Weak Sterling and the impact on oil

Today's warning from Gordon Brown on the oil price sparked a few thoughts in the Collective. Prices have tumbled from $150 to $40 per barrel in the last few months, and we've seen falls at the pump from around 120p to 89p/litre.

One of the reasons generally given for why prices at the pump don't fall in line with the market is the level of duty charged, and there is no doubt that the UK is one of the most heavily penalised Western countries.

However another reason, for which the UK government can also take great credit, is the slump in the value of Sterling.

In July 2008, crude cost around $147 per barrel, and at the same time the exchange rate stood at about $2:£1, so in Sterling £73.50 per barrel. Today crude is around $44 per barrel, but with Sterling having weakened this equates to £29.00.

In simple terms, oil has fallen in price to around 30% of its peak dollar price, but in UK terms it's only fallen to 40%. To put this in perspective, oil in the UK would be £7 per barrel (or 25%) cheaper if the currency hadn't crashed.

Thanks, Gordon.

Is it Boom or Bust for the UK Government, Darling?

One can only feel dismay at the government's latest proposals to dig the country out of the threat of a deep recession. Whilst the government is not solely to blame for the problems we face - there are undoubtedly global issues over which we had little control - the government has been responsible for fuelling an economy centred on rising consumer debt and the belief that house prices will always go up. Unfortunately we believe that having allowed house prices to boom out of control, some adjustment downwards is essential - it is, afterall, the best way to help first time buyers onto the housing ladder.

Yesterday's pre-budget report was meant to deliver a range of stimuli to the economy that would see a return to more stable economic conditions. The fundamentals of the package saw large increases to government debt in the short term, funded by tax increases a little way after.

None of that sounds particularly appealing, so the good news must be hidden away somewhere, isn't it? The Collective believes that the single biggest challenge to the UK economy at the moment is not just that we all stay in work; it's also that our wages are sufficient to fund the current cost of living. Therefore the policy changes should, in our opinion, have been designed to ease the burden on ordinary households. Will these achieve their aim?

To an extent this is true - a reduction in the standard rate of VAT should see some consumer prices come down. That being said, some of our largest expenditure is unaffected such as many types of food, and gas and electricity bills. The cost of a litre of petrol will also not change because, whilst this is affected by the VAT reduction, this is offset by a rise in duty.

What will be affected is the bigger ticket items - furniture, consumer electronics, cars. For us this is where the problem lies: the government is making cheaper those items which rely either (a) on the housing market or (b) being able to take some form of credit. If we have borrowed excessively to get into this mess, why is it good to borrow more to get out of it?

The government will further stimulate the economy by taking on massive debt to fund infrastructure projects. In their view, such expenditure will provide a catalyst for a recovery, but it seems to us to be full of risks. If excessive, ill-judged credit behaviour both by banks and consumers is a bad thing, why is excessive borrowing by our government a good thing?

Of course it's easy to criticise, and much harder to offer an alternative. We don't pretend to have all the answers, but here's a few suggestions of how to help the UK family:

• Reduce the VAT rate on domestic utility bills to 0% for 24 months
• Double the personal allowance, taking a far larger slice of low paid workers' wages out of the income tax arena

And how would we increase government revenues?

• Put airline fuel on a level playing field as regards fuel duty

Good luck in the coming months.

Enterprise Week

Last night's Wales@work programme on BBC Radio Wales asked the following:

Yesterday saw the beginning of Enterprise week in schools and colleges around the UK. Students from around the country are being challenged to come up with successful business ideas to teach them more about entrepreneurship and commerce.

• But are events like this worthwhile - can you really teach children how to become entrepreneurs? Or is it something that you are born with?
• And as these teenagers start out in the big wide world shouldn’t we be giving them a financial education as well as an academic one?
• In the current climate with money being tight shouldn’t our children be taught how to manage money and not get into debt?

So this week Wales@work goes on the road to Neath Port Talbot College to ask guests and a young audience whether business and finance is a worthwhile education.

We sent our thoughts to the show...

