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Following the sale of my company Cake in 2017 and working with the acquiring company for a couple of years, I left the business and began thinking about what I was going to do for the next 25 years of my career. I was trying to work out what would keep me interested, what would get me out of bed in the mornings and get me excited. 

I’ve always considered starting a new company, which I have now done, but the first thing I decided to do after leaving the company that acquired Cake was to work as a non-exec director with a couple of companies that had reached out to me.

What makes a good non-exec?

When I started thinking about the reasons why they’d reached out to me, I realised they were also the qualifications I think you need to be a non-exec director. Over the last 17 years or so, I’ve grown a company from nothing, which you’ll know if you’ve read any of my previous blogs. I built a software engineering company (Cake) and saw that through to a reasonably significant sale. The experience I gained along the way is something that I believe other entrepreneurs can benefit from. I might be able to help them avoid the mistakes I made, or I might just be able to help them get to their goal more quickly. 

Ultimately, I believe this is what a non-exec is there to do, to help another business grow and achieve its goals more quickly. I’ve explained in a previous blog the importance of having a non-exec in your business, and how we can help you. In this blog, I’m going to focus on what you should look for in a company if you’d like to become a non-exec and how you can find the right organisations to partner with.

Search for similarities

Much of what a non-exec can bring to a business is their experience, so looking for companies that are on a similar path to your previous business (or businesses) is a good place to begin.

To give you an example, I’m a non-exec (now Chairman) for a marketing company that used to supply Cake with marketing and branding services. They felt that they were in a very similar position to where Cake was about seven years ago, in that they have got lots of experience in their industry, they have some really good people working for them and they have some really good clients.

They aren’t a huge company but they are working with bigger clients than a company of that size normally would, which is a really good springboard for high growth. I’ve experienced that because Cake was in exactly the same place. 

As a result, I’ve already been able to work with them to look at the various things that we did to build a platform for growth. That started with winning the additional business and having the capacity to continue to grow – in other words, having a very robust marketing plan. I’m also helping this company build a smart and capable senior team. 

It is also very important for a business to build their senior team ahead of growth so that when it does begin to grow, it can cope with it and stay ahead of the curve. This is something that we did pretty well at Cake. We marketed ourselves in quite a unique way, which I’ve talked about in several previous blogs, and we put together a very smart and capable senior team to enable us to manage our growth. Using my experience at Cake, I’ve been working with this marketing company to form a plan to do the same. 

Getting a business ready for acquisition

As a non-exec, you can also help other companies get ready for acquisition. If a company you’re working with is aiming to be acquired in three to four years, you can help them get all their ducks lined up so that when due diligence happens as part of an acquisition, the acquiring company finds nothing wrong with the way the company has been run. 

I can share my experience of an acquisition at Cake; things like having three to five years worth of board meeting notes, strategy meeting notes, monthly management accounts, annual account details and weekly cash flows available. A company’s HR systems need to be really robust and up to date, and the whole system infrastructure is not only fit for purpose but also ready to scale. 

As an entrepreneur who has successfully gone through this process, I’m ideally placed to help another business that aims to be acquired on their journey to that goal. 

Keeping your knowledge current

As a non-exec, you can’t just rely on your experiences in business, because things change and develop, particularly where technology is concerned.

For example, I would expect companies who are looking to grow quickly to be using very robust software as a service application’s. At Cake, we used Xero as our accounting system, Harvest for our HR system, GitHub as our source code repository, Jira as a project management system, Google Apps as our main communication software and Zoom for our video conferencing and quite a few more.

We adopted all of those technologies and made ourselves very efficient. As a non-exec, that’s something I’m looking for in the companies I work with. But I think a good non-exec also has to have a handle on what’s happening in the future. That means I spend a reasonable amount of my money and time making sure that I’m always up to date with technologies that are coming out in two or three years’ time so that I can advise the companies I’m working with to be aware of them or start thinking about adopting them. These technologies may also be a threat to their business, so again something they need to be aware of to begin mitigating that risk. This is about getting ahead of the curve. 

My belief is that most companies will be tech companies or tech-led companies by 2030. If they are not they will either be incredibly niche or really struggling.

Understand the value you can bring

As a non-exec, you bring your badges and scars from running your own company to the companies you’re working with. I’ve talked about some of my personal badges and scars from my years with Cake in previous blogs. The scars are particularly relevant as a non-exec because you can share the things that didn’t go well and probably help the companies you’re working with to avoid those pitfalls as well.

If you’re a good non-exec, there is so much value you can add to a company and they will save considerably more in money and benefits than they’ll ever pay for your assistance as a non-exec.

Considering what you will get out of the partnership is just as important as looking at the value you can bring to a business. For example, our non-exec believed in the business and we recognised how important he was to our development that he bought a shareholding in the company.

Know you can go the distance

As a non-exec, it’s important that you are going to be around to support the companies you’re working with for the long term. You have to commit to being with each business for the duration of their journey because there’s no point in only going part way with them. 

This is why it’s important to make sure that you’re aligned with the journey that a company is embarking on. I mentioned that at Cake our non-exec became a shareholder, but this wasn’t a step we took until we’d been working together for at least six months. It’s important to spend a good six to 12 months working with any business to ensure that you get on with the entrepreneur and the senior team before you commit to taking the relationship further.

How to decide which companies to work with as a non-exec

Once you’ve got a certain amount of experience having been on your own journey with at least one organisation, you might be considering becoming a non-exec to help other businesses. There are a few things to look for in potential companies to engage with. 

If you can work with a company that you already know, that’s always helpful because there’s less of a learning curve for you and you’re already invested in that company. 

However, if you don’t already know the company in question, it’s important that the journey they’re going to go on, the one that you’re going to be supporting them through, aligns with your journey as an entrepreneur. 

There are even platforms that match non-execs with companies who are looking for someone with your specific skills and experience so if you’re not sure where to begin I’d recommend doing a quick Google search because there are plenty of sites out there offering this service. 

When you’re looking for companies to work with, the biggest thing for me is that you get on with the entrepreneur and also the senior team. If you don’t get on with them, or there’s no chemistry there, then it’s advisable to look elsewhere. 

After that, I think the next most important thing is that your experience aligns with the direction this company is going in. You want to be sure that you have the relevant experience to add significant value to the company. You’ll need to have several conversations with the entrepreneur to understand what their vision is, where they want to get to and how quickly they want to get there. 

I would also advise having conversations up-front about the expectations on both sides so that there are no misunderstandings further down the line. These are the ‘what’s in it for both of us’ conversations and it’s important to have those early on, because you don’t want to spend six months working with a company on the expectation that you’ll be able to buy into it or will be gifted shares at some point, only to discover the entrepreneur has other expectations. 

In this relationship, there has to be a win-win. It’s important to be clear about what you’re looking to get out of the relationship and to know that the company and entrepreneur you’re going to be working with is willing to offer you what you’re looking for. That might mean you have to go on a few dates before you commit to the relationship, but this process will be more than worth it when you find the right match for your experience and skills where you can add value and help another business grow.

A minimum viable product (MVP) is a concept that I feel is often misunderstood, particularly by people who are not technical or used to building technology products. In this blog, I’m going to explain why I feel MVPs are misunderstood and explore the difference between an MVP and a 1.0 delivery of a technical product. 

What follows is my opinion of an MVP and my experience of it in the context of a software development environment. You may well have come across a different definition for an MVP, as there are many different opinions on this.

In my experience, MVP is quite a misunderstood term, because there are so many varying definitions of it. When you’re running a software development company or a technical team and a client comes to you and asks you to build a minimum viable product, it’s very important that you’re both on the same page. This means it’s important to work closely with your clients to ensure the vision surrounding the MVP is realistic and that it reflects what the client wants to achieve. In some cases, a client’s expectations of an MVP will be higher than it should be, simply because their understanding of the MVP concept is different. Therefore, if you don’t align expectations from the outset, they may be disappointed with what you deliver. It is in no one’s interest to have that kind of misunderstanding. 

What is an MVP?

As I’ve said, there are many definitions of a minimum viable product (MVP), but the way I describe it is as a no-frills, feature-poor application that has enough functionality and content to show users what it could look like and get them to go through the process of using the system, whatever that system is. 

For example, if it was an e-commerce app, you would be able to sell one product for one penny on the app. The MVP will have enough functionality to allow you to sell one product whether that’s for one pence or maybe £100. You might want to add more than one product on there, but it will be the most basic version of what you’re ultimately aiming to create. 

The main purpose of an MVP is to get feedback, either from a small group of friends and family, or other people in your network. The point is to get early feedback and test the market to a very limited number of informed people. You want to make sure that you are happy that you’re in a place where you can then build this MVP out to a full, what I’d call 1.0 version – and I’ll come on to what a 1.0 is a bit later in the blog. 

Why are MVPs important?

Fundamentally, though, an MVP is really important for gathering feedback and it can be really important for beginning to test the market in a very limited fashion, but that’s all it is. Quite often clients expect that they’re going to make lots of money from an MVP for selling that product or service, but that’s highly unlikely if you’re building a true MVP. 

It’s your job to help your clients understand not only what you define an MVP to be, but also why it’s so important to start here rather than going straight to a 1.0. As I’ve said, the main reason for an MVP is to allow your client to receive early feedback on their idea and on their product. The key is in the name here: minimum viable product. You’re using the MVP to find out whether an idea is viable. Is this something that the market requires? Are you adding sufficient value to people’s lives that they will pay money for it? 

The second reason to create an MVP is to get early feedback on the branding and the user experience – or how easy it is to use. Even though it’s not fully finished and there may well be elements that you’re still going to improve, it will be really useful to get that kind of early feedback on how you think the process should be working and how you build that MVP.

The beauty of an MVP is that you’ve not spent all the money you would on taking a full 1.0 version of your idea to market. With an MVP, you spend a smaller portion of that money and if you decide to pivot or even stop the idea altogether because the feedback isn’t great then you’ve lost less money.

