Personal Guarantees

No Personal Guarantees… all in Due Course…

Jonathon Grove and the guys at Due Course are daring to be different by offering Invoice Financing to Owner Managed Businesses… with no Personal Guarantees.

Their core online offering uses clever tech to provide a slick, quick & painless way to raise money on your invoices…

All great stuff… but it’s the fact they know their market place that impresses me…

Owner Managed Businesses hate PGs…

… so if the the Fintech industry really wants to innovate & disrupt they need to take a leaf out of Due Course’s digital book… be brave… back their clients by believing in their businesses… and drop PGs

The Due Course 3 second Takeaway

  1. crackingly quick online invoice financing
  2. they’ll back your business… so no PGs
  3. Made in Manchester… a no nonsense Northern Quarter outfit
FRS 102

Watch out… there’s an FRS 102 about…

For companies with year ends December 2015 * (and all those thereafter) there’s a new accounting standard to help your put your numbers together… FRS 102

FRS 102 has a few interesting tweaks on the old rules… so check your accountant is making the most of them… start by letting them know that you know it exists…

Ask ’em “FRS 102… anything to do?”

The ACCA have spotted one area to keep a particular eye on…  in their technical factsheet on the subject they say the new standard is ‘likely to result in more Intangibles being recognised.’…

… and I love the smell of Intangibles in the morning…

For most of you, classifying costs as Intangible Assets is a surefire way to boost your Profits… and strengthen your Balance Sheet… which’ll help your Credit Ratings

a    win… win… win…

And there aren’t many of them in life

You want a Quick Hit example?

Say you are developing a new product… the costs of that development would typically go through your Profit & Loss… reducing profits for the year…


… if the development can be classified as an Intangible Asset those costs are taken out of the Profit & Loss (so profits go up)… and into the Balance Sheet (so assets go up)…

I’ll be posting more on these new rules… and you can mail me about them if you like… but you can check them for yourself here

*technically, the new standard must be applied to accounting periods beginning on or after 1st January 2015… for most companies that’ll mean all accounts year end 2015 onwards will be prepared using FRS 102


Hierarchy of Buyers

Hierarchy of Buyers… who you sell to matters?

When you come to sell your company… who you sell to can have a massive impact on the price you get… so let’s take a quick look at the Hierarchy of Buyers… worst first.

Management Buy Outs (MBOs) … usually these guys don’t have the money to buy you out… so they borrow… and anyone who borrows money has the price they can offer capped by the bankers they borrow from

And it gets worse… bankers love doing MBOs but they hate the sight of you disappearing into the sunset to live happily ever after… so the earn-out part of the deal can be big… and loooooong…

There may be cuddly reasons you’d like to do this (legacy stuff/guff) but I’m talking getting best price here… so MBO is a no…

Venture Capitalists (VCs or PE)… these are pro’s who work ‘for sale sites’, accountants, lawyers et al to find opportunities… if they’re buying your company outright they’ll look to buy it low… goose it… flip it quick…

… and buy low is a no…

Competitors… they get what you do, should understand your value (may not be a good thing?!) and there’ll be synergies when you combine… & that’ll boost the value… (2+2 = 5)…

… if they’re buying ‘opportunistically’ then the price may not be great… (everyone loves a bargain, right?)… but if it’s strategic the price may be worth it…

Complementary… these are companies not quite in your space but it makes sense for them to move into it through acquisition… they’re likely to be strategic buyers… which means they should give any Competitor a run for their money when it comes to the price they’ll pay…

…. so much for the basics… you can see that to get a better price you want strategic buyers (not opportunists) with cash (no banks involved)

… but there are a couple of other buyer-characteristics that can boost the price you’ll get…… 

Overseas buyers… will definitely be making a strategic acquisition… and so pay premium prices

PLCs... there are a few reasons why stock market companies might pay the premium price you want  (e.g. their management might be using acquisition to hit City growth targets… & they’re not using their own money!) … but I’ll just quickly explain the PE game & how it can help you get the price up…

PE game… The value of a stock market listed company can be expressed in terms of a Price Earnings multiple…  where the value of the company is measured as a multiple of its profits…

… so a Plc with £1m profit and a stock market valuation of £20m would have a PE of 20…

You’ll have heard talk about profit multiples when it comes to valuing a private business… typically non-stock market companies may sell in the 2 to 8 x profits range… (I’ll discuss this in detail elsewhere)

Now, there are a variety of reasons why private companies have lower PE multiples than Plcs (e.g. governance issues )… but the main thing is that there IS a big difference… and you can exploit that to seriously raise the price you’d get…

Say your private company makes £1m profit… and a complementary private company has offered to buy you for £8m… that’s a generous top end multiple of 8 x profits

To a Plc with a PE of 20… £1m profit could boost their stock exchange value by £20m… so your £1m profit is worth more than £8m to them… and there’s no reason why they wouldn’t share a bit of that ‘extra value’ with you !

