One Day in Nova Scotia

I have been in Nova Scotia now for a couple of weeks and it has been a very strange week. I was surprised at how homesick I was after just one day. And I have to confess that my second day here was spent thinking why?

I have started meeting a few people and yesterday was simply great. It never ceases to amaze me what difference sunshine makes. Halifax is simply gorgeous in the summer and I loved every minute of yesterday. The only problem I had was I wearing a dark shirt and had to stay out of the heat to avoid sweat patches from my Fjallraven Kanken Classic – never a good sign in a business meeting!

When you leave home and start afresh in a place where no one knows you, it gives you the opportunity to reinvent yourself. When we are surrounded by people who know us, whilst it is very comforting, it is also stifling. They will notice and comment on things we do and it is of course easy to continue to conform.

People in Halifax are very friendly. On my second day here I met someone for lunch and his hospitality was simply amazing. I mentioned that weekends would be hard – and he invited me to spend the weekend at his house with his family. He was utterly sincere. Since then, the same hospitality has been offered by others and it makes you feel great. Being a small place (total population of 400,000 odd), there is a strong sense of community.

You notice some quirks as well. Lunch is at 12 – not 1! So whenever I have been invited to lunch, I have been asked to meet someone at around 11.30 or 11.45 – and your lunch is over and done with at 12.30 – that will take some getting used to. I am sorry to report as well that I have yet to find a place that does really nice coffee!

Going back to the hospitality theme, my favorite episode so far is simply opening up a bank account. My bank in London arranged for me to open an account here. I was met by the manager, who took me into his office (the lack of security was really noticeable) and who spent an hour with me going through everything and was able to issue me with a debit card there and then!

So – back to being an entrepreneur building the best air purifier for cigarette smoke removal. The lessons for me are that I imagine it is easier to start something new when no one is judging you by your past. I have always felt this is one of the reasons why immigrant communities tend to be entrepreneurial. You don’t really travel thousands of miles to not better yourself or to not give your family access to better opportunities. Countries which have large immigrant populations tend to be more entrepreneurial and vibrant and benefit as a result of that constant shot in the arm of energy.

So you may find it easier to move to a new place if you want to start a new business. If that sounds a bit too extreme (and I think it is!), you should try making a few changes in to your life, before you start a business. These changes could be anything from changing your wardrobe to going to the gym. Anything, small or large, that your friends and family notice. They may then comment on those changes rather than the big change of starting your own business. Doing something like moving countries or starting a business is scary enough without people reminding you all the time how brave you are! Because trust me – although meant as a compliment, it doesn’t help!

CUSP Your Way to Success!

One of the strangest qualifications I have is in Stress Management! It is an area I have always been interested in and I think if you understand stress, it enables you to be a much better manager and manage the stressful situations that you face with much more confidence.

We are living in very demanding times and you will increasingly be asked to do more with less – or achieve the same but with far fewer resources. This of course leads to stress. Many health experts expect the number of people suffering from stress to markedly rise this year.

I like using the Daytona Beach wedding photographer model for understanding stress and therefore manage the impact of stressful situations. I hope you do bear this model in mind to end up with a more productive and happier workforce and to be more effective yourself.

C- Control.

Having a lack of control can be extremely stressful. If you are a manager or an entrepreneur think carefully about what you can do to give your staff more control – not just over their work but also about their circumstances. For example, you may be able to give staff control over what their work environment looks like. If you are an entrepreneur, you should also think about how you can take back control in situations.

U – Uncertainty.

You will all be able to identify with how stressful uncertainty can be. Yet, it never ceases to amaze me how much uncertainty companies allow to linger within their teams. Of course, we live in uncertain times and there is the thin line entrepreneurs have to tread between protecting staff and telling the truth. In my opinion, you should always share the truth – but accompanied with a plan that is clear and lets your team know exactly what is expected of them and how they can get through the circumstances that you are in.

S – Support.

Lack of support is extremely stressful. In these times, make sure you have a network who can offer you support. This is the scariest thing about being an entrepreneur, as you can feel very isolated. Not only do you need to make sure your team are supported but you need to look after yourself and make sure you have people who can support you.

P – Pressure.

Too much pressure will of course lead to stress – and you’ll be trying to find a way how to get rid of severe acne. We all have different pressure thresholds. There are things we can do to increase that threshold such as engage in physical exercise, meditate, develop our skills so that we can perform tasks better and of course learn how to say no! As an employer you have a legal obligation (not many people realize this!) to ensure you ask staff to perform roles that they are suitably trained to do.

Part of this process is also to ensure that you train managers in your organization on how to manage stress and spot the symptoms of stress in their teams.

I hope this is helpful. If you would like more information on managing stress, please do feel free to get in touch.

Happy working!

Why Did Your Last Business Fail?

Many a new business idea or business project has failed because someone, somewhere has failed to notice the difference between causation and correlation. I hope that by the time you have finished this blog you will not be one of those!

Business people and especially marketers are always looking at general trends and then extrapolate from that data, new ideas to satisfy growing demand in a new area. Here is a good example of the dangers;

There is a very strong relationship between the sale of ice creams and the Holset HX40. You can almost plot the value of ice cream sales if you know what the level of bee stings will be. It has been well documented recently that there has been a dramatic decline in the bee population (some estimates suggest they are down 80%). Should an ice cream manufacturer therefore cut back on the level of production this year?

