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THE BIGGEST CHALLENGES FACING INVESTORS RIGHT NOW

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– Anthony is CEO and Co-founder of SeedLegals

 

With Covid restrictions tightening and the government instructing all companies to ensure their employees work from home where possible, it’s clear the challenge for businesses is far from over.

At SeedLegals, we’ve seen the varying degrees of impact on start-ups and businesses across the UK. Many are under increasing pressure, while others are thriving and growing as we adapt the way we live. Both scenarios, however, mean more businesses than ever will be seeking investment to either replace declining revenue or support growth and help to navigate an increasingly uncertain economic future.

This investment will provide crucial support for both the economy and the startup ecosystem, and access to investors and platforms which support funding rounds has never been easier for entrepreneurs.

But the same cannot be said for investors. With increasing demand for their time, funds and experience, choosing the right investment and managing deals has never been more challenging. From the influx in approaches, learning to network virtually and choosing businesses that have the ability to adapt to a volatile economic climate, the landscape for everyone has changed.

Just like businesses, investors need to adapt too. As the largest closer of funding rounds in the UK, we’ve taken a look at some of the challenges facing investors right now, and how they can tackle them.

 

  • Capitalise on virtual networking opportunities

Whether you loved them or hated them, pre-Covid, networking events were invaluable. But with everyone advised to work from home for up to six months and large conferences postponed or cancelled, we’re not going to be seeing physical events again anytime soon.

In their place however, the virtual conference has arisen. Like many other things, networking has gone digital. Zoom conferences run by companies like SaaSGrowth and Informa Connect offer investors multiple opportunities to connect with entrepreneurs in an informal way, helping them make decisions about whether to progress conversations.

LinkedIn has also emerged as one of the most valuable social tools in an investors’ armory – the networking platform has reported a 25% growth in user sessions. These aren’t just people looking for jobs – with over 690 million members, LinkedIn is the perfect place to connect and engage with new prospects.

In this new world, it’s important we share information amongst us too. I have personally taken to using WhatsApp as a networking tool – it’s great to be able to chat to groups of similar people, across different industries, who can share tips, advice and challenges they are facing in a quick and informal way.

 

  • Manage your deal flow

If the economy is to recover from the recession we find ourselves in, it will be vital that businesses receive the funding they need.

Start-up and scale-up businesses face the added pressure of needing to continue to grow their business while adapting to an ever-changing landscape. Many have been catapulted into hypergrowth as a result of the changing consumer and business needs.

However, the process of arranging investment with multiple seemingly worthy businesses represents a hugely arduous administrative task. This was true before lockdown, but is exacerbated by the current norm of employees either back on furlough or working remotely.

With an inevitable upcoming clamour for investment, investors need to be mindful and ensure they are not overwhelmed by the huge number of potential opportunities.

We recently launched a new product for investors, Deal Manager, which has been specifically designed to solve this issue. Investors can build their investment proposal, generate term sheets and legals and review, share, agree and sign everything they need online.

It aims to speed up the process of closing a round for investors by eight times, keeping everything in one place and taking all the interaction online to reflect the world we currently live in.

 

  • Identify businesses with opportunity for growth and longevity

Adaptability is a particularly important quality right now. This might seem obvious, but with such a volatile economic landscape, it is imperative that investors identify businesses which have the ability to adapt to change.

While many businesses have been catapulted into hypergrowth, it might be tempting to invest in a business which is thriving in the current climate with the potential for immediate returns.

However, considering how the business will fare when we do eventually return to ‘normal’ will be key. Can it adapt just as easily to the needs of its customers without the restrictions currently placed on us? Will people even want it? And when things become ‘normal’ again, will the business still have the capacity to grow at the same speed?

That’s a vitally important consideration.

While objectives will differ from investor to investor, short-term planning is a privilege few are privy to in the current climate, so looking at longer term investment strategies is the only smart move for investors.

 

  • Make reasonable valuations

Covid has seen millions wiped from, and added to, businesses. This makes valuations increasingly difficult.

Traditional methods of reaching a valuation – cash flow, net assets and EBITDA – are hampered by the uncertain, changing landscape and while many investors and industries will have general rules of thumb, many of these may not be applicable at the moment.