If you decide to pivot, you’ll also lose less money because you’ve got less to change because you haven’t built the whole thing. That means it’s an easier task to make changes based on the feedback that you’ve received from clients. You can also gather feedback from people outside your circle of friends and outside your network by placing a few fairly cheap Google ads and offering your product or service for free, or offering a cheaper version of whatever you’re selling. As long as you collect people’s details, you can reach out to them and ask if they’d like to give you feedback. That’s a useful thing to do because it extends the feedback circle away from the people you know among your friends and network who might not be quite as honest with you as complete strangers.

What’s the difference between an MVP and a 1.0?

A 1.0 version is a more fully-featured version of your MVP. I’ll give you a specific example of a project that I’m working on at the moment to help you understand the difference. I can’t go into too much detail, because we haven’t launched this product yet, but in essence, I’m working with a business partner to build a legal document platform. 

Our MVP for this platform will have three basic products which will allow the user to geb=nerate the three main types of legal documents from the application sitting on the platform. When we go to 1.0, we’re probably going to have eight or nine different products, however, we don’t want to build all those out, spend all the money and go to all that trouble before building an MVP. Our MVP will be used to test the market, we’ll get feedback on the user experience, on the branding and design that we put in place, and maybe even on some of the advertising and wording that we’re using. This will help inform exactly what we do for the 1.0. It might tell us that we’ve got it exactly right and we should carry on as we are. There might be some really useful small changes. Or there might be some bad news in the fact that we actually haven’t got it right at all and we might need to make some wholesale changes. 

Either way, the feedback will be really useful and it’s at a really early stage so it’s a lot easier to make those changes. Once we’ve got this, we’ll go to the 1.0 version. The 1.0 is not the end of it, but it is a far more complete version of our vision for this project. 

From there we can get our user experience on those eight or nine products nailed and when everyone seems happy, we can continue to add other features that are hopefully going to add more value. For us, after our 1.0 we might be adding some automated marketing tools so that we can send out automatic reminders and maybe some special offers to people who go partway through the process and then stop for whatever reason, just to encourage them to finish up. We might also introduce some added value items where there are little extras, for example, a legal document could be checked over by a lawyer or you could buy some of a lawyer’s time to ask specific questions about a particular legal document. 

Our intention is to continue to build out the products, as well as the offering. With the legal document service, there will be other document services we might add onto the system, such as conveyancing, wills and trusts, or any number of different legal contracts. 

Mitigate project risks

I learned in the very early days of running my software engineering company Cake that there can quite often be misunderstandings with clients if we are working with differing expectations. There are no winners in that situation, because if the client’s expectations are different then they’ll be disappointed when you build the product, even though you might put your heart and soul into it and do exactly what you thought they were expecting.

I’d like to leave you with the point that it’s really important to define what constitutes an MVP in any proposal document or legal contract. You don’t have to define this to the nth degree, but you need to have enough detail in there to prevent those kinds of misunderstandings. Just to add clarity, you might want to articulate what the 1.0 could be as well, which will further explain the differences between an MVP and a 1.0 for your client. 

This is a blog I wish I’d read before I started my business because I probably would have had a different outlook. When I started my business in 2001, there certainly wasn’t as much scientific information freely available to demonstrate the importance of looking after your health. 

However, looking after your health allows you to be far more focused and have much more creative ability within your business. So, this blog is all the things I wish I’d known about and read about before I started my business. I’m not a health expert and I have no medical background. What follows are just my own personal observations and the things that I do. I also keep an active interest in health, fitness, and technology and how that’s changing and helping the general population to be healthier, as well as in particular how it could help entrepreneurs to be healthier and consequently be able to put more into their business. 

It’s generally accepted that there are three main areas that affect your health: sleep, exercise, and diet. Back in 2001, I had the view that sleep was for wimps, a kind of you can sleep when you die attitude. Exercise I was actually pretty good at (and I still am) because I enjoyed it and I was competitive. Food has been, and probably still is to a point, the area where I fall down a bit because I don’t eat as healthily as I should and I certainly didn’t eat healthily back then either. 

I’m going to share some practical suggestions of what I do in each of those three areas, and what I wish I’d done a long time ago because it really does help you run your business more effectively. 

The importance of sleep

Looking back, I wish I’d known a lot more about sleep. Sleep is probably considered to be one of the most important aspects of your health. There are so many things that happen in your sleep. Sleep is definitely very important for your body’s regeneration and for your brain health. There are plenty of things that happen at the various stages of sleep that mean if you have a good night’s sleep, you’re able to do things better both in the short and long term.

As an example, your memories are organised at night. All the information you’ve taken in during the day is filed and it’s filed in your brain in a certain way. Sleep allows that to happen, so if you don’t have enough sleep then there’s a good chance that you won’t retain some of the stuff that you learn. 

There are various practical things you can do with sleep. Like I said, I think I always had what people nowadays would consider to be a pretty old-school attitude to sleep in that I didn’t think it was important and I didn’t understand what happened at night or how your body repaired itself. Now that I understand that, I consciously try to make sure that I get enough sleep and a lot of the time I’m good at that. Of course there are times when I’m not as good as I should be. We all know how easy it is to be watching a series on Netflix and just watch one hour after another and before you know it, it’s 1am and you have to be up at 7am the next morning for a call at 8am. 

There are several things that I do to try and avoid that now. One of them is using an Oura Ring, which is an IoT device that measures things like your body temperature, heart rate and movements. The technology combines with the science that goes into the app and this device learns your behaviour over a period of time and makes intelligent suggestions as to how you can improve your sleep in particular, but also activity and that kind of thing. It actually gives you a readiness score for the day, so if you’ve had a good night’s sleep and you’ve done some exercise the night before, you wake up refreshed and all the indicators are that you’re going to be far more likely to have a successful day and have plenty of energy, rather than feeling tired halfway through your day.

There are various other devices available that do something similar. Oura is just one that I use, I also use an Apple Watch. Both look at your activity and at your sleep and I just find they’re a really useful way to get an indication of how well you’re doing on that front. The data they provide is scientific and not just a figure plucked out of the air.

One thing I often find with the Oura Ring app is that when I wake up in the mornings, my readiness score is a bloody good indication of how I feel for the day. 

This isn’t all about the time that you sleep. You might still have had seven or eight hours of sleep, but it could be disturbed because maybe you have something on your mind or maybe you’re too warm or too cold, so you might not be sleeping as well as you should. The app gives you some really interesting suggestions, such as looking at your duvet to make sure you’re not getting overly hot or cold. 

The importance of exercise

Exercise is one element that I think we’ve known about for quite some time, but there’s clearly more and more science coming out to show how important exercise is and that you really need to do that minimum of 20 minutes of vigorous exercise every day to get your heart pumping. You can do that in any number of ways and you’re probably better to keep it fairly varied and not do the same thing all the time to keep it interesting and build up different muscles.

You don’t have to be a gym bunny and spend two hours a day in the gym. I’m a big lover of technology, as you’ll know if you regularly read these blogs. I use the Peloton bike and I find that incredibly useful and motivating. It’s as close to being in a live spin class as you’re going to get, but it also has other activities like yoga if you’re into that kind of thing. The great thing is you can do a 20-minute class, or a 30-40 minute class and you can tailor it to where you are in your day and how much time you have.

Even just 20 minutes of a high-intensity workout is really good for you. That’s all I do, I make sure I do a minimum of 20 minutes of a high-intensity workout on one or two machines that I have at my house. That makes it really easy, it’s something that I don’t have to travel to. If I combine that with going out for a walk with the dog or the family, I’m set. I always make sure that I’m closing my exercise rings on my Apple Watch every single day. That’s my aim and when I don’t do it, I feel bad about it, which is actually a good thing. 

I’ve always exercised though and it’s the one element I’ve always been good about including in my routine. I’ve always played sport competitively as well as for fun. Although I can’t play football as much as I used to, I’ve tried to substitute that for other activities these days. In my experience, exercise just makes you feel better. I feel ready for the day when I’ve had a good night’s sleep and I’ve done some exercise. I know when I’ve ticked those boxes I can genuinely go all day without feeling tired and stay energised until 11 or 12 at night when I’m ready for seven or eight hours of sleep.

The importance of food and fasting

Food is probably my weakness and I still snack a little bit too much, but I always try to make sure that I eat healthily and have my fruit, vegetables and fresh stuff in there. 

There’s also more and more research going into fasting as an important way of maintaining body weight and health. It’s something that, having read the science, I find I fundamentally believe in. As a result, I try to make sure that I have a 15-16 hour window where I don’t eat every day and the meals I do have are within that eight to nine-hour window. Personally, I tend not to eat after 9 pm and I try not to eat again until midday or 1 pm, which is when I’ll have my first meal. 

There’s a lot of science to say that this is a good thing to do and it’s actually how we used to behave before the concept of eating three meals a day became popular, even though there’s no science to support eating three meals a day. You can make your own mind up, but I think fasting is a really useful tool to use alongside a balanced diet. 

The importance of mental health and mindfulness 

Mental health gets a lot of exposure nowadays and  I think mental health is really important. I also believe that mindset and mindfulness are really important aspects of this, although I’ll admit I’ve been a massive doubter about that over the years. 

For example, I actually meditate regularly now, but if you’d asked me 15 years ago whether I meditated I’d have said, ‘No way, I don’t believe in that stuff.’

My routine is that after my exercise, I lie down and do a ten-minute meditation. That brings my body back down. I raise my legs while I do it to allow all the blood to flow to my vital organs and help everything recover and I try to blank my mind out and clear my head. I honestly feel that it makes a big difference to my days because it’s as though I have a clear head and fresh start. Essentially I feel that I’m mentally prepared for the day.

For mindfulness, I use an app called Oak but there are literally hundreds of mindfulness apps available. I like Oak because it’s really simple and easy to use. I just spend ten minutes on meditation and although I don’t do it every day, I try to do it whenever I can. I always feel better for doing it. 

If I’ve had my seven to eight hours of good quality sleep, done my exercise and mindfulness in the morning, then if I also eat healthily I’ve hit the jackpot. 

Why looking after yourself is important for your business

I do think that looking after yourself is far more important than I ever gave it credit for during the first ten years I was running a business. I’ve said before that I didn’t look after myself in terms of my own personal development, but I also didn’t look after myself in terms of some of the important aspects of my health.