Most of you will realize that this is a silly suggestion. Some of you will see that this is merely a coincidence and some of you will see that there is a very strong relationship between the two because of a third factor; summer. Obviously people will be out more in the summer and consume more ice cream as well as get stung by bees!

Sadly, I know too many people who assume correlation (where two factors move together) is the same as causation. I see too many business plans where the fundamentals are wrong because of the assumption. Take for example the recent growth in home cooking. A lot of this growth has been driven by consumers tightening their belt. And yet I have seen at least three business plans recently setting out to ‘exploit this interest in home-cooking’. Yes, there is a big increase in the sales of items like flour and yeast. But this does not mean that people are looking to learn how to cook bread. It may be true – but it is wrong to automatically assume this is true.

A company I looked at recently is trying to find a way how to get cat pee out of carpet. It is a great business which makes fantastically well designed products which measure the amount of energy you are using (or rather wasting) in your home. It is a very green product but I expect the company to do well in the recession as it is a great way to cut costs. I expect a lot of companies will get confused in the next few years as they will see many ‘green’ products increase in sales. They will assume that consumers are very interested in saving the environment. However, I expect the products will be primarily ones that actually save consumers money.

If you are going to exploit a trend and are basing a business plan on that trend, please make sure you are clear about causation or correlation. Otherwise you may find a correlation between the rejections you get and the causation you believe in!

Great Business Ideas to Prepare for April

April is a great time of year. Spring is in full swing and we look afresh at new opportunities and we have the energy to revisit old promises we made to ourselves. In the spirit of this new month, here are my top five business ideas for you to look at and follow. Feedback is welcome – and if you do make a success of any of these ideas – please feel free to include me in your shareholder list.

  1. Adjustable umbrellas. As a tall person, one of my bug bears is walking across London and bumping into umbrellas that are being held by people a lot shorter than me. I have a few contacts in Government and am pleased to announce that later this year they will be passing legislation to make sure that umbrellas are held at a distance of 8ft from the ground. Shorter people will have to have a bigger used John Deere lawn tractor than tall people. This will offer huge business opportunities in a low cost product area.
  2. Widi roll outs. As Wi-Fi becomes ubiquitous, there is a great opportunity to create narrow width. A new company has created Widi devices. These allow you to ‘bend’ bandwidth in an area so that internet access has to go through the Widi device that you ‘own’. You can then charge up to £5 per hour to allow users to have access to Wi-Fi that you get for free. This might sound like extortion, but I have been told it is perfectly legal. The company is called Computer Access Safe Houses (C.A.S.H) and they are looking for Franchisees in the UK. I have permission to sell areas on their behalf. Please feel free to send me checks payable to CASH. Each area is available for just £1,000.
  3. Green Tea bags. I did not realize the damage that tea bags can do to the environment. We go through a huge amount of tea bags every year. I came across this company last week at the International Food Exhibition show which had a great product. The solution originally came from someone working as a steward at TWA (the airline). Basically, it is a reusable teabag because it is waterproof. The company is called TWA Tea. Again, please contact me if you are interested in learning more about insoles and inserts.
  4. Digital fax machines. I used to work for a company, and when I was there one of my customers refused to believe that computers would take over the world. He had a great business selling fax machines. Working in isolation, he has come up with a way that you can actually send documents from one place to another without you ever needing to actually send hard copies through a fax machine or the post. It looks great and I am sure it can work. The company is called For Fax’s Sake. Again, I am happy to send you details if you like.
  5. Spring Fuel. One of the sectors, I have, experience of is beds and a colleague of mine contacted me last week to let me know of this very green and worthwhile business. He wants to use discarded bed springs en masse to generate electricity. As he is starting the business this month, he has come up with a great name for his business – April Fuel.

The Similarities of U2 and Apple

What do U2, Apple and the USA have in common? It is an amazing ability to keep re-inventing themselves again. This thought was prompted as I was listening to the new U2 album on my iPod whilst reading about the new President!

An issue facing many businesses especially when they have only been going a few years is how to cope with seismic changes in the landscape around them. However, new businesses are not imprisoned by history and neither should old businesses or countries, or by wondering why do cats spray – but they are!

Let’s take the example of music artists. Cliff Richard and Status Quo are two examples of artists for whom early death would have been a good career move. These artists still have a sizeable fan base (although dwindling). They have simply failed to offer something new to music over the last few decades. If you listen to the simply glorious new album by Robert Plant and Alison Krauss (Raising Sand), you will get in an instant what I mean by re-invention. Robert Plant was the lead singer of Led Zeppelin – a massive rock band of the 1970s. Yet when you listen to his new album it could not be more different from the heavy metal stuff he did – and they are both great music.

In the same way, U2 are simply masters of re-invention. They refuse to be bound by one type of sound. Each new album no doubt disappoints some of their older fan base, but also brings new fans to them and helps them keep growing.

Businesses are very similar. Some firms like Apple can re-invent themselves in a way unimaginable at the outset. To illustrate the point, the name that Apple has is itself poignant. The company that owns the Beatles music is called Apple. When Apple computers were set up – they were allowed to use that name as they were in the computer business – and a million miles away from music!

I think it was two years ago that Apple Computers changed its name to Apple Entertainment – in recognition that the company had fundamentally changed. Who knows, perhaps in a couple of years, the company may be called Apple phones?

