We were actually on another accelerator, where we met KPMG in 2014, and the amount of support that you need when you’re starting up in areas such as finance and legal is phenomenal. So, when we first set up, we were straight out of university and we got to the accelerator and they got us in contact with the mentors and handed us this big wad of paperwork. As people who just make games, we thought they had got it completely wrong, but we quickly realised that we needed to understand and get those types of things in place very rapidly in order to succeed. That was a huge step, going from being a start up raising money, to talking to an investor. The whole process made that step so much easier and that’s something we wouldn’t have done if we hadn’t had that support from KPMG and others. In terms of meeting larger businesses, when invited to these events, we got to meet big companies as well as other startups. The larger corporations were very interested in speaking to us and seeing what we were up to. In return, we sent them a build of our game and got some great feedback. So, just from meeting at a low-key, casual dinner, we built that hugely beneficial relationship.
Fiona Anderson: We are very fortunate in Brighton to have two leading universities, both of which have a slightly different focus. There’s a large focus on education in Brighton itself. Tom, could you tell us about some trends you’re seeing in Brighton with younger people in this capacity?
Tom Bewick: I sit as a member of the Labour administration at City Hall and I am really passionate about education in our city. I am accountable for the 70 schools, who we work very closely with. I’ve spent around 15 years in post-16 education and training. There’s a huge amount going on, but what I see in the city is a real gap between the mainstream education system – which is very much incentivised to get children to pass their exams and reach national targets. Our universities are doing some wonderful things within enterprise and innovation, but again are incentivised on the whole by attracting students. I take quite a hardline view: we need to change the incentives around how, for example, young people are encouraged to think about apprenticeships and setting up a business. This is one of the biggest challenges we face around our education and enterprise system now. Arguably, in Britain today, the definition of success drilled into our children is that unless they’re on that gold-standard path (GCSEs, A Levels and a degree) somehow they’re a failure. That’s why the work that NatWest is doing here with Entrepreneurial Spark is so important, because in the end our children are only going to be focused on enterprise if they see other people like themselves making a go of it. There’s certainly no lack of talent in the UK, and no lack of will, but the incentives and definitions of success need to change.
Gary Peters: I think it’s important for me to make it clear that I haven’t even got an education! I started my business when I was 25 and the word ‘entrepreneur’ probably didn’t exist at that point. My first business, called ICP Search, which is an executive search company that recruits globally – we placed people into 44 countries last year – happened almost by accident. My more recent company is called LoveLocalJobs.com, including BrightonandHoveJobs.com as part of the family. I of course started my first business thinking it would be easy, but that certainly wasn’t the case, however my experience and failures have given me the tools for the next generation. The chap who gave me my first job inspired the ‘Be the Change’ programme indirectly. He saw a 20 year old without any GCSEs or A Levels and he gave me a break, which was a pivotal moment. What I see in schools now is a lot of amazing talent, but I don’t see a lot of hope or confidence. The program is in its first year, and its focus is on working with disengaged young people across the county and perhaps further afield, working closely with a company called Human Utopia. The program aims to deal with the issues that they face individually and helping them through those problems through a sequence of events that prepare them for the world of work, and dare I say it, setting up their own businesses. But it’s more about giving them confidence and hope about the future.
Fiona Anderson: Mel, you’re an entrepreneur but you’re also a mum, so I wondered how your entrepreneurial spirit has rubbed off on your children and how you feel about the balance between education and entrepreneurship?
Melanie Lawson: I was just thinking that. My middle child, my son, has just turned eight, and one of his favourite questions is, ‘Mummy, what job earns you the most money?’ Children like to see an immediate effect. My children are always asking to buy an iPad, so I tell them that they have to earn the money to pay for it. They then go away and consider the ways in which they can do that. Children do get it; they just need a push in the right direction. I did an event in February with a government minister about girls in underprivileged backgrounds, in order to help raise their aspirations. A range of female entrepreneurs were there and these girls just didn’t know what was on offer. A careers advisor from a school said to me that even they didn’t really know what jobs were out there, so how can they inspire the girls? One of the girls emailed me afterwards saying that having met me and the other entrepreneurs, she now wanted to do what we do. That’s exactly what we were hoping for.
