Interview with Ryan Bevington & Grant Peggie about investing in SME's
In this interview on The Logros Show – in association with The Greater Manchester Chamber of Commerce – Lee Dinsdale talks to Ryan Bevington from the Maven Capital Partners and Grant Peggie from British Business Bank about investment in SME’s.
Interview with Ryan Bevington & Grant Peggie at Unity Radio – The Real Sound of the City.
Lee: Good afternoon and over the power of zoom we have two very special guests; they are Grant Peggie and Ryan Bevington. Grant can you tell us who you are and what role you play at the British Business Bank?
Grant: Yes I am in charge of the regional funds at the British Business Bank with the UK’s National Economic Development Bank. We have certainly come to the fore in the last few months in terms of responding to coronavirus so we deliver a number of government’s interventions to support businesses during the current economic crisis. I am personally responsible for the Northern Powerhouse Investment fund which is providing microfinance, debt and equity finance to businesses in Greater Manchester and across the greater north.
Lee: Ryan you are from Maven Partners, can you tell us about yourself?
Ryan: Yes Maven Capital Partners is a small fund manager. We have managed a number of different funds for SME investments debt and equity funds. I am a fund manager for the northern powerhouse investment equity portion of it in the North West based out of our Manchester office. We invest in businesses through that fund throughout the entire northern powerhouse region.
Investing in Start-Up Businesses
Lee: You work with a lot of business owners and it is your responsibility to invest the money that Grant gives you into business. We meet a lot of business owners on this show and talk about traits that they have so it’s great for you to come on and share what you look for when investing in businesses. Grant you offer quite a lot of start-up loans, is that correct?
Grant: Yes it is. Clearly one of the great successes of the UK is start-up economy. We’ve been very successful in that but we recognise that it’s tough out there at the moment. A lot of people are losing their jobs and not sure what the future holds for them. We do have a start-up loans programme which provides funding of up to £25000 per person. It is a six percent fixed interest rate that you can repay up to five years and there are no fees or penalties if you repay early. It is an important package of support for people who do want to set up in business and go it alone.
Lee: What sort of discussions do you have with the client and who can qualify for this package?
Grant: Pretty much anybody can qualify. We do provide pre-support so that they don’t go into it with their eyes closed. We help them with their business plan, their financial modelling to make sure they understand what going into business means and that they can afford to repay the loan. Although it goes up to £25000 it’s fair to say that the average loan size is probably about £6-8000 spread over five years. I think the fixed interest rate of six percent is quite helpful because you know exactly what you have to repay.
Lee: Can you give us an idea of some of the businesses who you have helped in the area?
Grant: Greater Manchester is one of the most entrepreneurial areas across the UK and we have supported thousands of businesses in the area. Some of the best known perhaps are people like Seven Bro7hers Brewery Company based over in Salford. They have recently opened a bar in Ancoats, North Manchester. We have provided them with the funding to help them get their premises, buy equipment, set up the brewery. Another example would be Creative Seal, a great marketing agency. We have provided financial support to help them set up in business in Manchester. There is a real spread of businesses, everything from one person setting up their own café through to big growing businesses like Seven Bro7thers Brewery.
Greater Manchester is one of the most entrepreneurial areas across the UK and we have supported thousands of businesses in the area.
Lee: One of the questions I’m always interested in asking people is, what was the planning that they did before they set up in business? What support do you have for those people still in employment and looking to leave and be confident that they can move forward?
Planning For Setting Up In Business & Seeking Investment
Grant: We have a lot of online tools to encourage potential businesses to think through. That may be finance, so making sure they have the right finance. Thinking about premises, are they going to work from home and what are the implications of doing that? If they are going into an office what is the best and most effective way of doing that. Taking on staff can be a bit tricky when you take on your first employee so there is a lot support out there before you start up. This includes business planning guidance as well. We would encourage people who are thinking about going into business to look at the online guidance. In Greater Manchester we work with the Growth Company in Oxford Road and they have a support team that will help people thinking of setting up in business. What are the key risks you have to think about and what is the wider support. It’s not just about money as well so we work with our partners to make sure that business has got as much information as they can before they start up.