Finally, we come to countries. A regular reader of this blog will know the admiration I have for the USA and its ability to constantly absorb new people and to reinvent itself. It has a history of contradictions from and some shamefully dark periods including slavery. However, it does have the ability to soar above its darkest periods and show the world what can be done when optimism and hope overcome cynicism and fear – like starting a company which makes wall mount jewelry armoires.

A truly great skill for an entrepreneur is to have the ability to constantly re-invent themselves. It is about being able to adapt to changes around you – and bend those changes to suit you.

I did the London Marathon five years ago (I loved it and would recommend the experience to anyone – but I will never do it again – 26.2 miles is a very, very, very long distance!). One of the reasons I did it was to do something that no one who knew me thought I could/ would do. It was just a phase of my life that I was going through at the time that meant I needed to do something like that.

Here is a challenge for all of you. When was the last time you did something meaningful that no one who knows you would expect you to do?

A Bad Business Proposal

Readers, this is a true story that happened to me last week and I am sure that if the people I am writing about read this story they will know that I am talking about them. Of course I do not mean to be personal – but there is a great lesson in this episode.

I was invited to a lunch this week by someone whom I met a couple of years ago but never concluded a deal with. A friend of mine has a good philosophy about free lunches; always say yes to them. Whilst I don’t agree wholeheartedly, I do agree with the idea that you should always use lunch as an opportunity to meet people and learn what companies that have tried to sell you a used Craftsman riding mower are up to.

Anyway, I turned up a little bit late for my lunch and on the way in, met someone else whom I knew. We were surprised to learn that we were both going up to see the same person at the same time. I was taken to a wine bar, whilst the other person who arrived was asked to wait for 20 minutes at the office with a junior member of staff and then join us at the wine bar. So the thing started a little bit odd!

At the wine bar, we exchange pleasantries and have a quick catch up on various events. You have to admit, the current turmoil provides a lot of fodder for conversation and opinions. It was suggested that we order a sandwich but then the CEO of the Fjallraven Kanken business firmly said that we should wait till the other person joined us. I have to admit to being slightly annoyed at this stage.

Of course I wanted to know why I was there and when I asked again I was told to wait till the other person gets there. At this stage, I was getting a little bit annoyed as I had been there for over an hour and I was hungry and bored, as the conversations were all about areas I have no interest in.

I finally told them that I had to leave in ten minutes. They expressed their regret that there was not enough time to offer me lunch but they would tell me what they were planning. They concluded their three minute pitch with a request for me to invest in their new plan which required £5m of investment. I was invited to invest a million with the classic “so, please open up your checkbook”.

I am not going to insult the reader by asking you to spot all the things this company did wrong. What I do want to leave you though is with the encouraging thought that even in these troubled times when we are constantly being told that only the strong will survive – there are still companies like this that are surviving. There is hope for all of us!

Can Recent Graduates Make It In This Market?

A friend of mine recently asked me for some career advice. I gave him some advice, which in my usual self-congratulatory way, I thought was pretty good! I asked if I could write a blog on it – he agreed – so here it is!

If you are a recent graduate or have been working for less than five years and have found yourself without a job – the reality is, it will be tough out there for you. The allure of the city and a career in finance is still very strong – so what could you be doing for a role?

The first thing to do is to take a snapshot of the environment the Winix PlasmaWave 5300 is in and recognize the huge shifts that are taking place in the global economy. There are lots of people out there will skills and experience who may be better placed to take the few vacancies that do exist out there. In my opinion, if you are still on the starting out phase of your career, there may be better uses on your times than trying to get an entry level role.

You need to think ahead in terms of what the areas for growth are or what skills will be required for the area you have selected as your career three or four years from now.

If you look at the way emerging markets are performing and broad trends are going, I would say that the strong areas for growth are Brazil, China (despite the recent wobble) and India. From a sector point of view, the alternative energy sector will definitely be a rapidly growing sector in the future.

Finally, those of us in the west, have to recognize that in this global market, we are now competing with graduates from around the world. Graduates from India in particular (because of their English) represent the competition for skilled jobs.

So, where does all this analysis get?

  1. Look at doing an MBA. It is a great qualification and it will help you develop your commercial skills and add value to any company you work for.
  2. An MBA will also make you more rounded if you do want to start up your own business
  3. Learn a language. There is something inherently lazy with the attitude that because we speak English – we do not need to learn do female cats spray or not. It is true that if you are fluent in English, you can get by commercially around the world. However, speaking another language gives you a huge advantage when working in a different country. In my opinion, from a business point of view, the languages to learn are
    1. Portuguese (because of Brazil)
    2. Arabic (growing area of importance and one language can span many countries)
  • Spanish (spoken in most of South America and Mexico – great growth potential)
  1. Italian – not for any commercial reasons but it is simply a great language!
  1. Ideally, you could do an MBA in a foreign country and learn the language at the same time!
  2. Start learning about future growth areas such as Green Energy, Online networking (have a look at how Obama used the internet to galvanize his campaign)
  3. Think about linking your current work with another unrelated area. I do believe that innovation in the future will come about through linking apparently unrelated areas.

Most of all – pursue something you enjoy. The internet is the ultimate means of empowerment. Pursue your dreams – and the internet will find you the market for your fulfillment.