I was speaking at an APPG around Women in Enterprise and one of the questions was, ‘Why do more men start businesses than women?’ Well, I strongly believe that if men think they can do 30% of a job they will apply for it; if women think they can’t do 30% of the job, they won’t apply. Reshma Saujani said that girls are taught to be perfect and boys are taught to be brave. So, women are thrown into life with this idea that they can’t start anything unless they know it’s going to succeed, whereas men just give it a go. This really affects the business climate, as women are so much less inclined to just start up a business without fear.
3. Supporting Success & Employability
Fiona Anderson: Let’s talk more about Brighton as a city. Brighton is actually one of the larger cities outside of London for start-up businesses but it also has one of the highest failure rates for start-up businesses. About 82% of businesses that start up down here fail in their first year, which is incredibly high. One of the main reasons is a lack of support in their first year of trading. It’s a complete minefield and I think a lot of people really struggle with the legal side, accountancy and finance. So really one of the key focuses is on trying to improve the survival rate of businesses in Brighton, but also maintain businesses here by encouraging employability. We want graduates not to immediately want to work in London but to work here. Gary, your business has grown hugely with regards to offering jobs and employment to people around, not just Brighton but Sussex, so it would be interesting just to get your take on this?
Gary Peters: It’s a minefield right now because if you ask a typical business what they think they are missing from young people, it’s the softer, non-cognitive skills – which is partly true. It must be true because over 70% of businesses that we speak to are saying that’s the problem. From what I understand, not much has changed over the last thirty years apart from the market that we work within and the environment that we work within. So there is a gap. I don’t know that you can teach common sense but that’s one thing employers are looking for. That often comes with experience of falling over and getting up again and again and again. So the things that employers seem to be missing are confidence, a can-do attitude, a professional attitude, preparation for work. Again, this comes down to the educational system in that they’re not necessarily encouraged to think like that. When it comes to business failures in Brighton, a large number of those, I feel are setting up businesses in the same old thing. They soon realise that there’s not a need for what they’re doing. You equally need to have a genuine passion for the business you’re in and that seems to be lacking for a number of the business start-ups that I see fail.
Tom Bewick: In a city like this, 95% of firms employ less than 9 people in the area. Whilst it’s fantastic that the Chancellor is saying, ‘in 2020 all cities will be able to retain 100% of the business rates’ but at the same time, he says, ‘a lot of small micro firms are exempt from paying the business rates’. This says that, yes we want to encourage businesses, but particularly successful scale-up businesses, because they are the bigger businesses of the future that will pay business rates and contribute to a tax base in the city, as opposed to lots and lots of bedroom businesses. It’s fantastic that people have those ideas but they’re not employing people, and they’re not paying business rates. Over time, you can see how that has a sort of downward spiral effect on an economy.
Tim Boag: I agree entirely with Tom. A lot of businesses get to wherever the turnover band is – a million, a million and a half – and then face the challenges around ‘can they get the right people with the right skills? It’s not just about finance: often people say it’s about access to capital. We talk a lot about ecosystems and what we do with Entrepreneurial Spark and the entrepreneur hub is arguably the first stage of that ecosystem. There’s a whole range of businesses in between that we need to join up, and if you can get the collaboration right, connect and create that community, then you’ll start to improve employability because the big businesses will start to help the small businesses. We’ve just taken on a whole load of apprentices last year and they have been a breath of fresh air to our business – unbelievable enthusiasm. I think we need to give those people more opportunities. Small businesses can’t necessarily do it, but you can link to the big businesses and start to learn from that. The ecosystem is really, really important.
George Tsekouras: At the university, we actually compared the market share and number of employees employed in different groups of companies. You can see persistently from 1997 to today that smaller micro-businesses are going downwards in terms of the market share they present and number of employees, as opposed to self employed people and large companies. So we do have a problem in this country that we are a very entrepreneurial economy, it’s easy to start up a company, but once you start it, you are left alone. People don’t get enough support or advice to grow their company to a successful, large company that can really benefit the economy. It’s a critical issue that we need to tackle.