You can move towards an answer to all three questions by teaching children to understand "the bigger picture", and how debt and risk fit in to it. History talks about three ways to get wealth - steal it, earn it or marry it. Borrowing money without understanding its consequences was never the answer. However we shouldn't assume that debt is fundamentally bad - it isn't, but we have to recognize that it comes with consequences.

For example, businesses may take on debt as an investment in their future profitability; likewise our parents took on debt to fund the purchase of a long term asset (their house) which over the period of the debt (25 years) would increase in value. Debt to fund a short term lifestyle boost is plain daft - it doesn't deliver any long term benefits and simply makes securing debts for those things that do (such as a mortgage) more difficult. You wouldn't see a business taking out a loan to fund entertaining at a rugby international, for example (and nor would you find a bank willing to give one!). But that shouldn't stop individuals gearing up to drive future wealth creation opportunities - by all means borrow to set up a business, if you can demonstrate your belief that in doing so you'll be better off in the long term.

Being a successful entrepreneur is partly about identifying what you or your idea can do that gives you an advantage over what's already in the market, and then doing it profitably. It's also about knowing your weaknesses and either learning to address them, or getting people and resources around you to mitigate against them.

Fundamentally all of this is an understanding of risk - what's the risk of me not being able to pay my debts, what's the risk of my business idea failing - and having a strategy to deal with it.

Put it this way, borrowing money to buy a second property on an interest only basis only just covered by the rent is only GUARANTEED to deliver profit if you can say with certainty that (A) you will always have a paying tenant, (B) rent will go up at least in line with rises in interest rates and (C) property always goes up, not just in the long term but also in the short term. Sounds obvious, but amazing how many people didn't apply this thinking over the last 5 years...

Finally, for a broader look at how education stifles creativity, I can thoroughly recommend this lecture by Sir Ken Robinson.

Retentions, or how to get a free overdraft at your suppliers’ expense

Retentions are fairly common in building and construction, and represent a proportion of the total contract price which is retained for a period of time, typically 12 months, by the customer. The idea is that in the event of a snag occurring within this period, the contractor will fix it, otherwise he doesn’t get his retention. A South Wales SME sent us their recent experiences…

The SMEs has been chasing two retentions relating to work done it did in 2002 as sub-contractor to a listed plc. The plc was doing work for a university, and had sub-contracted some of it to the local SME. The SME is only owed, in total, £150 in respect of these two jobs, which was supposed to have been retained by the plc for a period of 12 months after completion.

The plc did not pay over the retention in 2003 and when chased early in 2004, said that it wouldn’t be paying until it had itself been paid by its client. This policy, known as “pay when paid”, is illegal, but the plc was banking on the SME not going to court for such a small amount of money. In 2006 the SME wrote again, and this time received no response.

In the last few weeks the new CEO wrote again to the plc, and received a phone call back. The commercial manager in the plc’s local office agreed that the retentions were due. He blamed the SME’s lax accounting for their non-payment, and said that he expected every supplier to write quarterly to chase retentions – their own money! He then suggested a “deal”, have one retention (£65) paid and write off the other (£85). The SME refused, and so was told that neither would be paid.

The commercial manager went on to make a number of accusations and excuses - perhaps the SME was on the verge of bankruptcy if it was bothered about £150; hadn’t the CEO got something better to do with his time; the member of plc staff who had previously dealt with this had been made redundant, so there was nothing he could do; it would be a shame if the two companies were to fall out over such a small amount and not have the opportunity to work together again…hmmm…. blackmail and threats, anyone?

Yes it’s only £150, but how many £150’s are there owed? The commercial manager proudly said that the total value of retentions held by his office alone was £1.3m – if just 5% of these are held unfairly then the office is using £65,000 of its customers’ money as a free overdraft. Multiply that by 15 offices around the UK, and it’s around £1m of free money in the plc’s bank account. Oh yes, and if we don’t get our money in 7 days we’re going to court.