Lee: Ryan you are the investment director for Maven Capital Partners and your role is to invest money on behalf of other entities such as wealthy people, government, local councils and they invest that into other businesses like start-ups. You are going to give us your wisdom for those starting a business or maybe they have a family in business. What are some of the reasons that people decide they want to take on investment outside of their own family or themselves?
Ryan: Quite often they maybe have funded the business themselves as far as they can. Maybe family and friends have invested but there may come a point where funds run out and they are looking for a larger sum of money to grow the business and scale it up. Maybe they want to take on more staff to develop the business further. Generally when businesses come to us the shareholders have funded it as much as they can.
Lee: As an investor what are some of the most important things that you look at, for everybody listening to be aware of, what are the priorities, the key things?
Ryan: One of the key documents that business owners will bring us is a business plan. We will discuss that plan at length and the more well thought out and developed that plan is, the better. Generally one of the areas where people fall down in business planning is not researching the market as much as they should. You should really try and understand the market; will people want to buy your product or service at its most basic level? That would be key to the success of the business and you have to know the risk and whether it is a product or service people will want to buy. Research the competition as well because the vast majority of businesses will have competition and the more you know about those the better.
One of the key documents that business owners will bring us is a business plan. We will discuss that plan at length and the more well thought out and developed that plan is, the better.
Lee: What about management teams and the individual business owners?
Ryan: We spend a lot of time working with management teams and we try to understand their objectives and motivations. We want to back a strong management teams and what makes a strong management team? We can talk all day about that question but we back management teams, we will help them and provide advice and assistance as much as we can. It’s their business at the end of the day and we are backing them to run the business and also grow it. The idea of taking investment on isn’t just to keep the business at the same size; it is to grow the business and take on more staff and generate employment etc. Backing strong management teams is key for us.
Lee: As you and Grant have said Manchester is prolific with entrepreneurs. In terms of your experience and the funds that you manage and the businesses that you are involved with, what have you noticed are some of the higher growth areas within Manchester where entrepreneurs are getting involved with?
Ryan: I think technology is a key area in Greater Manchester. I think it’s clearly easier to start a technology business than other businesses. Nowadays you can start it with a laptop in your bedroom and I think that lends itself to start-ups. Within technology we see a lot of software developments and some software platform development. We are seeing quite a lot of technology that is in the area of HR and marketing in the Greater Manchester region.
Mentoring and Support for SME’s
Lee: Today’s show is all about giving guidance and advice to entrepreneurs looking up a business and Grant was sharing the British Business Bank start-up loan scheme and what I found interesting is that they also provide a mentoring scheme. So first of all Grant what is a mentor?
Grant: It is somebody who is there to support you through your business through the start-up and getting the business going. It is usually somebody who has their own experience of setting up their own business or running a business so they can share their experiences and mistakes as well. We provide twelve months of free mentoring to people through the start- up loans programme because we recognise it can be a lonely place out there setting out in business for the first time. You don’t know what you don’t know so the idea is the mentor can help and guide you through that process and potentially connect you into other forms of support. It may not be just about access to finance. You might be thinking of taking on staff, exporting or moving into new market and the idea is the mentor will help connect you into that wider support as well as helping to advise you on the business.
Lee: What is the process of finding a mentor? Do they do that themselves or do you do that for them?
Grant: When somebody applies for a start-up loan they will be matched with a mentor, hopefully someone with similar experience and skills to make sure the relationship works. It doesn’t always work so a new mentor may be found. What we do know and all the evidence shows is the business is much more likely to survive and be successful of you do have that mentor support rather than just having the money alone.
Lee: That’s what I wanted to ask because I can imagine some people are quite shy or nervous about working with a mentor if they haven’t done it before. What is the difference in terms of the business performance?
