“Many people ask me what is my number one tip in business and I tell them to start on a shoestring. Never give up your nine to five job to develop your business idea. Don’t be tempted to get office space you don’t need. Don’t engage in an untargeted, intangible advertising campaign. One of your main objectives when starting your company should be to try and make everything as cheap as possible, funding your company’s growth with the revenue you generate. “

“This concept that you need to speculate to accumulate, has no place in recessionary Britain. By definition, a recent company formation is something that has not been tested. It does not have the brand recognition, loyal customer following or any tried and tested promotional strategy. What it does have ,however, is carte blanche to go in any direction.”

If an entrepreneur chooses to start their company on a shoestring, they have more freedom to be innovative and maximize their company’s potential. Alternatively, if a recently formed company is burdened with huge start up costs, it needs to start paying back its debt pretty quickly.”

While your idea of being the CEO of your own company may involve impressive offices and an expense account. , in reality it is important that your company starts generating revenue as soon as possible. The only way it will do that is if it is cost effective from the point of company formation.

Purchasing an existing business is ,in essence, a much simpler proposition than starting your own company completely from scratch. One of the main reasons for this, is the fact that, by definition, a start up company is an un-tested business proposition and therefore attempting to raise finance – especially in the current economic context – is extremely difficult. While raising finance for an existing company, is comparatively easier.

It is a well published fact, that most recently formed companies fail within the first year of trading. This is due to the fact that investors and banks alike, are largely reluctant to put their money into a new company that may fail and is also unlikely to return their initial investment for some years to come.

The same theory also applies to getting suppliers, employees and indeed customers on board with your new venture; people are much more likely to trust a company with an existing track record.

However, despite the fact that raising initial finance may be easier, buying an existing company is likely to be much more expensive than the cost of starting your company

Stevens suggests that this is the result of a number key economic factors; the re-emergence of trade buyers, the availability of debt and the shortage of good opportunities.  But how do these broader changes, impact the SME sector?

The Buyer’s Cycle

In the context of global consolidation, the perception is that much of the trading activity taking place involves larger corporation deals. However, Stevens suggests that such activity will eventually filter down to the SME sector and the market will experience a period of many mid-market deals. However, as we have seen in the last year, economic trends can turn. It would only take a couple of high profile mistakes and the confidence of the private equity market could be severely dented

Sell, Sell, Sell!

Obviously not all sectors are experiencing such interest from buyers. The most unpopular sectors are property, retail and recruitment while sectors such as technology, marketing communications and business with public sector contracts are increasingly in demand.

There are many reasons why a company chooses to diversify. However, in the current economic climate, many businesses are looking to adopt a diversification strategy as a means of business survival. In this post, we will define diversification, consider when to do it and identify the potential risks involved.

What is Diversification?

Diversification does not always mean breaking into new markets, it can also be used as a method of consolidating your position or increasing market share .For example, if your company’s core business is women’s jewellery, extending your product portfolio to include a male range is an obvious progression – allowing you to attract new customers and sell more products to existing ones, under the same brand umbrella.

At What Point should you diversify?

Diversification can play a huge role in a company’s growth strategy .Mobilizing your existing brand to break into a new market and extending your existing product portfolio can help you to sell to new markets and also sell more to your existing consumer base, therefore maximising profitability.  Though it is tempting to diversify at the point when your existing product or service is not successful or profitable, it is not advisable to consider diversification until your core business is stable.

The Risks

There are numerous potential advantages of a well executed diversification strategy; maximum profitability, increased efficiency, fast growth and increased brand longevity. However, it is not without substantial risk. If you choose to diversify new market, you run the risk that your brand will not enjoy the same success. Without careful planning diversification can fail, resulting in increased cost that could potentially jeopardise not only your future growth but also your core business.

If you are looking to diversify, you should evaluate your existing business – do you have the right managerial infrastructure in place to cope with extending your brand? It is also vital that you extensively research the market you are planning to enter.

Is it the Right Model for Your Business?

Collaborating with a third party is a classic way to expand your business. However, moving away from your core business requires careful planning if you are to deliver a commercially viable and mutually beneficial outcome. Before embarking on a joint venture you should take a look at our start-up checklist:

• Have you agreed how to manage your joint venture?
• How much capital does each partner plan to inject initially?
• What will be the decision making process?
• What is your conflict resolution strategy?
• How will you establish the success of your joint venture?
• What happens if the partnership dissolves?
• How will profits be apportioned?
• What is your growth strategy?
• How will future growth be funded?

Getting Advice

Regardless of the type of collaboration you choose, there will always be an element of risk. Getting advice early on in the process could prevent issues further down the line, when resolving disputeS could be more problematic.