How the stockmarket works

Once upon a time in a village in India, a man appeared and announced to the villagers that he would buy monkeys for $10 each. The villagers seeing that there were many monkeys around, went out to the forest and started catching them. The man bought thousands at $10 and, as supply started to diminish, the villagers stopped their effort. He further announced that he would now buy monkeys at $20 each. This renewed the efforts of the villagers and they started catching monkeys again.

Soon the supply diminished even further and people started going back to their farms. The offer increased to $25 each and the supply of monkeys became so scarce it was an effort to even find a monkey, let alone catch it!

The man now announced that he would buy monkeys at $50 each! However, since he had to go to the city on some business, his assistant would now buy on behalf of him.

In the absence of the man, the assistant told the villagers. 'Look at all these monkeys in the big cage that the man has already collected. I will sell them to you at $35 and when the man returns from the city, you can sell them to him for $50 each.' The villagers rounded up with all their savings and bought all the monkeys.

Then they never saw the man nor his assistant again, only lots and lots of monkeys! Now you have a better understanding of how the stock market works.'

Collective Thought is grateful to the person who wrote this joke and emailed it around. Thanks!

Collective Companies: utellus - Sainsbury's....Tasting Indifference

A regular Sainsbury’s customer complained to utellus that he had been ignored at the deli counter. Three members of staff chatted amongst themselves, none of them willing to serve the sole customer at their counter. He asked “Anybody bothering to serve?” and got the response from one employee “Not if you talk to me like that?”

Many of us will have seen the signs across a broad range of businesses demanding that the customer respect their employees. Without question utellus supports this position. However as with all demands for respect, there also comes responsibility. Members of staff have a responsibility to do their job to the best of their ability, and must be prepared to accept criticism when they fall below the standards that the typical consumer requires. Likewise customers have the right to be treated with respect, not contempt.

We asked Sainsbury’s if they would like to comment and they told us: “We expect our colleagues to serve customers politely and efficiently at all times. We welcome feedback from our customers and would encourage them in the future to report bad service (and indeed very good service) to a member of the store's management team.”

Hiding behind rights, and ignoring responsibilities will have only one outcome, particularly in a recession. All customer facing businesses need to face up to the challenges ahead, and ensure that their staff are best prepared to deal with them.

Collective Companies: utellus - customer service in a recession

We live in very interesting times. A significant proportion of younger customer facing personnel, such as retail assistants, bank cashiers and leisure staff have probably never known a recession. Those that have come into employment in the last ten years have only been exposed to a period of unprecedented growth, and consumers only too happy to part with their money.

Over the next few weeks, utellus will be running a series of articles based on our customers issues in a number of industries and asks – how will companies respond to competing for the consumers’ decreasing disposable income; indeed do they even recognise that they need to do so?

Collective Companies: Who will write the MMF screenplay?

...please help us to decide! The Writer's Brief competition closed for submissions at midnight on 31 July 2008 and the 17 entries are now up and awaiting your votes. It's going to be an exciting competition!

Are we on the verge of a recession in Wales?

Tonight's Wales@work programme on BBC Radio Wales asks the following:

The UK is facing the serious risk of a recession a survey by the British Chamber of Commerce revealed today. In its quarterly survey of around 5000 small to medium businesses the BCC found that rising costs and the credit crunch had seriously affected the cash flow of chamber members around the UK. This comes in the same week as house builder Persimmon has laid off over 1000 workers, and loan company Firstplus has announced 300 job losses in its Cardiff office.

• So are we in Wales feeling the pinch or are we in danger of talking ourselves into a recession?
• How long will it take us to recover from this slump or are we looking at a long summer of discontent for Welsh business?

This is Hivemind's response to the programme.

The current downturn appears very focused on the consumer end of the market – falling house prices, increasing food, petrol and utility bills and interest rates coupled with a lack of liquidity in personal credit (not before time) makes very uncomfortable reading for the consumer, and for those who look after them – retailers, retail banking, travel companies, etc. However those servicing industry, particularly the global markets for goods like steel, appear to be protected because of the fierce demand in China, India and other emerging economies.

