Alan Sugar is wrong about small business owners

Tuesday, 10 November 2009 09:05

Alan Sugar clearly doesn't seem to buy into the policy initiative that the UK government has set about the banks lending to SMEs to help them weather the current economic storm. He is confusing his role as a potential lender of last resort with that of the government or bank in that role, and I do believe this is evidence that he may have forgotten the lessons of his early years as an entrepreneur.

Far from calling SMEs who have been refused financing "moaners", those of us at Entrepreneur Country take a ‘roll-up your sleeves’ approach to business building. We are trying to be a part of the solution, rather than adding to the problem and simply passing the buck of blame.

I find, whether it's in the Dragon's Den or through the companies we meet at Ariadne or through Entrepreneur Country, that it is training and guidance which is required to help match the right funds to the right company and at the right price.

Many Managing Directors who run SMEs will not have encountered such bad trading conditions before in their lives, and so they need extra assistance in understanding how to navigate their ships through the current challenges.

In particular, they need to understand better how to reduce fixed costs, tighten contracts, negotiate, market and sell more effectively , prepare more detailed and more flexible forecasts, and access more types of finance from grants, to factoring (where appropriate), to private equity, private debt and bank finance.

There is generally a price at which debt or equity can be concluded if the entrepreneur is prepared to be flexible; he/she may not like the price, but that's much better than not being offered a deal at all. Indeed, a large part of what we do at Ariadne Capital with the entrepreneurs we work with is to help them understand the real value that they have achieved in their business, and how the market of investors will judge them.

Historically a lot of money and cash may have gone into a firm, but that doesn't necessarily mean that the firm has achieved the revenue, profit, market share or momentum milestones which would lift its valuation to take it to the next level. That can be a tough conversation to have with an entrepreneur. But if being straight with them leads them to secure financing at a proper valuation, then they are happy at the end of the day with being able to move their business forward.

Indeed, my contacts who head up the large retail banks in the UK are interested in partnering with Entrepreneur Country. This is because through the training programs and the access to successful mentors which we will be offering , we will prepare SMEs who are looking for bank finance to be ready to have a full and fruitful discussion with their bank manager.

In my experience, none of us would have got wherever we have arrived without some help and understanding along the way. We try to "send the lift down" at Entrepreneur Country and help the next generation of entrepreneurs and SME business owners to get to the next floor up.

We are unrepentantly optimistic as well about the role of the entrepreneur in society. It's a better place to be. Dynamic entrepreneurship is the only way to create real, sustainable wealth in our economy and the growth will intimately benefit all of us.

Alan Sugar of all people should know that.

Julie Meyer is chief executive of Ariadne Capital.

Add this page to your favorite Social Bookmarking websites

Set as favorite

Email this

Comments (1)

...

Finance models are different in the UK....in the US, SME's find it much easier to obtian un-collatoralised financing facilities....the UK is far far more conservative and will remain so!

UK based SME's will find it extremely difficult, if not nearly impossible to obtain lending facilities without provisions of hard collateral, and those that have collateral, will find that they will pay through the nose for the privilege, especially as any lenders / financiers that have learnt from the recent market madness realise that even historically perceived solid assets that have been used to back borrowing are easily devalued.

Win / Win goes out of the window when dealing with banks or investors unless they take a punt, in which case a true demonstration of interest of the financiers commitment to the SME in any business can only be demonstrated through taking an equity stake as an ordinary or even a preference shareholder. Any lending model excluding equity stakes in this environment should be seen as a red flag, since we all know that banks have become accustom to churning the finance that they provide for repetitive fee generation!

This relationship between the banks and SME's in the UK are cast in an environment of stringent 'Limited Liability' legislation!....I believe that US business Liability rules & legislation differ from the UK, and as a result the US is a far friendlier place for the financing of SME businesses.

IMHO, the respected Sir Alan Sugar's success is attributable to one core characteristic that the majority of aspiring business people fail to embrace....and that is the ability to be ruthless in criticism.....this very important characteristic encapulates an ability to say NO....an ability to say 'i'm going to have to pass'....because whether you like it or not....9 out of 10 new opportunites are likely to be losing propositions.

The word 'optimism' for me denotes a soft approach to business...the word optimism carries emotion, which is so often confused with the word passion!

Passing on 9 out 10 opportunites is the way to limit losses all round.

You can't knock Sir Alan....he's a very very wise man....we don't need anymore YES men/women....we need more people to say NO!

Economics 101.....In a sealed eco-system, we don't create anything let alone wealth, all we do is transfer from one place to another, we create the perception, the illusion that we're actually creating wealth that will benefit all man kind!....the only thing that is increasing is money supply which is being hijacked by bankers for their own gain.

I hate to say it, but the global economy has full blown cancer....yes cancer is a very serious disease...thats how out of shape we are...and thats why we should say NO! more often as Sir Alan would!

seanys , November 10, 2009