Looking back, I wish I had and now I try to take care of those things and I feel better for it. It’s something that I believe every entrepreneur should consider. 

The biggest difference for me is that I feel far more refreshed in the morning and also more refreshed throughout the day. I don’t get tired halfway through the day. I think most entrepreneurs have had times where they really push themselves, don’t eat properly, and don’t get enough sleep. I know I had nights where I was waking up at 3am worrying about the business and other things. It really does affect you the next day.

It’s hard to put your finger on one particular thing that poor sleep, nutrition and a lack of exercise impacts. For me, it’s more the case that you’re just not as effective in dealing with stuff throughout the day. You might be a bit more short-tempered with people, or it might be that your creative ability just isn’t there when you’re trying to solve a problem. You could find that you’re not coming up with a really creative solution to an issue that you’re facing and instead are just trying the same thing time and time again, which keeps failing. 

I think getting all the elements I’ve talked about (sleep, exercise, food, mental health, and mindfulness) right helps with your creativity, with your focus, and with your tolerance levels, and how you deal with other people. As a result, I think it has a genuine positive effect on the business if you’re in good health and you’ve had proper rest.

This Blog takes a pragmatic look at the options to raise money both at the start-up stage and at the high growth stage. Although the title refers to raising money, I’m also going to explore whether there is a need to raise money and I’ll share a couple of specific examples of businesses that I’ve been, and am, involved with to show you two alternatives to looking for investment. 

Do you need to raise money?

From the outset, you need to think very carefully about what your strategy is. I meet many different entrepreneurs and often there isn’t even a question in their minds over whether they need to raise money, they feel that they need to raise reasonably substantial amounts of money to get their business going. But you need to look carefully as to whether that’s actually the case. 

There are some entrepreneurs who do need to raise money because of what they want to do, the products they’re creating, and the speed with which they want to grow. However, it’s important to think about whether you can still reach high growth pretty quickly without raising those funds at this early stage. 

For example, as a startup, you have to think about what funds you need or whether you can do it on a shoestring – I talked in a previous blog about how you can grow a startup very effectively without needing a lot of money upfront. 

Once you pass the startup stage and you’ve got a solid platform with a business that’s working well and you really want to go for it in terms of growth, it’s also important to think of the different kinds of options you have available. 

With any business, I believe the strategy has to be one where you concentrate on moving into profitability as soon as possible. 

Start with the basics

Moving into profitability as quickly as possible involves cost control. You can’t spend oodles of money from the outset because you’ll soon run out. You also have to look at how you reward your team to make sure that they’re motivated. Of the two, cost control is absolutely essential at these critical periods of your company’s growth. 

Essentially you have to get the basics of the business right before you consider what your strategy is in terms of whether you need to raise money or whether you grow organically and reinvest the profits you make back into the business. Clearly, if you move into profitability quickly then you can reinvest those profits and use the money to grow the business, take on new people, particularly at a higher level, and bring in some extra support or whatever it is you need to grow your business. You’ll be in the best position to do all of this if you go down this route and can become profitable quickly, because you probably won’t need to raise as much money, if any, as a company that isn’t able to become profitable as quickly. 

Consider the times

You also have to take into account the times, as it were. The reality with COVID at the moment is that it’s really difficult to raise money because a lot of the investors out there are using their money to triage the companies that they already have. 

The world has changed pretty quickly, almost overnight, and some will do very well out of that because they’ve been able to seize upon some of the advantages of the situation and have been able to adapt to the changes. However, there will be other companies, such as those in the entertainment industry, that are having a really tough time and at this stage, it’s all about surviving. In areas like entertainment, travel or leisure it’s really hard to raise money at this point in time. 

What are the options for raising money upfront as a startup?

There are plenty of good reasons why a company won’t be profitable quickly and in this case, your strategy has to be to raise the money to grow. There are a number of ways to raise money and the most suitable will depend on the stage that your business is at.

If you’re a startup, you could borrow money from friends and family. I started my business in 2001 with a £15,000 loan from my parents, which I had to pay back because that was a sizable amount of money for them. Many startups look to friends and family to raise money.  

There’s also a company that we’ve worked with in the past at thestartupfactory.tech that wanted to build financial services products. They came to us having raised a sizable amount of money from friends and family, but it still wasn’t enough to do what they wanted to do. This is where we were able to help at thestartupfactory.tech because we can help companies build the first iteration of their product to an MVP (minimum viable product) or maybe a 1.0 version, in return for a reduced cash fee and a small equity stake. 

These are two examples of how you can raise money upfront, using companies like thestartupfactory.tech or through friends and family. 

Another option is to look at seed funding and going through business angels in particular. The issue at this stage of your development, however, is that you are a high risk no matter how good you think your idea is. As a result, I think quite a few entrepreneurs are surprised by the amount of equity that a business angel or seed investor wants in return for what is, in reality, probably a relatively small sum of money in the grand scheme of things just to get you up and running. That means you need to think very carefully as to whether you want to go down the seed funding route, or whether you can manage to do it through friends and family.

In some ways, raising money through friends and family is probably going to be better because you aren’t going to have to give quite as much equity away, if any, depending on the situation. However, that brings pressures in itself because you really don’t want the business to fail and you want to not only pay your friends and family back but also for them to do well out of their investment. 

I’m also developing a business at the moment that will be a legal document platform providing consumers with the ability to have self-service online access to certain contractual legal documents. The business model we’ve worked out is such that once this product is built, it becomes self-funding almost immediately. Hopefully, it will generate reasonably significant amounts of cash, but we do need quite a bit of capital to get the business up and running because it’s a product that we have to build. 

We have that money in place and in this instance, we haven’t gone to an institution. We’ve used what I class as friends and family fundraising, and once the product is built we have a route to market which we believe will generate plenty of cash that will enable us to grow the business organically from that point onwards. 

In this situation, the investment is all upfront but it hasn’t really eaten into the equity. We’re building a small team at the moment and because we haven’t given away equity, we are able to look at some kind of equity reward for key team members. That helps to keep our costs under control in terms of salaries and rewards but still incentivises the team. 

Now, there’s nothing wrong with going to a business angel or some kind of seed funding organisation. However, the problem can be that if you give too much of your equity away at this early stage then it weakens your position if you do need to raise serious money further down the line. Giving away too much equity in your business can lead to two issues. The first is that you don’t have enough left to raise extra money that you may need in the future and the second is that you don’t leave yourself enough of a percentage in the pot to make putting all the blood, sweat and tears into this enterprise for the next few years worthwhile. 

As a result, I would advise you to think carefully about going down this route. There are very good reasons for going down the route of seed funding and business angels and it definitely works for some companies, but you do have to think hard as to whether it’s something you need to do or whether you can avoid it. If you can avoid it, you should, and focus on moving into profitability as soon as possible to allow you to reinvest those profits into the business. 

A non-executive director gave me some advice when I was at a previous company and I was considering giving a little too much equity away to team members. He checked me on it and made me think about it, and I’ll always be grateful for that because it was a really important piece of advice. He said that you need to have enough of an interest in the company that you’re going to grow, put everything into and probably risk quite a bit as well along the way, and you should be rewarded for that. 

How to raise funds once your business is up and running

Once you get past the startup stage and you’ve got a really solid platform for growth, you might be looking to take the next steps. At this point, you should be making a profit or be very close to making a profit. You’ll have a senior team who support your skill set so that when you do grow, you can grow very quickly with the senior hires in place and only have to worry about hiring and managing the teams beneath them to actually get the work done. Remember that it’s always easier to hire more junior team members than it is to hire the right senior people. 

Once you’ve got this solid base and your idea is proven and beginning to work, you have to think about how you’re going to move forward. 

Your strategy will depend on the type of business you have and how well it’s going. If you’re making reasonable money and a reasonable profit, you can reinvest that profit and use that as funding to grow. That’s absolutely the best way of doing it. 

The other thing to take into account at this stage is keeping your costs under control. As you begin to make money, it’s easy to start spending more money and you really need to think carefully about what you’re spending and keep a tight hold of the purse strings. I’d say that every six months you should look at what you’re spending money on and take out the excess costs. 

If there’s a service that’s not giving you value or there’s something you’re not using, get rid of it. Maybe there’s a better value option for doing something, so move. Although that route to growth might be slightly slower if you’re reinvesting your profit, you are hanging onto your equity or you’re not having to pay the money back that you may have borrowed. 

You have to evaluate whether this is the right thing for your business and whether this strategy allows you to grow quickly enough to satisfy the opportunity and your thirst for growth. 

If it doesn’t, you may need to get some additional funding to support that high growth. At this stage, there are two main types of funding that you could go for. One is based on giving equity in your company away and the other is getting a loan. My advice is that, wherever possible, look at getting a business loan. This is what Cake did. 

When we produced our three-year plan, we had quite a bit of money in the bank but we decided to go for some additional funding just to make sure that not only did we have funding for what we wanted to do over the next three years, but also to make sure we had rainy day money in case something went wrong along the way.

We had grown organically for most of our life, but at this stage, we wanted to really push for high growth. We had a seven-figure sum in the bank, but we felt that we would need all of that to push for the growth we were aiming for based on our projections. Our aim was to ten times most of the parameters within our business in that three-year period and we were concerned that what we had might not be enough, or it might not be enough to be safe. We submitted a funding application to a well-known funder in the north-west and after a relatively simple process secure the additional money we required.

So, that’s an example of where we felt we did need some extra funding and how we sourced that funding without giving any equity in the company away. 

This idea of having a buffer for a rainy day is important and COVID showed just how important it can be. No one saw that coming. Within three months we went from an economy that was actually pretty healthy to one that was 30-50% shut down with millions and millions of people on furlough and the government racking up billions in debt that at some point we’re going to have to pay back. 

If your business isn’t suitable for a loan or the size of loan you require, the alternative is to look at giving some equity away. In this situation, you have to be really sensible and make sure that you don’t give so much of your equity away that you run into difficulties later on. Giving away too much equity may hamper your ability to make raise money further down the line. There is also the risk that you don’t have enough of a percentage left in the pot to make it worth your while putting everything into growing the business for the next few years. 