What we do know and all the evidence shows is the business is much more likely to survive and be successful of you do have that mentor support rather than just having the money alone.
Grant: As I said the evidence is that your business is more likely to survive and grow if you do have that mentor and that wider support, than if you go it alone. We do make it mandatory, you do have to have a mentor but actually the feedback from businesses is very positive. There may be a few teething problems initially but once each other knows your respective roles it seems to work quite well.
Lee: Ryan in terms of your experience once you have invested into a company do you find business owners are working with coaches and mentors as well and what impact do they have?
Ryan: Quite regularly I think successful business people have used mentors throughout their career and we do find that with the businesses that we invest in. We do the same or similar to the British Business Bank, we use mentors quite a lot.
Lee: Would you say then that people embrace the coaching element of mentors because they feel it is going to add value rather than it being a perception of I’m not performing well so I need a coach? What is your view on that?
Ryan: If somebody doesn’t embrace it, it is a slightly worrying trait. I think there is always somebody out there that has more experience than you have in growing a business. I think it is quite a lonely place sometimes running and owning a business particularly a small management team. Somebody that makes you step back and think every now and then and make you ask some simple questions to make sure you are on the right track, so yes we tend to find it goes down quite well.
Key Attributes of Entrepreneurs
Lee: One of the things that I really wanted to find out about today is what are the key attributes for entrepreneurs that you believe make the difference from your experience?
Ryan: We work with entrepreneurs and business owners from all different backgrounds and different walks of life; they have different skill sets and different ages. The first common thing between them is firstly hard work. It shouldn’t be underestimated how hard it is to get a business off the ground and running. A lot of these guys work twelve, fifteen, eighteen hour days, six or seven days a week. We see that as a trait across a lot of the most successful entrepreneurs that we work with. These guys will not be afraid to make decisions and move the business forward. Sometimes you will get them wrong clearly and I think just being open and honest about getting things wrong or if there is a problem particularly if you take investment on board. Be open and honest with your investor. It’s not all plain sailing and there will be some issues along the way.
A lot of these guys work twelve, fifteen, eighteen hour days, six or seven days a week. We see that as a trait across a lot of the most successful entrepreneurs that we work with. These guys will not be afraid to make decisions and move the business forward.
Lee: Talking about hard work, it’s a theme that we hear. Is there a difference between those that do eight hour days and those who are doing sixteen hour days in terms of the growth of the business? We always hear these different phrases, work smart don’t work busy to let people off from not working sixteen hour days. Do you really notice that?
Ryan: As you said earlier quite often business owners set up a business whilst in employment so for a period of time they may actually be doing two jobs whilst getting the business up and running. There is just so much to do with a start-up business. Generally you haven’t got a lot of staff behind you to help with all the different functions, so you are doing everything yourself or between a small number of you. Quite often there is no income coming into a business at that point so you are trying to move a business forward quickly towards it being income generated.
Lee: Regarding staff there must come a point where you think is it better for me to pay a member of staff to do that or is it better for me to carry on? How do people make that decision? What is your advice when looking at your first staff members?
Ryan: Each circumstance is different but quite often it will depend on what stage your business is at in terms of cash flows. What kind of level of cash do you have coming into the business or indeed have you taken some investment on board to be able to recruit staff? I think most people would rather have cash in the bank and be able to pay the bills rather than take somebody on too early.
Lee: So you are looking more at your cash flow? Rather than taking a punt and thinking, I will get the staff in and get the cash after, do you see people more thinking I’ve got the cash in the bank and then I will take the staff on?
Ryan: Generally if you take staff on you have to pay their wages. You have to make sure at the end of the month you have enough cash in the bank to pay salaries so it is important not to take staff on too early. Equally as you say there does come a point where it makes absolute sense to get some help.
Lee: Do you notice a difference in belief and risk taking in business owners? Are there any trends or patterns in terms of what makes a difference?
Ryan: Starting a business up in itself is full of risk and quite often personal financial risk. I think it’s about taking sensible risks with a business, nothing that puts your business or yourself at risk in terms of your personal financial situation.
