Britain has nearly 5 million small businesses, so if you are looking for a Seed Enterprise Investment Scheme (SEIS) investment, how do you pick one that stands out from the crowd?
As an investor, a focus on return on investment from a SEIS that has a place in the market is an important factor.
A benchmarking study of millions of companies in Britain and Europe by audit and advisory firm Mazars concluded successful small businesses should display six key features.
Six points to look for
Here, research direct David Smithson outlines those six key points:
- Market focus
Markets are always in a state of flux and companies need to keep a finger on the pulse and adapt to changes otherwise developments can leave a company that was once doing well stranded
- Add value by being unique
Customers come back because a business offers something rivals do not. Companies that keep abreast of technology to enhance efficiency, have knowledge that is unavailable to the competition or bring something new to the market all help retain customers
- Strong financial management
Good ideas are only worth money if a company has strong business and financial management to take advantage of the opportunities that arise from those ideas. Managing debt and cash is important – and one good reason why firms look to SEIS.
SEIS raise cash from an equity stake without adding debt interest to cash flow.
- Match company size to activity
Identify what the company needs to progress and bring in the right people and resources at the right time. Overstretching or under resourcing can strain a business and restrict growth at the very time when moving forward matters
- Look for new markets
Sooner or later, local or national markets reach a saturation point and a business needs to look further afield to grow. Consider European or international expansion before the current markets are exhausted.
- Skills and experience
The team generating the ideas may be good at what they do, but they also need people who know how to market and organise a business from the grass roots. A business without tough and experienced managers is unlikely to flourish.
“Small businesses that fully understand how these six factors interlock and affect their growth and finances have a better chance of surviving as they will really stand out among their rivals rather than just remaining as one of the pack,” said Smithson.
Understanding how a business works
SMEs that develop a full understanding of how these six interlinking factors impact their business will have a much stronger chance at surviving and prospering, and really become a stand out SME.
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