Taking into account things like assets, profits and cash flow remain, but one of the most important assets now is the potential for adaptability and growth beyond Covid. This means that choosing the ‘right’ business to invest in is even more important.

At SeedLegals, we’ve seen thousands of funding rounds take place, with clear trends in industries like Healthtech and Edtech. These are not only valuable in the short term, but have the scope to change the way we operate in our hospitals, schools and universities in the much longer term.

 

Business

TOP TIPS FOR BOOSTING YOUR CASH FLOW AND BUSINESS IN 2021

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Ian Gass, CEO at Agitate

 

Many small businesses are still dealing with the disruption caused by the pandemic. Improving financial performance is most likely to be at the top of agenda, and a good place to start is reviewing cash flow. No matter what the product or services a company provides or the size of the business, cash flow still remains king.

Research has shown that 38% of small business owners who have suffered cash flow problems have been left unable to pay debts. With 1 in 7 small business owners having been left unable to pay employees because of cash flow issues, this equates to a huge 2.2 million people in the UK not being paid on time.

 

The importance of positive cash flow

Profit has traditionally been seen as the most important measure of an organisation’s financial performance. However, the focus is increasingly shifting from the income statement to the balance of cash inflows and outflows. Prioritising profit levels reflect long term fiscal health, but it does not necessarily mean that a business can pay its bills on time and survive in the short term.

Ian Gass

Sudden drops in demand prove how keeping an efficient cash flow balance is essential, and can expose shortcomings of currently used solutions. When reviewing your cash flow, you need to look at ways to get more money coming in and better manage the money that is going out. Here are a few ways to improve cash flow management and see positive changes in a short period of time.

 

  1. Efficient forecast

It is important to be able to compare actual income and expenses with those that are in the pipeline, as it helps to determine which area of business is under performing or generating unnecessary costs. Start by looking at your projected income and expenses for the next three months, don’t wait until you receive a bill to realise there are not enough funds to cover it. An easy way to overcome this issue is a free cash flow template available online.

 

  1. Terms and Conditions review

Making sure that T&Cs are clear and comprehensive not only provides your business with a protective layer, but also makes customers understand when and how the payment is expected, and the process and penalties for late payments. That’s why regular checks and reviews of existing agreements prevents businesses from potential loses. It is also good to use reward tactics to encourage customers for prompt or early payment such as discounts or free shipping.

 

  1. Payment terms

Payment terms that are understandable and realistic is clear T&Cs in place. As it creates a contract with suppliers and obliges the organisation to pay on time, it is important to match these terms wider operation processes. For instance, if you have 14 days to pay your suppliers, but your customers get 30 days to pay you, a problem of late payments will be inevitable. To avoid damaging relationships with suppliers, you should consider an extension of the terms or reducing the credit period for your clients. It is worth taking deposits, asking for payment in advance or on receipt.

 

  1. Invoice management

Another method that can quicky improve cash flow is sending invoices promptly and ensuring they are accurate. Any mistakes will simply require queries to be resolved and it will take longer to receive payment. In addition, it is important to remain persistent at following up late payments and moving the money to the bank as soon as possible. Some clients will always need chasing and, without a follow up, they will hold on to the cash as long as possible.

 

  1. Payment options

Making it easy for clients to pay gives businesses the best chances of being paid quicker. While accepting card payments might be common place, there is a high risk of fraud. For example, in 2019 £620.6m was lost in card fraud in the UK. Also, it can be expensive to process and often leaves an organisation to wait days to receive the funds. Using a free bank-to-bank payment app means businesses can send payment requests from mobile phone straight to customers via email or messaging app (such as WhatsApp).

In that case, the consumer will receive a message with all the information they need to make the payment instantly. They click the secure ‘Paylink’, which directs them to their online banking app and all the relevant information is displayed such as your name, the amount to be paid and a reference. The transaction needs then authorising with their bank and the money moves instantly from their account to yours.

 

  1. Cost reduction

If there is too much money going out that a company can’t afford, business owners need to think of ways to reduce those expenses. There are a few questions to help understand where money can easily be dislocated:

Is there software or equipment that you are paying for that you don’t use? Can overhead costs such as utilities and administrative expenses be reduced? Are card transaction fees putting an unnecessary pressure on cash balance? If so, it can be eliminated with a bank-to-bank payment app.