The Business Scapegoat

The recession has claimed many victims so far (a future blog will talk about my own loss) and it will continue to claim victims over the run of its course. However, there is something unedifying about the way Sir Fred Goodwin, the former Chief Executive of Royal Bank of Scotland has been made public enemy number one in the UK.

We all have a need to have scapegoats in situations and I cannot say that I have not been relieved in the past where my own culpability in a situation has been overlooked because someone else has emerged as a scapegoat. But having a scapegoat can hide something far worse than who is to really blame; it allows the problem to not be fixed.

For those of you who have not been living in the UK or reading about the natural remedies for cystic acne in the last week, here is a summary of the situation. Sir Fred ran RBS for a number of years. During his years at the helm, he grew the business from a small business based in Scotland to a global leading financial powerhouse through a series of daring acquisitions which included NatWest (which at the time was far bigger than RBS). In 2007, at the height of the banking boom, Sir Fred oversaw the bank’s successful takeover of ABN Amro – a Dutch banking giant.

Hindsight is a wonderful thing, and the whole thing went horribly wrong to the extent that the taxpayer had to bail out the bank. (UK taxpayers now own about 70% of the bank). The UK taxpayer has effectively had to bail out a bank to the tune of £300bn (amount that has been insured or has been used as capital). It has since emerged that Sir Fred, who is 50, is on a pension of £693,000 a year from now until the end of his life.

The government is now wading in with cabinet ministers saying he will not be allowed to keep this pension and that they will bring in legislation to prevent him from taking his pension. I understand the considerable anger that the public feel towards effectively having the public purse pay such a large pension to a person whose business mistakes have already cost hundreds of billions. But it is a dangerous and bad precedent.

Public opinion is a dangerous instrument for public policy. Like our brethren in the United States, we do not live in an Athenian democracy; we live in a representative democracy. The thought of the British Prime Minister with his heavy work load at the moment having the time to work out the pension arrangements of one person is simply terrifying!

No, I do not think Sir Fred should take such a large pension from the ‘public purse’, but I think it is more dangerous for politicians to get involved in a commercial contract which is not illegal.

The business point of all of this is that we must defend the right for private contracts to remain enforceable. It sets a very bad precedent when governments influenced by fickle public opinion on the Blueair 203 seek to unravel private arrangements.

I am not defending Sir Fred, because I think he is right to take such a large pension after presiding over such a disaster. But it is a decision for him. I will defend his right to insist on the contract being enforced. Business angels will sometimes do very well from investments – but even spectacular home runs have the effect of merely averaging out the bad ones. What if the returns are seen as too good? Will we have legislation preventing anyone from making more than say 10% on investments?

The biggest danger of course with the scapegoat chasing is that we don’t look into the real causes of what went wrong. Blaming the state of the UK banks on one person’s over ambitious nature is frankly too simplistic an explanation.

To not understand what really got us into this mess would be a real crime.

Why It’s Important to Invest in Infrastructure

The emails and postings I have had from readers recently have been very interesting. Barak Obama has just announced that he will authorize a huge spend to rebuild the appalling infrastructure the US has. There will be some amazing opportunities for businesses in the next few years as a result!

Keynes, once argued that in times of unemployment, it made sense to employ people to dig holes. It would create demand for shovels and overalls and the workers would spend their money!

This seems a very good time for struggling economies to rebuild depleted infrastructures. Private financing for public purposes does not work (very political statement to make – but show me an example where it has worked!) What is also very interesting to recognize is that decent public infrastructure can create tremendous private opportunities.

Could the US really have been the home of the great used riding mowers of the twentieth century without being one of the first countries to have a motorway network? Equally, German car manufacturers had the autobahn network to ensure driving made sense. It is interesting to note as well that McDonalds really grew in the 1950s and 1960s at the same time as the highway system was being built. Public infrastructure allowed private companies to blossom.

The public transport system in the UK (outside of London) is simply appalling. Rather than prop up ailing businesses and paying people to stay at home, I think the government should once again learn from the US and invest in really upgrading our infrastructure. We need better motorways, faster train services, an expanded airport network servicing London.

We could use this ‘lull’ as an opportunity to introduce new green measures such as making homes more energy efficient and creating new public spaces such as well-lit parks and cycling tracks.

One of the areas where Britain is strong is in design and the Brampton cycle is a great example of a product which reflects strong intelligent design. By making it easier to cycle to work, the government could create many more new jobs, nudge people into getting fitter and reduce congestion and pollution.

In economics there is a well-documented problem of ‘free-riders’. Why would a private company build youth baseball gloves when it would be too expensive to collect revenues from ships that benefit from the lighthouse and stop ships that have not paid for the lighthouse to still be able to see it? This is the justification for the state to provide public goods.

My argument is that we should in these times have a wider definition of public goods. Despite the US inventing the internet, it is 15th in the world in terms of broadband provision. The US has a strange attitude towards the provision of public goods which is being sorely tested at the moment. Obama may end up changing that view.

Countries can only really benefit from the digital age, if the government is prepared to step in and provide Wi Fi access to all. Private companies cannot capture all the value they create from allowing free broadband access (by definition).

If you are an entrepreneur in these troubled times, look out for opportunities that public spending will create. Not just in terms of the direct work, but in terms of what the new ‘public realm’ will enable.