Whatever option you choose, control your costs

There are lots of strategies for a startup or a more established company going into high growth that you could look at to make sure that you have the money you need to go through that high-growth period. That may mean borrowing money, it may be reinvesting all your profit or it may mean both. Whatever it is, you have to think carefully, make a decision, go with it and be confident in what you’re doing. 

The most important thing, whatever route you go down, is to keep tight control on your costs, because if something doesn’t work and you have to pivot then for a period of time you’re going to be short on cash. The cost control that you have in place will be really important and your rainy-day money might be really important to make sure you don’t go bust and run out of money in the middle of the pivot.

Even though the potential for a business might be massive, so many companies go bankrupt simply because they just run out of cash. They may be pretty profitable, but that won’t save them if they don’t have money in the bank. 

Picking the right funding option both at the start-up stage and during a high growth period is never an easy decision. You just have to carefully evaluate what’s going to be best for your company at that particular point. As well as trusting your instincts where possible discuss the situation with a trusted advisor, someone with the badges and scars from similar situations. 

As I said in my blog Ignore Personal Development at Your Peril, it’s easy to forget to look after yourself when you’re starting a new business. In that blog, I talked about this in the context of training, but there are other aspects of looking after yourself too. One is physically, which I’ll discuss in a future blog, but in this post, I’d like to talk about looking after yourself financially.

When you start a new business, you put everything into building the business. You’ve worked really hard, probably too hard sometimes, and you tend to put the business and your team before yourself. I think it’s important to do that, but I also think there’s a point when that becomes more of a badge of honour than a necessity. At some point, you have to rein yourself in, which isn’t always easy. I was rubbish at it! As I said in my previous blog, I was happy to spend thousands on my team and give them time for personal improvement, but it took me six years to do the same for myself and that actually had a negative effect on the company. 

Why look after yourself financially?

So, why is it important to look after yourself financially. One of the reasons I feel this is important is that if you look after yourself financially, it means your headspace is free to concentrate on running the business. 

When you’re in a startup, the reality is that for the first couple of years that might be difficult because you’ve put everything you’ve got into the business. I get that and there’s nothing wrong with that. But again, don’t make it a badge of honour. There’s a tipping point at which your business can sustain itself and you can begin to think about looking after yourself financially. 

When should you bring in an IFA?

The best thing I ever did was find a good independent financial advisor (IFA). I’ve maintained that relationship for around 17 years and this IFA has been with me through thick and thin, the good times and the bad. They’ve always been there to offer advice, even when there wasn’t money for me to put aside in savings, investments or pensions. I think it’s really important to say that, even when you start your business, having a financial advisor will help you.

In the first instance, they can make sure you don’t overstretch yourself personally. Like I said, if you’re having personal financial problems as well as dealing with business issues, that’s a real weight on your shoulders. If you have a financial advisor and an accountant, the three of you can work together to figure out what you can afford to put into the business and what you would be prepared to potentially lose if it doesn’t work out. 

Equally, they can be ready for when things are going really well and you are in a position to put something to one side. 

If you have a financial advisor in place when you start your business you can seek their advice as to how much you are able to put into the business yourself. You will also have someone there to question some of your decisions. You might have a really bad two or three months and decided to put £20,000 of wages on your credit card. Ultimately, that is your decision, but you need someone who can question you and be the sense of reason who says, ‘Hang on a second. Are you throwing good money after bad with this, or is this something you can do because you know the client who hasn’t paid you will be paying you in 30 days’ time so you don’t have to put the next set of wages on the credit card too?’ A financial advisor can make you stop and think about whether, in the worst-case scenario, you might have to fold the business with a load of personal debt as well as company debt. Your accountant is also important for questioning these decisions too. 

Equally, as your business grows and things are going well, your financial advisor can be really important. At this stage, the conversation between your financial advisor, your accountant and yourself is about what the business can sustain so that you’re able to not just keep it ticking over but to grow it and fulfil your vision, while also making sure that you begin to reap some of the rewards of the risk and effort you put into building this business. 

At this point, you might start thinking about putting some money aside in your pension, and using your full pension limit, as well as topping up your pension for the three years you haven’t been putting any money into it, for example. Or you might put some money in investment funds, or ISAs. The aim is to set money aside in a really tax-efficient way to make sure you’re looking after your future without bankrupting the company. 

How an IFA helps when things are going well

When you reach the stage where your company is flying, you’re doing really well and you’re generating enough profit to put some back into the company to keep it growing, while still being able to take out, at this point, pretty decent sums for yourself, it’s important to think about how to do that in the best way.

At this stage you might have used up your ISA allowance and your pension allowance for the year, so what is the next best, tax-efficient way of saving your money and extracting it from the company? This is where an IFA can be very helpful. 

In case anyone is wondering I use Foresight Wealth Strategists, https://foresight-ifp.co.uk/, whom I can highly recommend. 

One point I’d like to make at this stage is that I’m sure you’ll be approached by people about sticking your money offshore, whether that’s personally or from the company’s point of view. This is just my opinion, but I believe you should never do that. You should pay the taxes that you morally have to pay in the country that you do business in and you shouldn’t try to hide profits, either personal or company, in offshore, havens. There are two reasons I believe this. The first is that it’s morally wrong, and the second is because it has a habit of coming back to bite you. I know several good people who were tempted to make poor decisions and HMRC caught up with them. They then not only owed a fairly sizable sum of money that had to be repaid but also a fine on top of that. 

Finding the best solutions

Having a mix of an independent financial advisor, an accountant, a financial director and a tax advisor around the table if you reach the stage where people are interested in buying your company is also really important. 

What I used to do was get everybody together in a room, explain the situation and then ask what the best way of dealing with it was. What you quickly realise is that there are many different ways of dealing with situations like that. Of course, you want to pay the least amount of tax you can, but you have to do it within the rules. Using the rules to your advantage I believe is fine, you should pay what tax you are due, but not pay more. 

When you get your financial advisor in a room with your accountant, tax advisor and financial director, it’s amazing the discussions that happen and the debates they have. At the end of it, they will come out with something they’re all happy with and, nine times out of ten, that will be the most efficient way for you to extract your money. 

This is particularly important during an acquisition. You need to make sure you are in the best possible place for a situation like that because the sums of money involved are big and you don’t want to make mistakes and do things in the wrong way that cost you maybe an extra 10% in tax. It can be easy to do things incorrectly if you don’t have that specialist advice. It’s not worth scrimping and saving on fees for people, because more often than not, IFAs and other professionals will save you far more than they charge. 

How to choose a financial advisor

I’ve talked about IFAs, but you can of course also see a financial advisor who works for an organisation that sells its own financial products. Whether you choose an IFA or another kind of financial advisor is a personal preference. 

Personally, I prefer to have an IFA, because they can go to the market and help me decide which are the best financial products and which companies I should invest my money with. I believe they have an unbiased view of the investment opportunities available, which is why working with an IFA is my preference. A financial advisor who works for an organisation that only has a limited number of products available isn’t able to give you the same choice. They might have great products, but they’re still limited, which is why I think it’s more advantageous to work with an IFA instead. 

That’s not to say there aren’t very good financial advisors who work at big financial institutions and will do a great job of looking after your money, this is just my personal view. 

When it comes to choosing an IFA, I would treat it like choosing any other supplier. You can look at their reviews online, or get personal recommendations if possible. Once you have a shortlist, you can go and see them and choose the one who you feel is the best fit for you. Of course, there’s a risk involved – hopefully, you’ll get it right the first time but if you don’t, I don’t think you should be afraid of moving and taking your investments with you, although the longer you leave it the more complicated that gets. I mentioned in a previous blog that we went through six or seven accountants at Cake before we found the accounting firm and specifically the accountant that we were really happy with. 

It’s also worth remembering that the reality is when most entrepreneurs start out, they often don’t have a pot to piss in. That was certainly the case with me. But I think IFAs take a view on you and look at your potential, rather than how much money you might not have at that particular point. If they’re prepared to take a gamble on you and spend the time helping and advising you when they’re probably not going to get that much return from you initially, that’s a good sign. 

They’re prepared to take a gamble on you just like you’re prepared to take a gamble on them. If you’ve done your research, looked at some reviews, asked for testimonials and maybe had a referral from somebody then I think you’ve probably done as much as you can to find an IFA who is the right fit.

I believe that having an IFA is incredibly important at every stage of being an entrepreneur and you should get one right from the outset. I didn’t have one to begin with, but a few years in I realised that I needed one. If you choose the right person, they’ll be with you through thick and thin, and I feel very lucky that I found somebody who really did help me with a lot of things over the years. 

Working from home is a really relevant topic right now and I have some opinions on this based on the last ten years of trying various ways of running a modern engineering team. I believe that having the ability to work from home and work in person with your team is the best mix in many situations, and I’ll explain why a hybrid model works so well in this blog. 

As I’ve said in previous blogs, at Cake we would try different things and sometimes they’d fail and sometimes they’d succeed. We’d always fine-tune and improve them and for us, the hybrid model of working is a result of trying things that didn’t quite work how we wanted them to, trying other things that worked well and then putting all of this experience together in a proper strategy. This hybrid model of working from home and in the office became part of the way we worked as an organisation and, on the whole, I think it worked well. 

Of course, there are some people who evangelise working from home and want to work that way all the time. For some people that works, but I don’t think that’s necessarily true for the majority of us. Although there are absolutely benefits to working from home, there are also benefits to working as part of a team, face-to-face. As humans, we thrive on interaction and we do things better when we’re working with people. I’ll explain how we came to develop our hybrid working model at Cake and what benefits that brought. 

In the early years at Cake, we hired purely remote workers for very good reasons. They were really good people who, for whatever reason, couldn’t work from the office. Some of them didn’t live in Manchester where we were based, or they moved away and we didn’t want to lose them, or for them to lose the opportunity of working for us. 

