Why SMEs aren’t always plane sailing
1 February 2018
A successful start-up business is composed of many different ingredients, but the most important of those is patient planning, believes Colin Baker, chairman of private jet company 365 Aviation.
Baker has been involved in a lot of start-ups spanning from hospitality through to healthcare. After growing disillusioned with a career in finance he decided to do something in the real world rather than move numbers around, and so set up 365 Aviation with his brother-in-law.
“I have seen too many people get a good business idea and think that is a good plan, that is going to work and then rush into it, without enough planning,” Baker says. Too many start-ups are hopelessly optimistic when it comes to anticipating revenue, believes Baker, and many fall at the first hurdle by not planning budgets thoroughly enough and assuming nothing will go wrong with costs.
They also, he adds, don’t listen to the opinions of more experienced people. “It is terrible when you see a good business idea fail because it runs out of money,” he says. “Don’t sit there and think that you know it all. You may know everything about your business, but listen to everyone’s view – surround yourself with people with experience in different disciplines.
“Planning does not cost anything. Do a business plan and bounce it off half a dozen people, taking all that feedback into consideration. Collate it and do a budget, then redo the budget. It is surprising how quickly costs can eat through your capital.”
Baker is certainly speaking from first-hand experience – he’s watched more than one company with a great business plan that he invested in implode because the founders at the top wouldn’t listen to people around them.
“It literally brings the company down, by not divesting any responsibility to people,” he says. “I have been at the sharp end of that one as an investor. You have to find good people and trust good people because you can’t build a business alone – otherwise by definition it cannot grow.”
Baker’s approach at his private jet business is very different. At the moment he is reviewing his CRM customer relationship system and is seeking advice from his entire staff to help establish what works well and what does not. He is also looking at employing a consultant with experience in understanding systems in the private jet business.
Baker’s aim is for his company to develop a strong cultural identity – he looks for people who share the values of the firm and are self-motivated. For Baker, this means finding staff that pay attention to detail. He presently employs five full-time staff and has plans to employ more.
“We make sure all our brokers know our private aircraft,” says Baker. “They have been out to our fields, they have looked around the aircraft and they understand what is good about them, what the limitations are. When they are speaking about them they are really talking in the first person. It is not like reading a brochure.”
It’s this personal touch and attention to detail Baker believes differentiates 365 Aviation from other private jet firms. The person who gives you the quote holds the customer’s hand all the way through the process, he says, rather than being passed through to different people.
Another problem Baker believes SMEs commonly face is funding and the burden of regulation.
“Nowadays, [as] an entrepreneur it is incredibly hard to raise money,” he says. “The banks are clearly quite dysfunctional still. They are happy to lend to very large corporations, but if you are a small business owner banks don’t want your business. A lot of this also comes back to regulation.” Thankfully, Baker believes, technology has made it easier for SMEs to bypass the banks and raise funds using alternative investment such as crowdfunding platforms.
Having invested in a few companies Baker has plenty of advice for entrepreneurs when things go wrong. “Be prepared for major changes,” he warns. “Be prepared to admit that you are wrong on things and take early action. Do not wait until you have no money in the bank – look at your forecast budget regularly and adjust it every single month. If you are tracking under for two or three months why assume you are suddenly going to jump up onto this imaginary line you had at the beginning of the business. Don’t kid yourself that it will be okay.
“Look at the data you have, use that data, extrapolate that data that is telling you the reality of the situation. If you are over budget sometimes you are going to have to make hard decisions – it may be trimming staff or parts of the business. Be honest – especially if you have external investors.”
This article was published in our Business Reporter Online: SMEs.