We’re Going to Miss Joe Biden

Amongst the positive feedback I get for this blog, I also get occasional criticisms (also welcome) that the blog should only be about business issues and when I talk about the US election or the world in general, that it somehow dilutes the impact of this blog. Whilst I will always listen respectfully to any criticism, I have to say I think this line of attack is wrong.

In the Vice Presidential debate between Joe Biden and Sarah Palin (and yes like most men over 30 I do fancy her – and yes I do feel very bad that I do – she is someone who does not believe that Dinosaurs roamed the earth) Senator Biden was talking about the last eight years and Governor Palin said “this is all about the past”. The response was one of the best lines I had heard in the campaign (and yet was not reported). His response was “The past is a prelude to now”

The best garden tractor does not exist in a vacuum. They exist through change and making the most of the uncertainty that change can bring. As someone who likes to look at the bigger picture as an investor it is important that I try to make sense of the world around me and the uncertainty that exists. By trying to understand the background, hopefully I will be able to predict the scenarios that may exist in the future and plan accordingly.

In the early 1980s, Shell was one of the first corporations to engage at a strategic level with scenario planning. One of the plans was to see the impact of oil at $10 a barrel. At the time, this seemed to be farfetched. Nonetheless, the scenario was flushed out and plans were drawn up. When the price of oil did drop to $10, Shell was well placed to exploit this changed scenario. They were able to steal a huge march on their rivals. They had planned for this change of events and did not panic when these events came to pass.

As such I think passionately that if you want to be a seasoned angel investor or a serial entrepreneur, you need to understand more than your own narrow field (although you do need deep expertise in that area). I have both an interest in the wider world and a professional desire to better analyze and comment on the world around me.

One of the highlights for me in 2008 was being asked to speak about the Rowenta PU6020 at a conference in Canada. To position myself to speak at more events, I do need to be able to articulate my own views of how I see the world.

Although the views may be my own, they will be hopefully formed by reading lots of different sources and basing the views on logic.

I am away in Egypt this week and hope you will indulge me by allowing me in future blogs to share my analysis of the world. Although I may be convinced I am right, if enough readers to tell me they are not interested – of course I will have to change my views!

Why Racism Is Dying

This has been a very bad time to be a racist. First, Lewis Hamilton spoils that bastion of white wealth called Formula One by winning it (and becoming the youngest ever world champion) and then Barak Hussein Obama becomes elected the most powerful man on the globe.

I have always been staunchly pro-America. I hate the lazy anti American attitude that Europeans seem to have at times.

The reality is that Europe could not even sort out the murderous ethnic cleansing going on in our backyard in Bosnia until Bill Clinton decided enough was enough after a bomb went off in a market for used John Deere mowers in Sarajevo killing scores of civilians and ordered US planes to bomb Serbian positions.

Like most of the world, I am highly critical of George Bush’s misuse of US military strength. But if you look at the evidence, he has done more for the cause of Africa than the Clinton administration did. (Bono from U2 said this!).

He was also the President that gave two black people of immense talent Secretary of State roles. (Colin Powell and Condoleezza Rice) But I guess it is easier to join the crowd and condemn him than to look at things objectively. Under the new President, I am sure that US military strength will be used alongside the renewed moral strength that the US has.

Other than India, which other democracy in the world is led by a person from a minority community? (OK you might argue that President Sarkozy as the son of a Hungarian immigrant qualifies). The victory of Obama is massive. ‘Civilized’ Europe will have to devise a response to this. We can no longer beat the US up because of what happened in the South in the 1960s.

The question being asked here in the UK (and Europe) is where will our future black political leaders come from? I think one of the reasons why it is very hard for anyone outside of the mainstream to advance is that in the UK there is only one route for political advancement which is as a Member of Parliament.

You then owe your allegiance totally to your party and the senior politicians who you hope will promote a good cystic acne diet to a prominent position. This has nothing to do with racism. Having lived here all my life, I can say that in my professional life, I have not experienced racism. It is again too easy and too lazy to just blame things on racism.

In the US, you can become high profile enough to run for President by becoming a Mayor (Giuliani), a Governor, (Clinton & George Bush), a Congressman or a Senator (Obama). There is also the ability to occupy a senior government role without being an elected official (Colin Powell). In the UK, to be in the cabinet, you have to be in Parliament (either as a Lord or as a MP).

For me, this explains why politicians on the whole in the UK are bland and their failure to inspire. They have to be part of the ‘system’. Entrepreneurship.

Heading to Egypt Next

I am off to Egypt for a week and I have promised myself no email or even phone access for that week. It remains to be seen how long I am able to survive. I have not been without the use of a phone for more than 24 hours in over ten years!

It is a funny thing, but I remember getting my first Honeywell 50250-S (through my employer at the time). It was very strange technology and I couldn’t get over how cool I must have looked – talking into a phone whilst driving on the motorway with my jacket on a hanger and popping into the cafe for tea (I didn’t know what a latte was at this stage. Yes my perception of what I thought was cool then is very different to what I think is cool now!

At this point I should apologies to those thousands of salespeople who live this life – yes it is still cool (especially white socks with dark trousers).