We probably hired four or five people over a period when we started to think about having remote workers as well as a team in Manchester, but the reality is that none of the remote workers we hired worked with us for as long as the vast majority of people who worked out of the office. 

Relationship building is key

When we looked at it, there were various reasons why retention among remote workers wasn’t as high as it was among our office-based team, and I’ll just say at this point that our retention rate was incredible. 

One of the main challenges with purely remote working is building relationships. It’s very difficult, no matter how hard you try, to build as solid a relationship or camaraderie with fellow team members when you’re purely remote. Even if you have occasional visits to the office where you start to build those relationships, then you go back to working remotely and you lose that very human, natural interaction that most of us thrive off. 

From a personal point of view, I believe that the team member misses out on certain things as well. Human interaction is one aspect, but I also think that when you’re purely remote you don’t learn as much. The best tool in the world is being able to turn around, tap somebody on the shoulder and ask them a question; or just grab a couple of people to take five minutes to look at a problem you just can’t solve and get their thoughts. It’s just harder to do those things when you have that barrier in front of you, albeit an ever decreasing barrier. When you’re not sitting next to somebody and you can’t see their body language or just be spontaneous, it makes things a bit more challenging and less natural than a tap on the shoulder and asking for five minutes of someone’s time. 

We found that our retention rate from remote workers wasn’t anywhere near as successful as it was for people working from the office, despite our best attempts to reduce the risk of that happening. We tried lots of things to make working purely remotely work, but in the end, it was never quite as good as people working together in the same space. This was when we decided we weren’t going to have purely remote team members anymore. 

Homeworking has its benefits…

While we wanted people to work in the office, we also recognised that it’s really important for people to have a work-life balance. Having the option to work from home allows people to be around for unplanned events, like a child being ill, or for deliveries where you have to wait at home all day. It also allows you to manage planned events like doctor or dentist appointments more easily. People need flexibility nowadays to do that kind of thing. 

Another benefit to working from home is that you don’t have to commute. I, more than anyone, understand the benefits of not having to commute and the improvements that bring to your family and personal lives, having spent 15 years leaving the house for work at 6.40 am and getting home after 7 pm. 

When you’re working at home it’s also just nice to go for a walk in a familiar environment at lunchtime. We understood that having the opportunity to do these things makes life better. 

We wanted to find a way to give everyone the best of both worlds and that’s why we came up with this hybrid model. 

The best of both worlds

This was why we developed our hybrid model, to allow our team to have all the benefits of working from home without losing the benefits of working in the office. 

We didn’t want to make it overly officious or procedural though, so if someone wanted to work from home they didn’t have to get permission from any of the senior team. The way it worked was that they would go to their team leader and they would explain that they needed to work from home tomorrow because of a delivery, a dentist appointment, whatever it was. 

We typically had teams of six or seven people and it would be up to the team to say, ‘Yes that’s fine’ or ‘Actually, that’s going to cause an issue could it be moved to the next day?’ However, 99% of the time, the team were fine with someone working from home as long as everyone from the team wasn’t away at the same time. One or two people missing and dialling in remotely at any one time didn’t cause the team any issues and it provided the flexibility that everyone needed to help them strike the right balance. 

It meant that, on the whole, they wouldn’t have to commute for at least a couple of days a week and it meant they could deal with the things that modern life demands. Equally, when they were in the office they benefited from the learning opportunities you find in that kind of environment, whether that’s working with your peers, going to a lunch ‘n’ learn at lunchtime or going to a user group with some of your colleagues straight from the office. 

We operated this hybrid policy where people could work from home and work from the office, and it was the team who made the decision about when working from home was appropriate, not senior management. In general, we found that everyone would naturally take into account the effect that them working from home would have on their team and that meant this hybrid approach worked well for everyone. 

I’ve talked in previous blogs about the importance of community and how this was an important part of Cake. Cake worked hard throughout its existence to be an active part of the technical community we operated in. In this blog, I’m going to explain the benefits of building and being part of a community regardless of the industry you work in. 

Being part of the community that you ply your trade-in can be applied in many scenarios. This doesn’t only apply to technology companies, I believe that as a philosophy it goes further than this. 

Joining a community to stand out

There’s more and more competition in most of the areas that people operate in and it’s becoming harder and harder to differentiate yourself and your business. What you don’t necessarily want to do is differentiate yourself purely on price, because then your margins drop and the value that you offer is potentially perceived as lower. 

In my experience, you want to differentiate yourself and your business by being seen as experts and if you do this, you can command a higher day rate, product price or licence fee, or however it is that you charge. 

As I’ve explained in previous blogs, Cake Solutions was a software development company and we began life specialising in the Java programming language which, at that point, was used by many of the Fortune 500 companies to build their software systems. That meant we had to work hard to differentiate ourselves and there was a lot of competition in that area. 

We focused on a new framework that, when we started working on it, hadn’t been released. That enabled us to become part of what was initially a small community building this particular framework, called the Spring Framework. 

We were lucky we backed the right horse! The framework grew in popularity and at its peak had a million downloads and became the most commonly used framework in the Java world at that point. The community grew with the technology, as it always does because when technologies become more popular the community naturally grows. 

Giving back to the community

It’s very important that to become part of the community you don’t just take from it, you have to give back and ultimately doing so will have a positive impact on your businesses in a number of ways, which I’ll come on to a bit later in the blog.

At Cake, we had a strategy to become part of the community and as a result, we regularly shared expert content. That meant when we were solving problems that were interesting, something that we felt other people could benefit from, and where we weren’t infringing on the IP of our clients, we would talk about the technical side of that problem in a blog. We’d also give conference talks and user group talks which, again, were about us demonstrating our expertise and sharing our knowledge to benefit the technical community. 

We also wrote books, which were a really important element of what we were doing at Cake. For me personally, sharing knowledge in this way has become an important part of what I’m doing now. I get to share expertise and give back to the community, although in my case I now focus on the startup community. 

Giving back isn’t only about sharing knowledge, it’s also important to give back commercially where you can. In the open-source world  people volunteering to contribute to projects with their knowledge and skills is essential, but it’s only one part of the puzzle. These projects also require money.

At Cake, we did both. We contributed to the community through blogs, conference talks and user group talks, but we also sponsored events. The money from these events very often went to the company that was the custodian of this particular open-source technology. In the case of the Spring Framework, it was a company called SpringSource. They required money to operate and therefore pay people to carry on working with this technology, as well as all the other contributors from the open-source world who were doing this in their spare time. This was a mixture of effort, expertise and learning. 

Joining a community to build relationships

One of the byproducts of sponsoring these events was that we started to build relationships with other engineers and other companies. Even though quite often these companies were competitors, as I’ve said in previous blogs, there are often real benefits to getting on well with the competition. Of course, when you’re competing, you’re competing, but when you’re not competing there’s no harm in working with them on projects, sharing knowledge or potentially even passing work onto them if you’re too busy. If you trust them then it’s helping your clients and it’s helping them. We had this kind of relationship with a lot of our competition. 

We would also run technical user groups. When we started, Manchester University used to lend us a room and we would have 30 to 40 people attending the Spring user group in Manchester each month. This was another way of giving back to the community, demonstrating our expertise and spreading our notoriety. It also helped us build relationships with other engineers who were passionate about the technology we used. 

Using open-source projects to benefit you and the community

I touched on this earlier, but we open-sourced some of the work we did for clients. For example, with our more forward-thinking clients we might ask if we could share one part of the project we’d done for them with the wider community because we felt it would be really useful for the whole community as open-source components or library. Nine times out of ten, clients would say yes because what we were asking to share was just a fraction of the work we were doing for them and they also realised the importance of sharing it. 

Over the years, we also built a couple of open-source projects that people could take away and develop in any way they wanted. One of these projects was called Muvr and it was built primarily by our CTO at Cake Jan Machacek. 

For Jan this was a personal project. He realised there was a problem with apps in the gym in that you effectively had to feed most of the information into them via the keyboard. At this point in time, there was nothing automated about them. He wanted to build an app using machine learning that he could teach to understand when you were doing certain exercises, whether that was push-ups, using the cross trainer, weight lifting or whatever it was. The idea was that this app could use accelerometers and various things in the watch to determine which exercise you were doing with accuracy. Then, within probably five seconds, it had already started picking up the data and would ask you if you were on the cross trainer, for instance. You could say yes and it would carry on. It’s very cool and it was long before this functionality was available on things like the Apple Watch. 

These open-source projects are often spotted and the code used by other companies. To give you an example, we gained a large client at Cake in the vehicle tracking world that was interested in the machine learning element of Muvr and how it applied artificial intelligence to come up with suggestions of what you were doing. That’s just a brief example of how the skills from one project were transferable to a totally different scenario and sector. 

How being part of a community benefits you

As I’ve explained, at Cake we worked really hard to be an active part of our community, mainly from an expert content perspective but also from a commercial point of view. Why would we do all of this? There are many benefits. 

The first is that we became really well known for what we did. Notoriety is definitely one thing that you’ll gain from being active in a community and I think it’s fair to say that we made a lot of noise in our particular niche and community. 

As a result, when engineers were asked by commercial entities who they should talk to about getting this kind of work done, we were at the forefront of their minds and they’d say, ‘Cake are clearly experts in this area.’ The notoriety led to sales.

Recruitment was another excellent byproduct of this situation. Notoriety doesn’t just help with sales, it helped attract people who wanted to work either on the types of projects that we were working on or in the technology that we were working with. For us, this would be people with Java experience and then we moved into the Scala world as well. That meant we appealed to people who wanted to do functional programming and saw the same potential in that technology as we did, and therefore they really wanted to work with us. 

Ultimately, being an active part of our community indirectly led to the acquisition of the company because, again, our notoriety meant we were followed for quite a long time by some of the acquirer’s team members before they approached us. What that meant was that when these guys had the money and were ready to expand their team quickly with a particular skill set, we were at the front of their minds. It all comes back to notoriety.

There are some real commercial benefits from being part of a community, but it’s also just a cool thing to do and it’s like being part of a club. You get to see quite a few of the same people on a regular basis and you get to know them and build relationships with them. It’s really nice to see new people coming in, who really want to engage with you because they see you as a really important part of the community. They know you’re knowledgeable and they want to come and speak to you to find out what’s going on. 

