Business Acumen Is A Rare Commodity

According to the ABS, a start-up has only a 1 in 10 chance of reaching above $2 million in revenue. That should tell you that growing any business to a reasonable size is challenging but don’t forget that many fail trying. Somewhere between 50 – 60% of start-ups fail in their first 6 years. While there are lots of reasons why a business might fail, the dominant reasons are; bad idea, lack of business acumen and lack of funding. The major problem seems to be ‘we don’t know what we don’t know’ and what we don’t know can hurt us.

If you look at the flip side – what drives business growth, we do have some good models for what works and what doesn’t in terms of driving growth. They don’t guarantee growth but they go a long way to explaining why some businesses experience high growth and others don’t. Regrettably these are only insights as we don’t have yet a comprehensive theory on firm growth and this does somewhat limit our ability to fully explain the exceptions. Some businesses simply should never have survived – but they do and some go on to be large corporations. So leaving the exceptions aside, the fundamental attributes or growth drivers do seem to explain most high growth situations.

You could simply learn as you go

Most entrepreneurs learn as they go but you have to have a bit of luck to survive long enough to find out what works and what doesn’t. Even if you are somewhat successful, it doesn’t mean that you have the right business model or that some external intervention could not make a fundamental positive impact on your business. The problem is that there are very few places you can go and very few people you can talk to in order to get quality (and unbiased) advice. Too often the spin doctors only want to earn consulting fees but have little substance.

Several years ago I completed a book on the lives of entrepreneurs called ‘Get A Life!’ One of the major insights which came out of my interviews was the importance of peer-to-peer interaction for many entrepreneurs. By sharing their business issues in a confidential forum, they were able to tap into a wide experience base but also received a sympathetic hearing from people who had ‘been there and done that’.

Angel Groups tap into a wide variety of experience

When I joined the Gold Coast Angel Group I found a similar forum. A band of successful corporate executives and cashed-up entrepreneurs who all bring their experience to bear on a business issue. Every entrepreneur who came along for a meeting or a presentation walked away with invaluable advice whether they continued in the process of raising Angel capital or not. I also find that Angel members also benefit greatly from being able to tap into the diversified experience of the member base.

An Angel Group can be a very positive force for change in a high growth potential business. Very few individuals have ever grown a substantial business, raised external equity, undertaken an acquisition or sold a business. It is very easy to get it wrong and many professional advisors do not have runs on the board either. But the difference between quality advice from a pool of experienced Angels and going it alone or following the doubtful advice of a small business advisor can be staggering. Access to information, experience, networks and funding can make a substantial difference to realizing the potential in a business. It is not just getting the strategy right, it also tapping into resources to make it happen.

I continue to be amazed at the depth of experience within the Angel community which can be tapped by any of the Angel members. In one small meeting I attended we found one person to assist with a contract in the Middle East and another to assist with advice on how to deal with a receiver who had control over a potential investee business. We also found we had someone with 20 years of experience in telecommunications who could take the lead on an investment in that sector.

Use the Angel Group as a resource

What is clear is that this network is available to an investee firm. The entrepreneur who has the great widget but limited business experience can grow a decent sized business under the mentoring of an Angel Group. If the business needs overseas contacts, someone will be found within the Angel community. If the entrepreneur wants to develop the business for sale, the Group can assist with indentifying buyers, setting up contacts and finding experienced individuals to help with making the deal.

True – there is no free lunch once you have taken on an Angel Investment. They will want to see a good return on their investment. But could you be as successful by yourself? This is truly a case of a small part of a larger pie. It is certainly the case that you can get caught out by what you don’t know but a larger pool of expertise will have a significantly improved chance of getting it right and the advice comes freely with the investment.

If you have a business with potential and you are open to reaching out for some quality and unbiased advice and you are willing to give up part of your business for a chance at greater success, then go and have a conversation with your local Angel Group.