Although profit might be seen as the ultimate goal for companies of all shapes and sizes, sustaining positive cash flow provides vital foundations on which a company can grow. By using the right tools, business owners can not only get paid faster and more securely, but also improve customer experience, reducing the transaction to a quick QR scan. Making a few smart changes to the existing balance sheet can have a big impact and future-proof an organisation in no time.

 

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Business

BRIDGING THE DIGITAL EMPLOYEE EXPERIENCE GAP

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By

Matthew Sturman, senior technical consultant, AppLearn

 

While the financial sector was arguably some way along the digital transformation curve before the pandemic, embracing innovative solutions to enhance customer experience and security, the last 12 months have required a step change like no other for employees.

Overnight, teams were operating remotely, using an array of new business applications from communications tools to support systems. Business critical processes which may have been stagnant for some time due to a risk adverse culture, quickly evolved with a need for greater agility.

In a post-pandemic world, it’s crucial that financial leaders don’t become complacent about the employee experience; KMPG put employees at the top of their list for financial institutions six considerations in dealing with the impact of COVID-19. Organisations have rapidly undergone transformation to facilitate home working while maintaining operations, however the proliferation of technology has also highlighted a critical digital employee experience gap. Addressing this will be key to embedding digital strategies which enable and support employees in the long-term.

 

Matthew Sturman

The overwhelmed employee

Even before the pandemic, research from Okta detailed how the number of worker applications deployed by organisations had increased by 68% over the past four years.

You only need to look at how employees access IT support to realise just how complex this picture has got for employees. Every technology application – from risk and complicance to payroll software– has a different route to access support, with employees having to navigate chatbots, online knowledge bases, resource hubs or the helpdesk. The result? Context-switching. Time spent flitting between different applications or windows to complete tasks, taking employees out of the flow of work. Studies have shown that switching contexts has a dramatic impact on time lost mentally re-focussing between tasks, in addition to time wasted navigating to try and find support.

In fact, research from McKinsey has found that workers spend up to 20% of their working week searching for information or support on tasks. This issue has only been compounded further with employees working from home, and not knowing where to go for timely support.

 

Prioritising the user

Over time, these small interruptions can add up to a significant impact on an organisation’s performance – and lead to user frustration, as well as decreased motivation amongst employees.

Historically, financial services businesses have taken a customer-first approach to investing in user experience – prioritising external customer service and communication over the internal employee experience. However, most employees are also users of this technology, and expect the same smooth transitions and consumer grade experience when using their work devices or software. When their digital experience is seamless, employees can focus on their role without interruption.

In a recent report, KPMG said organisations should create an ecosystem of tools and technologies that work together to enable experiences that help people work better. Any shifts in technologies should consider the combined impact of features and integration. It’s this sentiment financial leaders must embrace to truly empower digital workers.

 

Bridging the employee experience gap

According to a recent report from analyst firm Constellation Research which looked at the impact on the pandemic on the digital workplace, organisations have a historic opportunity to transform the employee experience.

It encourages organisations to adopt an ‘employee experience platform’ (EXP) model that connects disparate digital tools into a more cohesive digital workplace. This model is made up of disruptive technologies that bring together siloed applications and software.

Technologies such as digital adoption platforms (DAPs), machine learning, ‘people analytics’ tools and on-demand talent sourcing have been highlighted by Constellation as key components to the EXP. DAPs, for example, help solve the issue of disparate IT estates by overlaying software applications and providing a consistent support experience across multiple applications. This can take the form of step-by-step guides to navigate the user through new digital tasks and workflows, through to ensuring knowledge articles and chatbots are seamlessly available when required and provided in context of the individual requiring it and the task they are performing. Crucially, this keeps employees in the flow of work and avoids wasted time switching between applications and searching for support.

 

Looking ahead

It’s been an immense year of change for financial leaders, organisations, and importantly employees. As we move out of the pandemic, getting this next phase right will be absolutely key. For many businesses, this will be about moving from survival to thriving in a digital world.

The steps are simple. Identify the experience gaps, explore disruptive tools and technologies that bridge them, but most importantly, create an employee experience that enables and empowers them to do their job better.

 

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