Another benefit to being part of a community is that it helps with retention on your team. Being an integral part of the community is important to a lot of software engineers who almost evangelise the software that is their passion. When you give them a platform to be in this community, have a voice in this community and to be proud of who they’re working for then that really helps with retention and recruitment. 

How to join a community

If you’ve got a passion for something, whether that’s technology or something else within your sector, start by going online and doing your research. As you read various blogs you’ll start seeing the same companies or experts on LinkedIn, or wherever they’re publishing their content, and you won’t realise it but you’re becoming part of that community automatically just by following these people and reading that content.

When you get comfortable with that then you should have a voice as well. I would suggest you start by writing a blog on something that you’re really passionate about within that community and publishing it. If you do that on a reasonably regular basis then people start following you. At that point, you’ve become part of the community. You can supplement this by going to user groups or conferences and socialising and networking after those events. 

In around 2012, Cake was still in the same converted cotton mill in Manchester that we’d started out in. It was ideal from a travel perspective, from a cost perspective and gave us the ability to move into a new office as the size of the team changed. We had moved to various offices within the building as we’d grown and by 2012 we were in the ground floor office. We had about 17 staff at that time and we were beginning to outgrow that office too.

At the other end of the mill was an opportunity for a much larger office space of 4,500 sq ft, which for 17 people is ridiculously large. However, we felt that it was an opportunity to build an office that was fit for our future and that represented our culture. When we first looked at this space, it was like an office out of the 1980s that needed not just updating, but a complete refit. 

There are various ways you can approach this, one of which is to hire a professional interior designer, and we did talk to a couple, but in the end, we decided that we would design our office ourselves. Money wasn’t the overriding factor in this decision, it was more that we believed we were in the best position to think about how the office would work because we had built the culture and the company and we knew it better than anyone else. We were confident that we could design something that not only looked good, but that also represented the culture and facilitated that culture. I’ll explain the thinking behind this in the rest of this blog. 

Tell your story through your office

We took a gamble and designed our office ourselves, rather than using a professional service, but it was one that really paid off. The measure of that was whenever we showed people around the office after we had finished it, we were telling the story of the company. It was never just an office tour, it was the perfect way to not only show people our workspace but also to talk to them about our ethos and culture, which was represented in the way that we thought about the office. 

By walking people around the office and explaining the layout, it taught them a lot about our thinking and the reason why we did certain things. This became a really nice story and I think everyone who walked around was impressed because they would arrive at our office which wasn’t really in the nicest area of Manchester and just looked like an old cotton mill from the outside and then they would walk into this really modern, forward-thinking environment. 

Our office wasn’t flashy – we didn’t have a slide in the middle of it, or beanbags all over the place, or a foosball table – but it was incredibly well thought out from a creative and practical point of view. 

Encouraging collaboration

One of the things we did was think about how we could create a space that would encourage collaboration. This was really important to what we did, because we would usually have small teams of around seven people working on the average project. We might have several teams on the project, or it might only be one team on a project, but we always made sure that the whole team sat together. 

That meant that whenever we started a new project, we would move people around the office. No one had their own desk per se, but what we did give everyone was a set of drawers on wheels. That meant when you moved desks, you could wheel your drawers to your new desk and still have everything that you needed in one place. This also helped to keep all the desks tidy. Projects lasted for different lengths of time. Some might only be three months long, others could be 18 months or even two years long, depending on what we were doing. The reason we encouraged everyone to sit with their teammates was to encourage collaboration. Everything we did was based on collaboration. 

When you keep teams together it’s just easier to turn around and tap your teammate on the shoulder and ask them a question, rather than having to walk to the other side of the office. 

Encouraging creativity

We also wanted to make sure people had space to be creative and do what they needed to. That meant there were different areas of the office that you could go to depending on your mood and what you were trying to achieve. If you wanted somewhere quiet we had offices where you could shut the doors. We had less formal areas where you could go and sit on a sofa to work, there were places where you could have some self-thinking time for creativity, and there were spaces where you could collaborate. 

The idea was that you could move to different areas of the office depending on where your mood took you. There were quiet areas and there were social areas. So, if you were in the quiet area you could stick your headphones on, listen to your background music and concentrate on what you were doing. Some of our engineers were working on really complex stuff and just needed that quiet space to concentrate for a while. But it was also really important to us that there were spaces where we could all go when we needed a break from that deep concentration, whether that was to get a cup of coffee, sit in the canteen and have some lunch, or go for a walk. We wanted to allow everyone to do whatever they needed to free up their minds and then go back to whatever they were doing at that point in time. 

We also made sure that there were plenty of meeting rooms. Not having enough meeting rooms is often a problem in many offices, and I’m sure it’s one you can relate to. We didn’t want people to need to wait three weeks to arrange a meeting. At the Cake office, if you wanted to arrange a meeting in a couple of hours’ time, you could book a meeting room and it would be available. 

Encouraging communication, collaboration and creativity

One of the most important features in our office was dry whiteboards. We put them everywhere. They were nicely branded, good quality, glass dry whiteboards. We had two or three in every meeting room, we had some around the open office space on stands that people could wheel to where they were if they needed to just huddle around one where they were sitting. All the glass partitions in our meeting rooms could be used as dry whiteboards too. So you could scribble on the walls and then just wipe it off when you had finished. That was a deliberate part of our thinking when we were designing the office.

We also had a glass dry-wipe table in what we called the boardroom. We got the largest dry-wipe board we could buy and put it on top of an IKEA table frame. This table could seat 12 to 15 people and you could use it as a table, but because it was a dry-wipe board you could scribble all over it, write down ideas here as well as on the whiteboards around the rest of the room and be really creative and collaborative in that space. 

Simple steps that make a big difference

Although we weren’t really strict about keeping the office tidy, we did encourage people to have clean desks. We did that in a few ways, I’ve already mentioned the drawers that each person had, but we also did simple things like ensuring there was plenty of locker space available. 

The two main reasons we promoted clean office space were that, firstly, we found that a clean office is just a better environment for everyone to work in. Secondly, when clients come and visit, it’s important that everything looks organised, professional, clean and tidy. 

We also thought about providing secure bike storage for everyone. As I said before, we weren’t in the nicest area of Manchester and you probably wouldn’t want to leave your bike outside for a long period of time, so we built a space for people to store their bikes in the office where they would be safe and dry. We wanted to encourage people to cycle because it’s healthy and environmentally friendly. 

Another very simple consideration was just making sure there were lots of toilets. We also set up a separate place to eat and we encouraged people not to eat at their desks. Instead, we would encourage them to go out for lunch, or go to the canteen and sit down, have a break and socialise with their colleagues or friends. The idea being that when they came back to the office they’d be able to get back to work and concentrate on what they needed to do. 

I’ve also mentioned that we had some couches in the office so that people had somewhere comfortable to sit if they wanted to. But we also had standing desks. We bought a number of these second-hand from a client who was selling them and we positioned them strategically around the office. That meant that if people weren’t sitting at a desk that had the ability to raise and lower, they could go to an empty one around the office if they wanted to stand up for two or three hours while they were working. These were really well used. 

Our office featured a lot of glass, some of it was frosted to give a degree of privacy, but this meant that there was plenty of light coming in.

Sharing our process

One final point that I’d like to mention in relation to our office design is how we shared our process. At Cake we had a very well defined and thought out process for building software. This became a key differentiator for us and it was something that our customers liked. The engineering team also liked it. This process wasn’t rigid, but it was an important part of the ethos and culture at Cake. I’d like to say that I had nothing to do with creating this process. We put a team of five of the engineering team together who spoke to their colleagues and put the process together over a three week period.  The process was a live document which was refined as required on an ongoing basis as technology changed and our thinking changed. That said, the main crux of the process remained the same over many years.

In this office, we had the process printed on perspex and hung it on the wall so that everybody could see it. The idea being that whether people were experienced existing team members or new staff in the office, everyone had a reminder of exactly how we did things and that kept everybody on the same page. This process was about collaborating really closely with our clients, making sure that communication channels were good and ensuring we were doing things in the right order with the right people involved at the right time. 

This process was flexible and from time to time there were minor changes to it, so we did our best to keep the perspex versions on the walls up to date. 

This was also combined with a flexible working from home policy, which I felt worked really well. The process helped make this policy work efficiently. We adopted a hybrid model where people could work from home if they wanted to, but they were also encouraged to come into the office and work with their team and it was the team who decided when people could work from home. That gave everyone the flexibility to work from home if they were expecting a delivery, or had a doctor’s appointment, or just wanted to have a day or two a week where they didn’t have to commute. But it also meant that our teams were able to collaborate effectively because there were periods where they were working in the same space together in the office. 

Time for coffee?

I remember going to a high growth forum at Lord’s Cricket Club, where I spent a day listening to eight entrepreneurs and CEOs talking about either having taken their company through a really high-growth period and then selling the business or their experiences of being in a high-growth period at that time. There was one common denominator across all of their talks: coffee. It was literally mentioned in all eight talks!

This was what I took away from that forum; that coffee was a focal point in the office and if you invested in a decent area for people to relax, socialise and even have informal chats among teams where they could also get good coffee, that was beneficial. 

I would say that it was a great investment of ours and we created quite a sizable space where you could get good-quality, freshly ground coffee. We had a couple of sofas in this space, as well as a big kitchen work surface in the middle with bar stools where people could sit. Of course, there were several dry whiteboards in here too, as well as a TV. 

It was a cool area where you could go and chill out, or have a bit of a creative or informal chat with colleagues. Often we also sat down with clients in here and had a chat, because from our ‘coffee shop’ you could see the whole office. This kind of space worked really well for us and I would recommend  creating a similar space in your office to encourage creativity, communication and collaboration. 

Remember the three Cs

We built an office space we were really proud of, which had lots of light, different areas for different things, plenty of meeting rooms and lots of dry whiteboards. But all of this stemmed from our focus on the three Cs: communication, creativity and collaboration.