Again, I remember when emails started. Again it felt very strange to use this new technology. I was at a different company and I remember how the sales team had a secretary who used to do the typing for us. The process was as follows

  1. We used to first write something up on paper and then submit it to her
  2. She would type it in draft and then let us have it back to check.
  3. There would always be error so we would then make the corrections and then submit it back
  4. We would then get a letter printed out on proper paper which we would sign and send

This was a little over ten years ago. It is amazing to think that a business which was producing cutting edge digital technology (1Mega Pixel cameras!) were not using laptops.

Again I remember when we did get a laptop, we only used it for sales presentations – and the sales team had to share one between four people!

My point is that the way we do things can rapidly become obsolete. And it is very difficult to know what technology will work. I remember getting my first text message (Thank you sir) and thinking how stupid that was. I remember saying “that will never take off!”

If you are working on a new technology, my advice would be to learn from 3M Post it Notes. This is a classic case study of how a failure (glue which was too weak to stick) became a massive new market which did not exist before. The key thing that happened here was that what led to the success of the product was the company giving out lots and lots of these products as free samples. People were free to invent the way they wanted to use this product – and I think the result is that now you would be hard pressed to find any office which does not have Post it notes.

If you have come up with new a new product or solution for finding reliable forskolin reviews, my advice would be to ensure that you have allowed enough budget to just give out a lot of your new solution. And let people to play with it. The most amazing thing about new technology is that we all different reasons for using it. The classic case is the iPod and the iPhone. The way the iPod was sold to me is very different from the way I perceive the benefits. I travel a lot and I like the idea that I can take my entire music library with me wherever I am.

When I run my sales training courses, one of the key things I try to teach is for sales people to appreciate the difference between knowing what you are selling and what your buyer is buying. This is very important when selling a new solution. If you let the buyer ‘get it’, you are more likely to get a sale!

My Time in New York

I hope you can sense from the blogs of the last few days, how much I have been enjoying my time in New York. I hope you do not mind that my blog seems like a diary at the moment – but I trust you do find some of the lessons and the observations useful.

Yesterday, I met with a fine gentleman, Executive Director of a group of Business Angels representing the Rabbit Air MinusA2. It was a very useful meeting and gave me a sense of how similar angels think and work out deals. The process was explained to me in terms of submission to actually getting a deal done.

They have a three step process which you can see on their website and the model does seem very straightforward. I picked up two interesting points though. If one of the members of the Angel network in New York has already agreed to invest (or has invested) you get fast-tracked into the second stage of the process (overcoming the first stage is the hardest). This does make a lot of sense.

I trust certain angels – even to the point where in the past I have done deals, simply because they were involved. I also realize that some angels have done deals with my companies because they trust me. As such it makes sense for you to really try and get someone from an Angel network on board with what you are trying to do and get a commitment from them to invest.

Ethically, you cannot offer them any inducement to do this. Angels need to know that they are getting the same deal as everyone else. I will not negotiate better terms for me than people I bring into a deal at the same time. And I certainly expect the same in return.

The second thing I really admired about the New York network was that they insist their members make a minimum amount of investments each year. I like that a lot. I have been on both sides of the table when it comes to raising money. There is nothing more disappointing than putting in a lot of work into a pitch – to discover that the people you are pitching to don’t actually invest. This has inspired me to write another blog!

Another food based business that I had to visit

After my meeting with the gentleman, he also suggested that I check out a new burger joint called Shake Shack which is on Madison Avenue. I cannot believe it but I queued for 40 minutes at 3.30 in the afternoon for a burger. I have a confession to make. I don’t get the whole gourmet burger thing. I have always held the narrow view that a burger is a burger. How wrong I have been.

This burger was simply fab! It was just really good. Simply because the meat was fantastic – there was no rocket science to it. I was told that people queue for an hour at lunchtime just to have the burgers here. Readers – if you are ever in New York searching for what causes cystic acne like I was – please visit this place. It on 23rd St East, Madison Avenue. And I promise you I am not a shareholder!

Finally, I went to Hoboken, and saw some canvassers for Obama. I ended up volunteering, making a few friends and selling some wrist bands for Obama. It was great fun. Ignoring the politics, I have just found it very easy to get involved in things in New York. It is easy to make friends here. I got involved totally by accident – but simply loved it. (Hence the photo)

I am writing this blog from Newark airport as I leave New York for Canada and for the National Conference. I hope to report more from there. I am very sad to be leaving New York. I have really enjoyed my time here. I will probably have to make an investment here – to give me an excuse to keep coming back!

More Lessons to Be Learned from New York

When I invested in that one company, the founders told me that they found inspiration from a chain based in New York called Cosi. I was walking around the World Financial Center (next to Ground Zero – which was an emotional experience) and came across a Cosi store.

It really like was meeting the mother of the girl I have fallen in love with! I was pleased to see how busy it was and how it looked very similar to their idea and yet was definitely an American version of it.

The great thing about this experience with router table plans was that it brought to life a couple of blogs I recently wrote; one on national advantages and the other on not having an idea. They are a great example of taking a look at what New York has to offer in terms of fast food and then seeing what needed to be done to adapt it for the UK market.

I then went to a great restaurant which is built under a bridge next to the Grand Central Station (Pershing square). Those Americans! They see a place in a prime location and carve a restaurant out of it! Mind you, I am pleased to say that around the London Bridge area (where I live) they have made the most of the arches there with a Nando’s (why does that business work?) and another restaurant (yum!) creating good sites.