Fiona Anderson: Gayle if I can just turn to you – I just saw you nodding your head obviously when Tom was talking about the scalability side because that’s very much something Entrepreneurial Spark focuses on.
Gayle Mann: Absolutely. We’re not here for lifestyle businesses, we’re here for those businesses that a going to create that positive social change – that is jobs and turnover into the local economies. I’m actually interested in your point there Tom about the scale-up businesses. What we’re finding is that there’s a real fundamental gap prior to scale-up – there’s that pre-scale gap which is where companies are growing. They need access to finance, they need access to talent, they need access to space and a whole load of other things. And if you want to keep people in Brighton generating jobs and generating turnover into the economy then they need to have an international focus, they absolutely do, but they also need to be able to access all the resources they need within the local. Why are we not thinking about how we develop the talent within the local economy, pushing young people to work in these businesses?
Fiona Anderson: I very much want to give Aurelia a chance just to touch a little bit on the legal side of when you’re starting a business. Aurelia, perhaps you could touch on what Isaac said earlier about investment and legalities. What challenges do businesses have, as well as not really knowing where to start on the legal side.
Aurelia Butler-Ball: Absolutely, I think Isaac made the point perfectly when he said right from the beginning you had to address the legal issues and I think that’s one of the ways in which you can be sure you are one of the few successful companies. The three key areas we would suggest you look at are: having a solid founders or shareholders agreement in place, securing your IP and sorting out your terms and conditions. This will set out the roles of each of the founders, what investment they’re going to make and what happens if one of them exits. Lots of companies now have good IP which they exploit with software development or other areas, and it’s about utilising the ways in which you can protect IP: maybe trademarking the name, patenting code etc. Once you have potential investment coming in, those investors will want to see that you own that IP. The next thing is terms and conditions. Business is all about transactions, be it with customers or suppliers, and when something goes wrong, these terms and conditions need to be there to ensure you know how to deal with it without causing thousands of pounds in dispute resolution. Once those three things have been addressed, we can help you and your business, as lawyers and accountants, both in terms of advice and also with our networks. Do utilise us for that support network also.
Fiona Anderson: When you’re working with start-up businesses are there any kinds of key themes that you’re seeing around lack of knowledge or lack of experience that are really key things that could potentially help the legal profession that are here today start up businesses with in maybe a different way?
Aurelia Butler-Ball: Yes, I think especially now there are lots of companies focusing around IP and knowing what is automatically protected and what needs formal protection. So there’s a number of ways we can help on that front. Legislation is always changing, especially around use of data, customer data – lots of companies now build up customer data and they think that’s something they can maybe sell or gain investment from. But if it’s breached regulations on privacy law – it’s a minefield when it comes to those things. We’re always happy to give advice and share experiences early on, so do pick up the phone to all professional advisors.
Tim Rush: I won’t go into the technical detail but actually here’s the interesting bit – when I’m looking at start-up companies I just ask one question: ‘Do you know your cash?’
It’s as simple as that and it’s fundamental. And yes they know their cash now but they have no idea what’s happening in six or twelve months and they don’t forecast it. You can make assumptions elsewhere, just know what your cash position is. I see a lot of profitable companies go out of business and it’s because they can’t fund their expansion. They’re making money, but it’s profit they’re looking at; they’re not considering the cash. I just go back to that in every single case – do you know your cash? Do you know your cash for the next six months/twelve months? – really simple but it’s what everyone needs to do.
Tom Bewick: If I just come back on the legal point. Aurelia, you’re very helpfully speaking in plain English today but I think part of the challenge for a lot of start-ups and indeed steady state businesses is some of the terminology around, for example, shareholders agreements and indeed commercial subcontracts that you might set up. I wonder how many times entrepreneurs find themselves a bit green behind the ears and don’t realise that with the right legal support, with the right agreements in place they could actually prevent quite a significant loss of money?
Fiona Anderson: We’ve had a lot of help from KPMG and a lot from other smaller accounting firms, and those from the legal profession have been particularly helpful with the Entrepreneurial Spark programme itself. We really do appreciate it. And on that note, I would like to bring this discussion to a close. Thank you all so much for attending today.