That’s the PE game… profits are worth more to a Plc than to a private company… & they’ll pay more for them…

Here’s another definition of the PE game

So… our ideal buyer is ... a cash rich, overseas, stock market listed company, operating in a complementary sector looking to strategically move into your space here in the UK

Better still… find a few of ’em… because…

Making a Market Matters… the more people after your company the better the price you’ll get… sometimes it’s easy to forget that basic principle when talking profits & multiples & earn-outs !!!

SIC Code

Quick SIC Code stuff

SIC CodeHere’s a fun site to help you find the right SIC code… SIC code Wiki

And here’s a blog post explaining why you should check it out… because Standard Industry Classifications matter..

Is your SIC code making your company credit rating sick?

You get to pick the SIC code that best describes your company’s activities… in fact you can pick 4… the Credit Agencies use the first one to pigeon-hole you & compare you against other companies with the same code… so make sure the first one of the four works for you?

Pete Wild - Pop Up Start Up Judge, Value Builder, Business Mentor and angles

Insights and Angles … first look


Insights & Angles is our first effort at a short video covering the world of Owner Managed Businesses… all put together by Sam Edge and friends at Squid Digital.

Justin Dooley from Caffe Cream, Pam Nugent from M&P Engineering, and lawyers Tom Hutchinson, James Robey & Mark Jolly get us off to a great start… discussing Grants, Kickstarter, the power of Video & SEO, IP funding… and onions…

Here’s a tad more detail on the video :

Justin Dooley, owner of Caffe Cream, discusses his national-award winning Ice Cream business… and his fund raising efforts. As a young entrepreneur, lack of collateral and capital has meant banks are reluctant to give Justin the support he wants… so having secured a £115k grant with a commitment to create jobs, Justin is turning to Kickstarter to raise the final slug of cash for his new factory.

(I’ll do a fuller post on Kickstarter as a source of perk-based capital soon)

Pamela Nugent, MD of M&P Engineering, discusses how putting up a video on youtube of her giant sit-on onion peeler has lead to a surge of enquiries, sales & holidays around the world. I admit to a bit of a stainless steel fetish… & it’s truly great to see Pam’s engineering shipping out globally thanks to video, youtube & SEO… could it do the same for you?

Tom Hutchinson of HutchinsonIP discusses funding available for Intellectual Property (IP) protection, with more details on the ‘free money’ IP audit grant provided by CTA (tax accountant) & MCFC fan Wendy Wild… (& I’ve done a blog post on the grant here : IP Audit… treat yourself for Xmas )

James Robey & Mark Jolly of Wilson Gunn chip in… this is their firm’s 15oth anniversary year… and having helped Manchester through the industrial revolution we’ll be getting a lot more help from them in our special edition video on the Patent Box.





IP Audit

IP Audit… treat yourself for Xmas

IP Audit Plus 2014 is a ‘free money’ £3k grant for SMEs like you to have a pro come in and see if you have any Intellectual Property that could be protected.

This is not ‘matched funding’… and the Government’s IP Office writes the £3k cheque directly to the IP pros who do your audit… so absolutely no cash outflows or costs for you.

It’ll cover IP such as copyrights, designs, trademarks… and it’ll see if you have any processes or products that could patented…

I’ve written about Patents before (and will do so again & again) because the new Patent-Box tax relief scheme could halve your corporation tax for the next 15 to 20 years… and, with schemes like ‘IP Audit Plus’, getting a patent needn’t cost what you think…

3 steps to saving money checking & registering your IP :

1. Some Patent lawyers such as James Robey & Mark Jolly at Wilson Gunn, and Tom Hutchinson at HutchinsonIP will have a completely free first consultation to talk through your IP possibilities & the prospects of getting it registered

2. The IP Audit Plus 2014 will grant fund a complete review of your possible IP options

3. Various ERDF supported regional funds and organisations such as MAS will then help with some of the costs of actually filing & registering your IP (typically on a ‘matched funding’ basis = they pay half)… I’ll cover these funders in a later post… but filing a narrow UK patent can cost as little as £2k to £8k and may take less than a year… and save you masses of tax… for you to reinvest in your business…

First steps?

1. Talk to an IP lawyer…

2. Then look to take up the IP Audit grant… it’s initially assessed & dealt with through your local Growth Accelerator (it’s classed as ‘Growth through Innovation’…).. in Scotland it’s through Scottish Enterprise, in Wales through the Welsh Government

But look sharp… the free funding ends in March 2015

So why not treat yourself for Xmas?