There’s a temptation when you start a company that you put everybody before yourself – that is exactly what I did.  Up to a point, there’s nothing wrong with that, because it shows that you’re selfless, that you really want the business to work and you are prepared to invest in your team before yourself.

Looking back I think that was misguided from a personal development perspective. You’ve got to stand back and say, ‘My personal development is really important’, because if you don’t do that I think it can slow down the growth of your company and slow down your ability to deal with stuff. What happens if you don’t focus on your personal development is that you end up learning slowly by making mistakes. The difference when you do personal development is that you find good techniques and speak to other people about mistakes they’ve made and how they’ve avoided mistakes. It will help you get things done more efficiently, more quickly and by making fewer mistakes. 

At Cake, I feel that probably for the first five or six years, I used to send other people on courses, to conferences and to user groups. It was all in the interests of the company because whenever those people came back, they’d improved themselves personally and, hopefully, that would have a knock-on to the rest of the team and the organisation as a whole. I was really willing to spend money and put effort into improving other people’s development. But I largely ignored my own personal development and, looking back, I think that was a mistake and one that probably held me back. I wish I’d done some of the things that I’m going to talk about in this blog earlier than I did, and I think if I had done that, I would have learned more quickly, made fewer mistakes and the company would have grown more quickly than it did. 

This is why I always advise entrepreneurs in startups to invest in themselves. It’s really important that you don’t forget about yourself and your personal development.

It was 2007 when I eventually felt that I needed to invest in myself, six years after I started the company. This process was instigated by me attending a seminar where a colleague of mine told me about a development programme he was a member, run out of Toronto in Canada. This colleague told me it was a programme for entrepreneurs that was run by an inspirational personality, Dan Sullivan, who was a coach to many successful entrepreneurs. He also told me that there were many entrepreneurs on the programme who were building their businesses, who were already successful to a point, but who wanted Dan’s help to get them to the next level and further. He told me that he’d really enjoyed the programme and that he thought I would benefit from it too. 

At that time, Dan Sullivan’s Strategic CoachⓇ programme was only available in Toronto. This colleague told me they were hosting a seminar at a local golf club and that I should go. So I went and I listened to what these guys had to say. 

What I really liked about it was that it wasn’t a one-off sales seminar or a one-day event where you learn stuff and then there’s no follow-up. Strategic CoachⓇ is a program with check-ins and follow-ups which act as reminders to implement the key takeaways until they become a habit.

What I often find with seminars is that you spend a couple of weeks afterwards being energised but very quickly you go back to reality, get straight back into what you were doing and the things you learned on that seminar get deprioritised. You don’t get the benefit that you should from it.

The Strategic CoachⓇ programme revisits things. There’s a constant reminder of what you should be doing. Every three months you meet up and go through the new stuff, as well as going through some of the things you’ve done previously and it helps hold you to account, as well as acting as a reminder. 

I also think that if you travel further for these types of programmes then that travel time gives you out of the office thinking time, both before you get there and about how to implement what you’ve learned on your way back. 

My first steps into personal development

I went to the seminar my colleague recommended and I really liked what they had to say. It was aimed at entrepreneurs and, back in 2007, that was the first programme I’d seen that was aimed at entrepreneurs. Although it was a lot of money for us in those days when we weren’t making a huge amount, I decided to join the programme. I can say, hand on heart, the benefit was way in excess of the money I paid for it. I have been part of the program since 2007  and I continue to benefit from the continually evolving thinking that benefits all its members.

In fact, I joined the first programme they were running in London. As you probably know from my previous blogs, we were based in Manchester so it wasn’t too far to travel. I would just jump on the (in those days) Virgin train and go straight down. That train journey gave me time for thinking and this all worked really well. The programme isn’t sector-specific, which I liked, and, as I’ve said, I really liked the fact that it focused on entrepreneurs. The other benefit is that there are different levels to the Strategic CoachⓇ programme. 

That means there’s the opportunity for progression. You might find that as your business develops and you’re in a position where you’ve been doing the stuff from the initial programme for the last few years that you’re ready for the next level. In 2015, that was the stage I reached and I joined what was called their 10X programme™. 

The initial programme I’d done in London was run by one of the associate coaches who is great, however, the 10X programme was run by Dan Sullivan, the owner of the company. I really enjoyed it. All the content produced for the programme at that point was produced by Dan, and you heard it directly from his mouth. 

Benefits of personal development

For the 10x programme™, I had to travel to Toronto. That meant it was effectively a four-day commitment for a one-day course. 

However, this was actually really useful because it took me out of the business. I would say it was one of the strategic byproducts that was especially beneficial. It took me away from the business for a few days, I’d turn my mobile off, leave my email alone. That was part of the programme on the day, to make sure that your brain was free to think creatively, to focus on what was being talked about and how that could benefit your organisation. I found it incredibly useful. 

It gave me confidence. It gave me tools and frameworks to deal with various things that, as an entrepreneur, you come up against on a day-to-day basis. One thing that it taught me about was time management and making sure you have enough free time. One of the aims of Strategic CoachⓇ, which sounds counterintuitive but I promise you absolutely isn’t, is that you must take enough free time. The idea being that when you are working, you can be focused, work really hard, be really creative and be really on it. You’re in a far better position to do all of that if you’ve taken some time out. If you don’t have any free time and you’re tired then your brain won’t be functioning as well as it could. I found this really useful and I still, to this day, make sure that I have at least one free day a week where I literally do not do any work. It refreshes you and gets you ready for the next week. 

On the programme, you also look at strategic planning and you’re given various tools to help you with that kind of thinking. They help you process your thoughts and come out with an outcome that is actionable and helps you deal with issues, such as if you find yourself procrastinating. The programme teaches you to be aware of this, and Dan gives you a tool that really helps you get over this issue and actually use it to your advantage because it helps you make decisions and use procrastination to your advantage.

Another benefit to joining a programme like this is that you meet a lot of like-minded people, who you can speak to, run ideas by, get ideas from and just talk to about the issues you’re facing. Some people talk about the issues they’re facing, and others offer solutions. You pick up on all of this and it gives you ideas. One of my colleagues would always say that when I came back from this programme that I’d have a head full of fairy dust because I had so many ideas that I wanted to look at. 

If I’m honest, probably 80% of those ended up not being anything massively worthwhile, but those 20% that were worthwhile were often gold nuggets. They’re the things that change the way you do business and can change the face of your business.

Starting your personal development

I strongly recommend joining a programme like Strategic CoachⓇ, which was the one I used, but there are now a number of other programmes out there that are offered by different organisations and that are awesome. They are a very worthwhile thing to do.

I would recommend that you look at these types of programmes and pick the one that you think is appropriate for you and invest in yourself. These programmes will help you. They will preempt some of the mistakes that you would otherwise have made. They’ll also help you frame your thoughts, refine your strategies and just do everything better and quicker than you would have done without this guidance. 

Another important thing that I did from a personal development perspective, which I talked about in some of my previous blogs, is work with a non-exec. I’m not going to talk about this in detail here, because you can read that blog, but I will just say that having someone who has the badges and scars of building a business can be an invaluable part of your own personal development.

At Cake, Ian Brookes joined us in around 2010 as a non-exec director and the experience he brought was invaluable. A non-exec will use their experience to ensure you make fewer mistakes and that you do things bigger, better and quicker than you would have without their involvement. You can learn from them very quickly, they’re there to bounce ideas off and you benefit from their experience and their specialism. That was certainly the case with me. I consider a non-exec to be someone who can help you run your business better, improve personally and just get that high growth moving very quickly. 

In my previous blog, I talked about personal development and mentioned that I use Strategic CoachⓇ for personal coaching. I also explained why I feel personal development is so important for every entrepreneur. I truly believe that every entrepreneur should look for a company, organisation or person for their personal development. 

One of the concepts that I learned from Strategic CoachⓇ, and this is straight out of their playbook, is the concept of a self-managing company. The reason I want to talk about this is because I have absolutely used this concept in my thinking for the strategy and development of my company. Therefore, I think it’s important to talk about it. 

The concept of a self-managing company, like a lot of these management concepts, isn’t necessarily something new. But sometimes you need someone to talk to you about a concept in a particular way and provide you with tools that allow you to get your thinking down on paper with some outcomes and actions. That’s what Strategic CoachⓇ did for me with self-managing companies. 

What is a self-managing company?

A self-managing company does what it says on the tin. In fact, I’d say most entrepreneurs and business owners aim for this. You want to build a company that doesn’t require you on a regular basis. You want to build it so that you’ve got the right team, the right structure and the right process in place. When you’ve got all of those key ingredients in place, it will allow your company to run and continue to thrive when you’re not there. 

When you get to that point, you’ve got options as to what you want to do next, which I’ll come on to a little later in this blog. The self-managing company concept really resonated with me. I realised that it was what I needed to work towards and to achieve so that I could sell the company and not have to work with the new company for a long period of time as part of the handover because the company would run without me. This was important for me because I wanted to minimise the amount of time I was with the new organisation. 

Selling the company is just one option though and that isn’t for everybody. The other option is to run it as a lifestyle business. It could be that you get to the age where you want to put your feet up a little bit, work fewer hours and play more golf. Personally that wasn’t for me. It might be that you want to go away and work on another project that either is or isn’t related to your existing business. If you’ve built a self-managing company that might mean that you’re moving into a chairman-type role where you’re there for the board meetings and to advise, listen to issues and help deal with those issues, but this actually doesn’t take much of your time and the business runs very well on its own and continues to develop and thrive. 

If you get to that stage, you can certainly put your feet up and play more golf, or you can look at another idea that you’ve had burning inside you for the last couple of years, just waiting for the opportunity to go and pursue it. Either way works. 

Start with the right-fit team

The first thing that I looked for, and what I feel is the most important thing in terms of creating a self-managing company, is the right-fit team. At Cake, we knew what we were aiming to do. We knew we were going to go for growth and we had a three-year strategy in place ready. The first part of that strategy was to make sure we hired the senior team that I felt we’d need for high growth.

