SME: How much does it cost you NOT to get specialist advice?

Post by Ethar Alali

Starting your own business full-time is a nerve-racking stage. Not only have you apparently given up the stability and security of full-time employment and the relatively secure income that provides, you’ve perhaps not seen the idea work in practise yet, so are going into business both new to it and with a totally uncertain market fit.

What many micro-business and startup owners don’t realise is the sheer amount of responsibility they then take on. If they came from a permanent role, they have almost always performed one or two functions within their jobs and perhaps have even stayed at one company all their careers. In any case, anyone new to running a business has never gambled with their own money.

Are you a small-business owner? How about you? Did you start off knowing the in’s and out’s of marketing, accounting, IT, HR, PR, stationery printing, legal & regulatory frameworks, sales and all the other elements you have to know and probably would have led you to doing something different with them in hindsight?

The unique things about the business you run, is you. All the other functions that operate within the business are all great, you have to have them, but the person in the SME who puts all the bits of the business Scalextric set together, to make it function as a cohesive unit, is you.

The Value

The unique things about the business you run, is you. All the other functions that operate within the business are all great, you have to have them, but the person in the SME who puts all the bits of the business Scalextric set together, to make it function as a cohesive unit, is you. Without you, there is no business. You have to understand enough about each of the functional units to deliver an end-to-end experience for all your customers in an effective, engaging and valuable way. Almost nobody that you hire to do any of the other parts of the track will be as invested, or as systemically focussed on the big pictures as you. Indeed, nobody else is ultimately responsible for the business apart from you. Even accountants acting on behalf of companies are not responsible for that company’s submissions to the tax man. It you and your business after all.

That’s a daunting prospect for a lot of people! Many give up before they even start. Others think “Well, that’s expensive! I’m sure I can do that myself” or “My mate Dave down the pub, he’s got a computer and he says that he made his garage toolshop website using [insert your favourite tool here]” only to then realise the scale and enormity of the task at hand, picking up things they never would have imagined they’d need to and falling foul of regulation designed to protect retail customers, their data, the goods, payments or something else.

Getting Help.

There many places you can look for help and advice. Some offer general advice, such as business courses run by the local authority, specialist membership organisations like the Federation of Small Businesses (link), or startup incubators, such as the very famous Y-Combinator biannual event, or Manchester’s very own SpacePortX or suchlike, which provide not just general business advice but specialists advisers and also either direct you to sources of investment or even have a [Crowd]fund they themselves help manage. This is a particularly popular in the tech community, where many startup organisations share a coworking space, knowledge and skills and band together for ventures which are seeded to test out before further investment is sought.

Incubators are a model we in particular think small businesses outside the tech space should come together under, since this opens up opportunities for all the specialist parts of a business, including marketing, accounts, web design, sales, fulfilment, customer services etc. In addition, those working in shared co-working spaces are registered as several hundred to a floor. So the few traditional businesses such as accountants and tax advisers, that appear there, suddenly benefit from perhaps 200 new clients overnight.

Consultants, Coaches and Business Mentors

A business mentor has been there and done that. Very often they have sold successful businesses and are looking for a new challenge, a step into venture capital, act as a business angel, a non-executive director or perhaps have retired and just like to give advice, which many do for free. Any active directors or business owners acting as mentors will be giving up an hour or more of their valuable time to support companies, which they really should be compensated for, as it can take up a lot of time and if they are the main fee earners too, they are losing income by helping.

Despite this, they almost always have a the skills to help any business succeed and those with specialist skills in your industry can perhaps open doors that would otherwise remain closed to you.

Business consultants on the other hand, are not cheap! A day of their time may cost upwards of £500+VAT as well as expenses, with some of the highest big name management consultancies charging their staff out at £20,000 a day or more! So it’s always good to know what you’re getting for your money and what sort of help you need.

To do a comparison, next time you need to find a specialist piece of advice. Start a timer from the moment you ask yourself the question. Then go and find it, do it, finish it off and then stop the clock. Don’t stop the clock for any distractions or sleeping. You need to compare the elapsed time. Note, this may stretch over days or weeks and is how long is has taken you to do it.

Now, look at your sales figures and the time you spend fulfilling them. How much would you have otherwise made in the time you spent researching and doing the activity? For service companies, think about the amount of time you were not working on fee earning, client work. Say it takes you 12 hours to research and your charge out rate is £60 per hour, then you have lost £720 in revenue.

Retail companies should think about the stock they would have sold and delivered. Count up those beans. If it took you 12 hours to fully research the quality assurance process and quality mark assessments for a product you‘re making at a rate of 3 an hour and will sell at £29.95 and could have got this from a 15 minutes conversation, you have lost £1,078.20 in revenue, when you could have spent around £18.75 talking to a consultant who could have told you this immediately.

Pretty Bad…

That’s not even half the story. As well as your own time, you have to consider your time to market. For many retail businesses, there is a seasonality to their income. During Christmas, Valentines Day. Easter and other special occasions, many businesses will make more money than the rest of the year combined.

Supposing for Christmas 2015, you bought 1,000 units of £10 items (including shipping) at cost from Alibaba, that you planned to sell at £29.95. That’s £10,000 worth of stock. It took 6 weeks to arrive, but you hadn’t known to check their safety credentials and whether or not the products had undergoing rigorous EU quality tests, then the product will have to be binned, as it’s illegal. So you’ve lost £10,000 unless you’re insured and you now have to source new stock, which will cost you another £10,000 and take another 6 weeks to arrive. Hence, you’ve missed Christmas. So by the beginning of the new calendar year, instead of being about £19,950 up, you’re £20,000 down!

Worse still, if the police catch you, or worse, you are responsible for the death of an individual after they use your product, then you are in some seriously hot water! Corporate Manslaughter needs to be a very real consideration to small business owners, since the ‘controlling mind’ definition used in the 2008 legislation is them, the owners, it’s you! Corporate manslaughter (and homicide) carry jail terms, not just for the individuals, but also any line management from the senior manager down the the manager of the bottom rung individual, or wherever in that line the order was placed. Despite this huge risk, most business owners and managers don’t know that is included in their responsibility in this space.

Universal Appeal

This model works for all types of consultancy business, including Virtual Assistants, your Accountants, Legal experts, IT consultants etc. We know the value of this, which is why we are proud sponsors of the UK Business Circle consultancy category. However, choosing one is not easy, since you need to be aware of how much you cost and how much you’ll get back from their time. If you’re writing a letter and you are stuck for time and would lose £150 just typing it, then using one of the plethora of Virtual Assistant (VA) providers out there affords you the time to concentrate on growing the valuable part of your business, the bit that is you!

All for the sake of saving less than £20 and 15 minutes of your time? Not getting help from an expert is a false economy, whichever way you slice it.

E

Ethar Alali (@EtharUK) is CxO and Chief EA at Axelisys Ltd, specialising in providing innovative agile enterprise advice to blue-chips and SMEs. Formed in 2011, Axelisys works with some of the biggest household names in the UK and across the world. Ethar is a lifelong programmer, still faithfully carrying around the BBC Master Compact 128 that made him the man he is today.