Here’s a must-read doc about Government support for companies like yours & your IP


And here’s a tad more detail for the interested from an article I was asked to write for someone else:


… IP Audit Plus 2014 – available via the Growth Accelerator money and minimal stress

Why should you bother to get your products, processes or services patented?……to increase their commercialisation, increase the value of your business or to take advantage of HMRC’s patent box scheme…….what ever your reasons ensure that you don’t miss out on the opportunity of a £3k grant to have an Intellectual Property audit done for your business.

To help you maximise your IP the government, through the intellectual property office (IPO), are offering grants of up to £3k to businesses to have an intellectual property audit carried out… allowing you to get a handle on your IP position without having to pay a penny and with minimal stress… but be quick the grants are due to end by 31 March 2015

So what do you have to do and what will it cost… the great news is, is that it won’t cost you anything apart from a bit of time in completing a form and then having a chat with your IP auditor when he visits.

The IP office work with intermediaries to carryout the paperwork and for audits done in England this is the GrowthAccelerator. (

Contact the GrowthAccelerator for your region and you will be put in touch with an IP professional for your region……….complete a couple of pages on an application form (so not to onerous) and you’ll be on your way, but remember to tick their boxes…….they are looking for you to..

….demonstrate that there is a sound business need for the grant

….IP is integral part of the company’s long term strategy and growth plan

….if successful the business will have dedicated resource, including potential financial resource, to carry out the businesses IP strategy

….show that IP is significant to the development and commercialisation of the business’s product/service offering. (perhaps with a view to export or license your products)

Your IP Professional will oversee your application thereon in by reviewing it and submitting it on your behalf to the IPO for approval…… it is effectively pre-vetted the approval only takes a couple of days and you then have two months in which to have your audit and for your IP Professional to submit his report to the IPO office

The great news is, that the IP Office pay your IP Professional direct so you don’t have any cash flow issues.

Once you have your report you will have to decide if you want to continue the process, and prepare and file and application for a patent, (registered trade mark or registered design) and unfortunately the grant of £3k that your professional has received cannot be used for this…….but costs at this stage can be minimised considerably if you narrow your patent …. and there are additional sources of funding to help with cost…

The Government & HMRC are genuinely behind companies who are trying to innovate… and chances are that’s you… so it’s well worth letting them help you !?!

Here’s a must read doc for IP funding from the government



SIC Code

Is your SIC code making your company credit rating sick?

Company credit ratings are affected by lots of things… but one of the major ‘unknown’ factors is a company’s SIC code… and in my experience most company’s don’t know what their’s is.

SIC stands for Standard Industrial Classification… it’s used to classify your business by type of economic activity…

Some can be very very specific… e.g. if you’re into ‘scaffold erection’ there’s a special SIC code just for that… some can be very general e.g. ‘other business support services’

And what code you have really matters…  Because agencies use it to compare your performance with others in same SIC code as part of their rating process.

If you’ve got the wrong one, or don’t look good in the one you’ve got, it can really hurt your credit ratings.

So who decides what SIC code you should have?

Believe it or not…You pick your company’s code and put it on your Annual Return which gets filed at Companies House (you can put up to 4 codes on the return, but the agencies will use the first one as the primary code).

I find that most companies leave this to their accountants, but I encourage owners to take an interest in their SIC code… and change it if necessary…

Because wrong SIC code = wrong rating?

The list of SIC codes can be viewed at Companies House SIC list

It may be useful to identify several companies like yours (or even your direct competitors) and see what SIC codes they’re using.

You can see any company’s Annual Return and therefore their SIC code for £1 at Companies House

(this is a brief excerpt from the book ‘Credit Ratings for Companies… 101 things your mother should have told you’… available free if you sign up for my newsletter)

HAT TIP to Caroline White who runs Liverpool University’s Growth Catalyst programme… not only did she make sure my session at the Uni the other night went smoothly… she even walked this old Manc back through the dark depths of Liverpool to the train station… AND she gave me the great title for this post…  (‘How your SIC can make you sick!’)

patent box

Patently obvious… open the box & take the money

The Patent Box means the tax rate on profits made from patents is to drop to just 10%…

This is a cracking way to encourage firms to patent their Intellectual Property (IP), and exploit it from here in the UK.

Any profits derived from exploiting a patent you own will be taxed in future at 10%… and not the current 20%

Patents can cost as little as a few grand to file… so should easily pay for themselves… because you get up to 20 years of paying tax at the reduced rate

So why not take a look at your IP… and take a look at Patenting some of it  ?
 I’ll admit that in the past I’ve been luke-warm on patents… the effort & costs just didn’t seem worth it for smaller Owner Managed Businesses given the limited commercial benefits.