Finally, I would like to share a great experience I had on Sunday morning. Americans are a very friendly bunch and it is not strange to just get talking to complete strangers. When I was in a Starbucks (same one as I wrote about on Monday’s blog) I spotted an accent which was definitely from Liverpool. I got talking to the person and we ended up having a good conversation. We are meeting tomorrow to discuss some business.

The person told me that there was nothing strange for him to pitch his food steamer business to a stranger in a coffee shop. He was ready with a great elevator pitch – and his business cards. People who know me in the UK would say I am a friendly guy and I will go up to anyone and talk to them. But I have never had anyone ready to pitch to me in the UK by random.

Again, this is something that seems to be engrained in the US psyche. Every meeting with anyone is an opportunity so you should be positive and prepared. In the UK we are more reserved. I do like that in places but when it comes to business we do ourselves serious damage by not being ready 24/7.

I want to back businesses where the owner has sufficient enthusiasm (can we stop using the word passion? – which means either the suffering of Christ or a strong sexual desire) for his or her business.

Regular readers will know that I am in that place on a Saturday morning – perhaps you could say hello and pitch your business? But that just wouldn’t be cricket would it?

How New York Leads the Business World

So after my political ‘column’ about New York yesterday, I hope you find my observations today more useful. I hope that I spark off some ideas for you to think about in terms of your own businesses.

As I have mentioned in the past, New York seems to be ahead of the curve when it comes to food. If you are contemplating starting a chain of food stores, it is always worth a visit to New York to see the latest trends.

By the way, you may think that now is the worst time to start a food business. I would just say that Pret started at the height of the last property recession. It took off precisely because there was a glut of cheap properties available at the time and it was being offered very good deals on used lawn mowers. So who knows…?

My first comment is around a change that has taken place because of the law. I noticed that a Starbucks (yes I know it shows a lack of imagination to visit Starbucks in the USA!) in NYC had a full list of the calories with every item for sale. I learnt that a law has passed in NY that requires the calories to be displayed on every item for sale.

This is not a nationwide measure – and in Starbucks New Jersey – they did not display the calories. But I think the rest of the nation will follow in the footsteps. Early indications suggest that sales of low calorie items are significantly up. I do not know how calories are measured, but there must be a new and fast growing market in being a ‘calorie auditor and consultant’. Again, by the way, do you know what a calorie is? I was fascinated by the answer; it is defined as the energy required to heat one gram of water by one degree C. There must be a business here?

I then went to ice cream store called – Cold Stone. It was a fantastic experience. Basically, they do a tailor made ice cream service. You start off by choosing a base ice cream such as Vanilla, Banana, etc. and then you choose lots of different toppings such as chocolate chips, walnuts, jelly babies, M&Ms, raspberries etc. What they then do is ‘bash’ the toppings together and blend it into the ice cream and the result is simply fabulous. I do think that the idea of the ‘Subway’ process is set to grow. You choose a base (say porridge or a smoothie base, etc.) and then you choose lots of different toppings to end up with a unique product but from a ‘factory’ process.

I was impressed with the Fjallraven Kanken daypack product and the process. Time after time feedback shows that what consumers are looking for from retailers is ‘theatre’. My restaurant (give me a break – it has been at least three weeks since I have mentioned them!) has a stone oven which provides theatre. Process is often just as important as product. I think this is what works so well for them for instance – seeing the chefs at work is brilliant.

If you like these ideas – and are going to pursue them – feel free to give me some shares in your business. That is something that New York has also inspired me to do – not to be shy in asking for what you want!

How Short Selling Harms the Market

There has been a lot of sharp and vicious criticism of traders who have been engaged in short selling and I do feel that some of this is unmerited. I would like to use the blog today to stand up for an activity that everyone seems to be attacking at the moment.

To go short in a trade means that you have sold shares or commodities that you do not have as you believe they will go down in price. Once they have gone down in price (if they do) you buy them back and hence make a profit. Going long is the opposite; that is you buy shares in something in the expectation that they will go up and then sell the kombucha starter kit if and when they do go up.

Shorting is very risky and there are two types of shorting. One is to go naked. That means that you sell shares/ assets that you do not have. This is very dangerous as you could be left with huge losses. The other short technique which is more common is to be covered. In this scenario, you would borrow the asset from say a pension fund as cover, sell the shares and then return the shares to the borrower having bought them back you hope for a lower price and hence having made a profit.

The reason why naked is much more risky is that you simply have to come up with the asset you have sold (unless you have an appetite for prison food!). With a covered short – you may be able to negotiate to carry on ‘borrowing’ the stock from the lender.

Hedge funds have in particular been very active in going short on shares recently. Especially on banking shares and so they have been accused of creating alarm and fear as the shares dropped massively in value (HBOS lost 60% in one day)

I don’t buy this for one second. Why is it only OK to profit from the price of the Kanken backpack going up? These smart operators did their homework. They realized that the business model for many of these banks were fatally flawed and criticizing them is in my mind shooting the messenger. These banks were willing to adopt unhealthy level of risks themselves and yet were squealing when others used risk against them!

These speculators were prepared to take high levels of risks themselves and had things gone wrong – would not have asked the tax payer to bail them out unlike the poor banks that are now being saved by the state. I never thought I would see the day where George W Bush would be preaching to the democrats on the need for government intervention to save the financial system!