Lee: Do you come across that though where people have put everything on casino style?
Ryan: We appreciate that sometimes there is no other option but I guess that’s where external investors come into play to help. People can’t afford to fund their own businesses forever and external finance comes in to help them.
Lee: Looking at the management teams or business owners, are there any individual traits that stand out for you? Do you ever think when someone walks into your reception or office, yes they’ve got it? Is there anything like an x factor there that you notice?
Ryan: Yes, I guess it’s difficult to describe. It comes across when somebody has worked hard on not just the business but the planning and the detail behind the planning. When someone has done thorough research into the competition of the market and has a real thorough grasp of where they want to take the business, those people will stand out.
The Northern Powerhouse Investment Fund
Lee: Grant let’s talk a little bit more about the Northern Powerhouse Investment Fund. We did talk about the start-up loans but for those more established businesses there are bigger amounts of finance that we can touch upon.
Grant: Clearly when a business is trading access to finance can still be an issue so we do provide additional loans from £25000 up to £750000 for those businesses in the Greater Manchester area who are looking to invest. Maybe they need to buy some more machinery, new equipment, maybe take on some new staff as well. Both our fund managers are based in central Manchester so the Growth Company based in Oxford Road and FW Capital also based in central Manchester. They are there not only to provide funding but also to provide support and expertise to help businesses grow and be successful.
Lee: Do they also receive the mentoring as well?
Grant: Not necessarily the mentoring. It will be decided what support they need. Sometimes it could be an introduction to a non-executive director or bringing someone else to the board to advise. It’s also about connecting to wider support whether its skills support or exporting support, making sure they have access to the advice they need to help the business survive and grow.
Lee: Any more words from you on the British Business Bank in general?
Grant: It’s been a tough couple of months for us supporting businesses. We are now working with well over a million businesses across the United Kingdom including Greater Manchester and clearly our focus will be on how we help those businesses to survive and grow so when the recovery does come back they are able to be successful, start employing people and moving into new markets again.
It’s also about connecting to wider support whether its skills support or exporting support, making sure they have access to the advice they need to help the business survive and grow.
Support During the Coronavirus Pandemic
Lee: In relation to the coronavirus what kind of help are you giving there?
Grant: Everything from bounce back loans where we provide up to fifty thousand pounds loan to a small business with a fixed interest rate of two and a half percent which can be repaid over six years. It’s a very simplified process usually turned around within forty eight hours by the lender through to larger companies and for the sort of companies that Ryan is working with, like the early stage tech company we have set up the Future Fund where we are co- investing directly alongside the private sector to help those businesses get the capital that they need to continue to be successful.
Lee: With the bounce back loan and I know a few people who have applied for that, do you have to be part of the Business Bank to get the loan?
Grant: Normally you would go to your own bank but if for any reason you are not successful we would encourage you to go and explore not just traditional banks, we have alternative lenders people like the P2P lenders, the Funding Circle and others who also provide it. I think what I would recommend is visit the website and look at who the providers are. If you are not successful with your first application try somebody else.
Lee: Great, thank you very much Grant. Ryan, I didn’t really want to end up on a negative note, usually its more about the positive traits of business owners however, we are in a bit of a fear based world at the moment. For business owners can you give us key things not to do, that you notice.
Ryan: Yes we’ve mentioned a few like making sure that you have done your market research and understanding whether people want to buy your products or services. That is a key thing. You see a lot of businesses that just cannot get off the ground because the competition is offering something they don’t. So do your research and don’t take on too many costs before you can afford to. Sometimes a risk does need to be taken but with regard to cash flow act on the side of caution. Listen to other people as well. When people don’t listen to good advice, those are sometimes traits that we have seen where people end up suffering down the line for not doing so.
Lee: Brilliant. Thank you very much gents for joining us on the Logros Show. Thank you very much Grant and Ryan.
Article Transcription by Terry Capostagno
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