A trio of articles have caught my eye this week(writes Steve Leverton):
- A research article about how much money is sitting in individuals savings accounts and how UK Plc would benefit if it was invested in SME’s
- A tax announcement raising the profile of underused tax reliefs for investing in SME’s and start ups
- An article from an angel investor expressing his annoyance at entrepreneurs and how they approach investors and how difficult it is to choose which to invest in
There is something here that is not quite working and opportunities are being missed all round it seems. But is any of this a surprise?
As a seasoned SME banker I was privileged to run a course in conjunction with Durham Business School to ‘educate’ bankers on how to understand and deal with entrepreneurs. It was innovative and hugely successful (but was sadly a victim of short term budget cuts).
The lessons from this were endless. We found, for example, that:
- Bankers who had benefited from years of training on how to analyse a business were prone to get it wrong when it came to smaller enterprises (and I note that one in three bank lending decisions submitted through the new appeals process have been reversed)
- The difference in the psychometric profiles between entrepreneurs and bankers, their professionals and also investors were immense (see my presentation on ‘Entrepreneurs are from Mars, Bankers are from ?’). Basically they found it difficult to understand and relate to each other and to communicate.
- It is almost impossible to ‘spot a winner’ as a start up or early growth business. But you can look for traits in the business owners that would cause problems and barriers to success.
- You can understand the performance of a business on the back of an envelope, better than most complex financial analysis tools.
Is it any wonder that high net worth individuals with surplus funds (now earning even less in the bank) steer clear or find this too risky an area to invest in.
I recently presented on a programme educating property investors about how to minimise the risks of buying properties at auction. Is there more need for programmes to help potential investors to understand how to invest in SME’s and minimise the risks?