At the Conservative party conference earlier this month, chancellor Philip Hammond announced £20m of investment in business networks “to enable small businesses to learn from each other and from world-leading firms”.
He also recognised the need for mentoring and management training for small and medium-sized enterprises, pledging another £11m to help 10,000 businesses by 2025, and calling upon 100 corporate mentors to support it.
We at The Supper Club, a membership community of business founders and chief executives, were intrigued to hear it. And we hope that the Autumn Budget this coming Monday will reveal more details about exactly how the chancellor intends to raise this money – and how he’ll spend it.
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We have seen the impact of entrepreneur-led peer learning and mentoring on scaleups for 15 years – our members have achieved an average sales growth of 34 per cent.
We know from talking to over 1,500 members since our foundation in 2003 that leadership and management are make-or-break factors. And we know that a strong management team enables founders to work on the business, not in it.
What is very clear is that entrepreneurs are much more receptive to learning from peers who have started and scaled businesses.
Executive education and mentoring from corporates are valued, but often lack that authentic entrepreneurial insight. Founders also need critical friends and radical candour from entrepreneurs who understand their challenges. They need to feel accountable to peers to help them make better and more timely decisions that lead to breakthroughs.
Entrepreneurs benefit from regular prompts to act on advice and insight from their network. Active management of this process, live and online, has the most impact, and this is where investment should be deployed.
What we hope to see this Monday is more clarity from the chancellor on how the £20m is going to be spent, and a promise that peer-to-peer networks are going to be prioritised over corporate mentoring.
Our members are also very interested in the impact of artificial intelligence (AI) and automation on their businesses – which should be music to the ears of the Department for Business, Energy and Industrial Strategy, whose “business basics” initiative hopes to encourage more SMEs to adopt new technology in order to boost productivity.
But some feel that the government needs to learn from the successes of other countries.
“There was a lot of talk in Hammond’s conference speech about the disruption of AI and automation, which I was pleased to hear,” says Charlie Walker, founder of accountancy and finance recruitment firm Harmonic Group.
“But I was disappointed to hear that his solution was to harness ‘the power of the market economy’ to overcome this. Rather than relying on the ‘invisible hand’ to support SMEs, I’d like to see a more interventionist government strategy on this front – as there is in Germany.
“Top of my wish list would be creating a fund and a regionalised advisory body that SMEs can access to gain advice on introducing AI technologies efficiently into their business.”
Entrepreneurs are also keenly interested in how the chancellor plans to pay for such a scheme. As always, tax is most often a barrier when it could be an enabler, even for schemes designed to incentivise and encourage investment in SMEs.
“We urge HMRC to reduce the complexity around the administration (particularly the confusing online experience) of tax reliefs which requires specialist advice and with that an unnecessary cost that could be directed toward an investment in scale,” says Duncan Cheatle, founder and chairman of The Supper Club.
Members who invest with the Enterprise Investment Scheme (EIS) or who have used it to grow their own businesses have echoed this call.
“It should be much easier to navigate and process EIS and there is still poor understanding of tax-efficient schemes,” says Reece Chowdhry, founder of RLC Ventures.
“With shareholder agreements being put online by lawyers, HMRC should go digital with EIS certificates to reduce the time it takes to secure investment and make it weeks instead of months.
“Requiring proof of an interested investor prior to applying for EIS makes businesses less attractive to investors, and adds further delay to an already lengthy process for securing funding. Addressing these two key areas would have a big impact on small businesses.”
Brexit and business
But dealing with Brexit is more taxing for entrepreneurs.
“One of the most significant initiatives the government could announce in the Autumn Budget would be to provide practical advice and tangible support for scaleups to prepare adequately for a post-Brexit world,” says John Stapleton, founder of New Covent Garden Soup and Little Dish.
“Compared to our EU counterparts, government-led assistance for scaleups is sadly lacking.
“Keep it simple: make a ‘Brexit-Risk’ scorecard available through government websites, supported with grant aid to encourage SMEs to quantify their Brexit risks and opportunities, leading to the development of a plan to diversify these risks (such as labour, currency, cash-flow) and deliver on the opportunities (like export markets and innovation).”
Stapleton adds that Brexit uncertainty and lack of preparation is a major contributor to the subdued growth that scaleups are experience at present.
Given that companies in the UK pay 19 per cent corporation tax on their profits, the chancellor should be well aware that businesses will be watching Monday’s speech closely.
But if he’s unsure how best to direct government funds, we’re very happy to share what we’ve learned with him – and he’s welcome to join us and our members for dinner anytime.