The patent gives you protection… and that could boost your business’ value… and make new external funders a little more comfortable investing/dealing with you…but…

Read more

The problem with banks… ?

It’s bankers’ outdated obsession with security that’s stopping SMEs borrowing…

A typical owner managed business looking to their business banker for funding will end up being asked for Personal Guarantees to secure any loan… and that’s got to stop

The desperate will always sign whatever the bankers want… but the rest are increasingly turning away from bank finance… and who can blame them…

Last month I was with a solid, established company who have a real growth opportunity. The middle aged owners have run the company profitably & completely debt free for over a decade, and for all that time they’ve been with the same bank… yet they didn’t get the modest business loan they wanted… why?

Because after supplying all the historic accounting information (which their bank had already been given), filling in all the forms, doing a we-all-know-its-useless-but-ya-gotta-do-it forecast, and emailing, phoning, meeting their lovely manager… the bank insisted on full Personal Guarantees for the whole loan…

These people have homes, with mortgages paid off, teenage kids etc … why the hell would they take the business risk so deeply into their personal lives that they could end up homeless at their age & after all their efforts?

Strikes me all the risk was on their side…what real risk were the bank taking when offering a loan that’s more than fully secured?

My gripe is… interest rates charged on loans are supposed to reflect risk… the higher the risk, the higher the rate… so let the rate take more of the strain… and drop the obsession with security

…or let’s be really radical and offer a company 2 rates… a lower one with Personal Guarantees… a higher one without any…

Security : how it works
This obsession with security & personalising a business’ risk is a real problem for the economy as whole (and for a Government that wants you to borrow)

It means banks effectively ignore any drivers of growth within the business (customer base, order book, employee skills, market position), and concentrate far too much on tangible assets to support any lending.

They make that even worse by applying ‘risk weighted asset’ models … which normally means ignoring most of your assets, like Stock or W-i-P.

It also means ignoring Debtors (which is why they try to push you to invoice discounting or factoring… they can’t lend against your Debtors… but they ‘know-a-man-who-can’)

So you’re typically left with tangible Fixed assets… which usually means Property.

For most Owner Managed Businesses this all means they haven’t got enough assets in the business to support the bankers’ obsession for security… so it gets Personal with Guarantees required.

Your manager : how he works
Your bank manager has almost no impact on the situation… they just package up the deal proposal to pass on to a remote credit committee…

That ‘committee’ makes a decision & sets terms based on a few of things, but they will :

1.check your company credit ratings : if you’ve met me you’ll know how important I think ratings are nowadays… banks take these ratings and employ a few twists of their own…

eg typically ‘Head Office’ will rank your sector (often in a traffic light scheme)… and the rankings are always changing…

… so a builder might find it easy to borrow today because construction is ‘green’, but next month it might be ‘red’ as the bank tries to reduce exposure to the sector or have a more balanced loan book… and now the builder won’t get the loan

2.check your bank manager’s record : after years of successfully not losing the bank’s money and only putting to the credit committee deals that they’ll accept, a manager will be given an internal score or % that improves as time passes…

I know an 80%er… and a 95%er…  the 95% banker is as close to ‘can-do-the-deal-guaranteed’  as you’ll get… but just you try getting him to take on a deal that he’s happy to put his name & score to and that he’ll push up to the Credit Committee…

(as an aside this is why sometimes the process can take so long… your manager may be stalling because he knows your current credit rating & sector rating means you’ll get knocked back.. and he doesn’t want to see that happen (it hurts you & his own internal score)… so he may spin things out to see if you or your sector rating improve… and of course they hate to say an outright ‘no’ because then you’ll go elsewhere !)

So what’s to be done?

I work with some cracking bankers… and they do genuinely want to lend and support the SME sector… and the fact that you guys aren’t borrowing is genuinely puzzling them…

So.. assuming that encouraging SMEs to take on more debt is a good thing… how about we :

1. get rid of bankers’ anachronistic reliance on Personal Guarantees
2. reduce their obsession with security & their reliance on ‘risk weighted asset’ models (which struggle to work for younger, service based businesses)
4. let the interest rate alone reflect more of the risk of the loan

And if the interest rate then gets too high… and the Government still wants to interfere with the market to get SMEs borrowing & growing again… they can subsidise the rate & get it down to a better level…

But it’s not interest rates that are the problem… or access to finance in the first place (only 9% claim it’s a barrier according to the SME Monitor, down from 15% 2 years ago)…

It’s the banks, and the terms they demand.