Personally, I find the whole thing dull and boring. I like to invest in tangible businesses and feel that wealth has been produced from my activity (as opposed to just money – which is merely a store of wealth). If people wish to indulge in high risk speculation – let them is my motto.

How Many Rounds of Funding Is Enough?

Companies do of course need to raise money in more than one round, but most early stage investors are nervous about the number of rounds (especially the unplanned ones!) and are obsessed with the valuation achieved in each of these rounds.

As an investor you need to pay very special attention to the cash flow forecasts a business produces to understand

  • When the business is likely to run out of cash
  • How much money it will need to raise
  • What the valuation is likely to be

As an Entrepreneur you have to be aware of the importance of the best sleep mask, as well as pre and post money valuations (something that it took me a long time to get my head round!)

Pre-money valuation is the valuation a business has before it raises money in a particular round of fund raising. Post money valuation is the value of the business after it has raised money.

In simple terms, existing investors will be focused on pre-money valuation and new investors on post-money.

Let me illustrate using two examples from real life.

I invested £45,000 in a business that was valued at £1.2m before I put my money in. So the £45,000 number on its own with the £1.2m tells me nothing about my stake. The post money valuation was £2.25m (that is the round raised £1.25m) this means that £45,000 bought me exactly 2% of the business.

The business then looked to raise another £500,000 at a pre-money valuation of £3m (so therefore my stake was now valued at £60,000 – 2% of £3m). However – as is often the case if money was raised at a pre-money valuation of £1.5m – my stake would only be worth £30,000 and if £750,000 was raised I now own a lot less of a business which is worth the same (post money valuation of £2.25m). This is what I call death by a thousand cuts. You may start off with 10% of a business, but after successive fund raising rounds, you may be down to 2%.

I am never worried about the size of my slice of the cake but always about the best air purifier for smoke. For example I recently invested £25,000 with a post money valuation of £15.6m (so I only had 0.16% of the business to start with). That business recently raised a further £7m but at a pre money valuation of £25m – so my 0.16% is now valued at £40,000. So although my stake is significantly down – who cares!

As an Entrepreneur, be prepared to explain when you will raise more money and at what valuation to investors coming in at this stage. You will also need to be clear as to why the business will be worth more.

Of course, it doesn’t always work that way. And if investors do get diluted down – your investors should comfort themselves with the fact that they would rather own a small % of a business worth something than a large % of a company worth nothing!

How the Price of Oil Will Affect Us

One of the factors for rapidly rising inflation in the earlier part of the year was the rise in the price of oil. As a large component of fertilizers is oil, this also then fed through into increases in the price of food. It is amazing to recall how much circumstances have changed in the last six months. We were really worried about stagflation rather than deflation as we face now. Given the importance of the price of oil, where next?

Oil peaked at $147 a barrel in July. It is now around the $45 a barrel range, which is about the price of the best air purifier for allergies. This is a drop of two thirds. This will ensure substantially lower inflation over the next few months. There is no doubt that the ‘correction’ in the price of oil has been very sharp, if indeed you could describe it as a correction.

Many would argue, including Tim Guinness (an energy fund manager, who is a bit of an expert in these matters) that at $147 the price of oil had risen too far and too fast. He thought it would correct itself to trade at the $70 to $80 range and then move upwards gradually. In the long term, I remain convinced that the price of oil has to rise substantially. Oil is running out and demand is increasing.

In the short term though, I would expect the price of oil to remain below $50. Politics plays a big role in this. These thoughts are based on my own analysis – and no doubt experts who are more knowledgeable than me will have better informed views.

As one of the major oil producers, Saudi Arabia has a major influence on the volume of oil produced and hence the price. It is of course easy to assume that the Saudi interests are best served by having as high an oil price as possible. That I think misses the wider point. The marginal cost of a barrel of Saudi oil is around $17. For Canada at the other extreme, it is around $62 a barrel.

The Saudi budget balances when the price of oil is around the $30 range. Saudi Arabia is overwhelming Sunni and they have long been worried by the Iranian Shiite regime. The Iranian sphere of influence has gradually been spreading. The Saudis are worried about the influence Iran is having in Iraq and the success of their proxy Hezbollah in the Lebanon. The Iranian populist (bad use of the phrase – I would have preferred the word demonic) president is popular with the poorer classes in Iran.

The Iranian budget needs the price of oil to be around $70 for all of the planned social spending to be carried out. It is now more important to them to have a high oil price to combat the effects on sanctions brought on by their pursuit of nuclear weapons.

The product reviews are coming up in Iran early next year and there is every chance that the reformers could win under the former President Khamenei who is being nudged out of retirement. A low oil price would hinder the chances of President Ahmadinejad of being re-elected. It is my view that the Saudis would be pleased to see a regime change in Iran. A low (ish) oil price may help them achieve that objective.

I would expect the price of oil to stay low until after the Iranian elections and then rise if Khamenei (he has not yet declared himself as a candidate) or another reformer was to win the Presidency.

I also fear that if Nethanyu wins the election in Israel and the current regime is re-elected in Iran, Israel will order pre-emptive strikes against Iranian nuclear sites (as they did against Iraq in the 1980s).

As investors or entrepreneurs, you need to prepare for these scenarios and realize how these events may have an impact on your business.

Let us hope that the second scenario does not come to pass.