It’s far better to do that at the start of that growth period than it is to do it halfway through. The problem if you start doing it once you’re halfway through that growth period is that you’re under pressure. That means you might hire the wrong person, or you might not find the right person quickly enough. By contrast, if you’ve got that person in place to begin with and you’ve thought about the structure and what the senior team needs to be like for you to be able to grow, then all you’ve got to worry about is building the teams under those people as you’re growing. 

For me, building a senior team and thinking about who that’s going to be ahead of any high-growth period is a really smart way of approaching it.

As an example, at Cake as well as myself I had a Commercial Director who looked after the operations in the company and some of the account management. But we were missing someone who could handle business development on the corporate side. I’ve talked previously about how we didn’t really have a sales team. We built our sales pipeline by sharing expertise, generating expert content and pushing it out there. What we didn’t have was any kind of corporate experience and there comes a point when you need that to engage with corporate entities. 

We were a very entrepreneurial-led company and, as a result, we didn’t really have anyone in the business who had worked in corporate for any length of time. One of the things I tried to do was hire someone who had that kind of corporate experience and who understood how corporate structures work, including the kinds of people they have to engage with to get things done, the job titles and all the kinds of things that perhaps as a startup or entrepreneurial-led company you wouldn’t necessarily know. This was a good hire. 

Quite early in our preparation for our high-growth period, we moved somebody into a part-time FD position. We already had a book-keeper, they did a terrific job of all the day-to-day accounting work and helped put the monthly management accounts together as well as a weekly cash flow. We had that as a process and it worked well. The FD was also the person who provided strategic advice around the financial side of the business. That meant whenever we wanted to go out and spend significant money, the FD would be part of the team who would discuss that before we made that decision with the board. It was really important. In fact, bringing in an FD was one of the first things we did ahead of our high-growth period. It is so important that I’ve written a separate blog about the value he brought to the business. 

We also worked with a non-exec director who added a huge amount of value, experience, knowledge, badges and scars to the thinking within the company. On the technical side, we had a CTO, but we also thought carefully about the structure and how it would work. We didn’t want to become corporate, we wanted to remain quite flat and non-hierarchical, but we needed some kind of structure to grow and provide accountability. As a result, we appointed a Head of Engineering. In the end, we actually had two Heads of Engineering who oversaw all the different technical teams within the business. Each technical team had a team lead, and that was the structure we put in place. 

The important thing is that we thought about, and acted on, all of this stuff before we hit that high-growth period. We hired most of the people I’ve just talked about before our high-growth period, which meant we were actually top-heavy for six months. However, what it meant was that we could move really quickly, win more and more business, and have more and more people working for us because we had the right team in place to cope with that and manage it. It didn’t hinder our growth or put us individually under so much pressure that we couldn’t cope and let things slip. I think this was the right way of doing it.  

Introduce the right partners

Putting the right partners in place is something that I think is sometimes overlooked in these kinds of situations. But the right partners can also take the pressure off. So, where you don’t necessarily want to hire a full department ahead of high growth, you can have partners in place who you assign some of the tasks to as a supplier. If you work really closely with partners, treat them well and build up a really strong relationship, they almost become part of your team. I’ve discussed this in a previous blog too. 

Developing strategic partnerships was an important part of what we did at Cake. For example, we had a good team of lawyers who we always used, Bermans. We had a great marketing company, The Realization Group. We had a good set of accountants. We used Standby Productions as our video team, at a time when videos were only really coming to the fore on the internet. 

We also partnered with a number of software as a service companies like HubSpot, Harvest, Xero and, on the technical side, Atlassian and GitHub. We had a lot of these things in place ready for the high-growth period and they grew with us. 

Harvest is a great example. An HR system isn’t necessarily at the top of the list for most startups, but it very quickly becomes important as you start to grow. You need to have a central repository where you record any interaction with the team, as well as their personal details and any of the documentation that you need. At Cake, we had quite a high percentage of people from abroad working for the company, and we would have spot checks from the Home Office, so having all that information to hand and presented properly was absolutely key. 

Get your processes in place

Having the right processes in place is also key to creating a self-managing company. We spent quite a bit of time working on processes, some of which were so important that we published them so that they could be seen by our clients. In fact, some of our clients even used our processes, particularly our technical ones. 

What we didn’t want to become, however, was a typical corporate which is process led. We wanted our processes to guide the way we did things and make things easy for people. That meant when new people came on board, they would have something to refer to. It meant when clients came on board, they could see what our process was. Those types of things are really important, but as I discussed in my previous blog, you don’t want your processes to restrict creativity or innovation within the company. 

There’s a fine line to tread when it comes to processes. Processes are absolutely critical to any high-growth organisation and any self-managing company. If you walk away, you don’t want to be the person who has to be asked how to do something. You want to have a process in place that people can refer to, or a person that they can ask. It’s important to look at processes alongside culture. If your culture is to encourage creative and innovative thinking, you don’t punish mistakes unless they are continuing to be made and are absolutely careless. Sometimes people make mistakes because they’ve tried something and it hasn’t worked. That’s not a mistake, that’s a learning opportunity. Processes help you build a self-managing company. 

Culture is key to a self-managing company

I just touched on it briefly then, but culture, which I’ve talked about extensively in previous blogs, is essential for the creation of a self-managing company. I believe it can only be achieved when you have a combination of things and culture is a key component. If you have a defined culture that you live and breathe, and that is geared towards empowering your team and helping them to do the job quickly, efficiently, comfortably, creatively and effectively, then it will help you go a long way towards creating a self-managing company. 

People coming on board will be absorbed by the culture, but actually you’ll probably take them on because you think they’re a good fit for the culture in the first place. Your culture guides recruitment, which ultimately helps with a self-managing company. 

Don’t neglect your finances

You could argue that finance is just a process, and to a certain extent it is, but I want to call it out because it’s such an important element of what you do. 

I mentioned before about having an FD in place, as well as a non-exec. Ian Brooks, our non-exec at Cake, really helped me professionalise the way we dealt with the finances of the company. We did okay on that front, but it wasn’t as professional or as rigorous as it should be. You need to know what the cash flow is at all points. You need to have management accounts within a week or so at the end of the month so you know exactly where you’re up to with the various figures in those accounts, whether it be sales, net profit, gross profit, expenses or something else. Whatever it is, you need to have your finger on the button of finances. 

The single biggest reason for companies failing is that people do not have a grip on their finances. I can’t stress enough how important this is. If it’s not something that comes naturally to you, and it wasn’t for me, it is important that you have processes and people in place to look after that side of the business so that it’s not ignored. Without it, you won’t be able to build a self-managing company. 

Another important element within your finances is cash flow. It’s a well-known fact that cash flow is the biggest killer of most startups for various reasons. At Cake, we would always aim to have three months’ cash in the bank. That’s something you’ll have to work towards as a startup, you’re highly unlikely to have that to begin with unless you’ve got substantial investment. The bigger you get, the more cash you need in your safety pot, so it’s a continual thing. 

As well as being on top of that, we also had some rainy day money. We were in a position where, if the worst-case scenario happened, we were probably okay for 12 months. That was through a combination of knowing that you were never going to completely run out of work, so you would have some money coming in, but also having cash in the bank as our rainy day money.

COVID is a really topical issue related to this at the moment. A lot of companies who haven’t looked after their cash properly and who haven’t built up that kind of reserve will be hit by something like COVID that comes out of the blue and all of a sudden see their turnover drop. Their sales drop and then the outlook isn’t so rosy. At that stage, having that rainy day money in the bank is what you need to get you through those kinds of unexpected, unpleasant surprises. This cash allows you to trade your way out of this kind of situation and prevents you from having to suddenly shut up shop. 

It could also allow you to gain a competitive edge because at a time like this there’s less noise in the marketplace. That means you should go out and make some more noise, rather than withdrawing to a safe place. If you make noise, when you come out of it you will come out quickly and be stronger than you went in.

The ultimate aim of a self-managing company

When you’ve built a self-managing company, you should ultimately know that you can go away and that your team will continue to drive the company forward. You’ll know that they can lean on the people within the company and the people outside the company that are part of your network for support in your absence. 

You are no longer critical to the development and running of the organisation. That gives you options. You could decide to really grow the company and spend time strategising and doing what you need to achieve that. Or you could decide you want to put your feet up and only work three days a week. Or you might decide you’ve got another itch to scratch, so you’re going to leave the team in place, sit on the board as the chairman and be there whenever they need you, but have the time and space to go off and do this other project that you’ve been thinking about for the last few years.

The whole point is that, once you have a self-managing company, you have options. 

The final point worth noting about self-managing companies is that they are considerably more attractive to an acquirer than a company that relies very heavily on the owner. There are two reasons for this. One is that when a company acquires you, there is the likelihood that you’ll leave at some point. If the company is totally reliant on you then the acquirer will be nervous about letting you go anytime soon, which might not be what you want. You could end up working for this new organisation for a lot longer than you’d hoped for, whereas if you’ve got a self-managing company you can make that clear from the outset and be more realistic about the time you have to continue working for them. 

You might want to work for the new organisation on an ongoing basis, in which case, fantastic. But in my experience, a lot of entrepreneurs want to use this opportunity of being acquired to go off and do something new. 

If you have a self-managing company, it will be more valuable to an acquirer too. Acquirers work on risk, so the higher the risk, the lower the value of your company, it’s as simple as that. 

A really well-run company with an amazing senior team, a bunch of partners in its network and all the other elements I’ve talked about in this blog, is going to have a much higher value than one that relies too heavily on the owner. But the other reason your company will be worth more if it’s self-managing is that there will be more competition to buy you. You shouldn’t underestimate that. 

When I was at Cake I always used to say that I didn’t want to have to chase someone to come in and buy us. I wanted it to be a natural situation, where someone looked at us and thought that we would really supplement what they were doing. That was what happened.

There are two reasons why I feel that someone approaching you to talk about your value is beneficial. The first is that they’re more likely to be an appropriate partner for you. The second is that you’re on the front foot at that point in terms of the value of your company because you’re not looking to sell and this company that has approached you really wants to buy you. That puts you on the front foot when it comes to an acquisition.