In my view this makes parts of Wales such as Cardiff (a local economy supported by financial services and retail) much more at risk than the more industrialized areas of Newport, RCT and Neath/Port Talbot. Cardiff in particular will have a very difficult time as, for a long time, its property prices have raged out of control even in the context of a national property boom.

The next issue for all of us is wages – we all have less disposable income thanks to rising prices (and a cruel and cynical Chancellor) and in a boom we all have a habit of moving our lifestyles upwards to match our increasing disposal income; there is going to be enormous pressure, especially in the public sector and amongst unions, to see wages increase to offset this. However if we give in to wage demands now, all we will do is fuel inflation.

Coupled with that, we have a government in debt despite 10 years of continued strong growth, and the prospect of a falling tax take. How can the government deliver against increased wages in the public sector without increasing taxation, and yet the consumer can’t afford to pay more tax? The only scope for increased tax is in the corporate sector, and on the basis of which businesses are thriving in current conditions, that can only mean an attack on oil and gas. Realistically many of these businesses are sufficiently large to move their HQ offshore, and reduce the exposure to UK tax, so the government has nowhere to turn.

My concern a year ago was how we would survive in 20 years time having put too little away for retirement; the issue has come home to roost a lot sooner than that. An economy driven by the availability of credit has the potential to bring enormous improvements to our lifestyle, and to rip us apart in equal measure. I cannot see a way through the current problems without a great deal of pain. Unlike other recessions, we’ll still have jobs, it’s just that those jobs won’t pay enough for many of us to maintain our standard of living; we won’t be able to sell our houses, or indeed remortgage them, and other types of unsecured credit will be hard to come by.

I hope I'm wrong, and I don't like the thought of being the prophet of doom, but in my view things will get worse before they get better.

Collective Partners: SpinDogs surgeries are back

SpinDogs Surgery is Back! SpinDogs to the Rescue!

Is your company in need of a new and exciting website design? Do you need some help getting more visitors to your website?

We are pleased to announce that SpinDogs surgeries are back by popular demand! We have set aside the following dates:

24th April at 6-8pm

8th May at 6-8pm

18th September 6-8pm

2nd October 6-8pm

Click here to book now

...have your web related questions at the ready, as we will be creating a relaxed networking event to help solve all your Web dilemmas!

The SpinDogs surgeries will allow you to attend a session which will include a brief demonstration of what SpinDogs has to offer and give you an idea of the solutions available across a variety of budgets. This will be followed by, most importantly, an introduction to SpinDogs team members who will be available to answer any questions you have regarding web design, search engine marketing, email campaigns.
At SpinDogs we focus on building open and honest relationships with our clients, we have set up this surgery to give you an understanding of what SpinDogs is about. So come along....interrogate the team...and have some fun!
Venue: Saint Line HouseMount Stuart SquareCardiff BayCF10 5LR
(Refreshments will be provided)

Collective Companies: Movie Mogul launches "Micro Movie Lab" competition

To follow-up on the success of the ‘Viral Filmmaking Competition’, we are pleased to announce the launch of the ‘Micro Movie Lab’ comp. We cordially invite all members to contribute to the creation of an entirely new micro-budget movie...

Under the supervision of a Jury Panel consisting of: Huw Penalt Jones from Capitol Films, Mark Sandell from Trinity Filmed Entertainment, Olivier Lauchenauer from Pogo Films and yours truly, the competition offers an open call for ideas, and a chance for a writer, producer and director to win that rare opportunity to make their debut feature film.

Round 1 is open to everyone, you don’t need to be a filmmaker, and you don’t even need any experience. We are seeking a genre, a title and a brilliant idea that can be pitched in 25 words or less. Facing a members vote, the top ten ranking ideas will be presented to the Jury for selection. The most popular idea will win £100, the runner-up will win £50, and the Official winners idea will be used as the basis for the movie. Enter now and it could be yours!

Check out LABS for more…

Some thoughts on the credit crunch

About two years ago, I sat round a dinner table with senior accountants working for a large building society, a major motor insurer and a leading consumer credit business. I argued that there was something wrong with the global banking industry if banks could deliver record profits whilst lending mortgages at below base rate and paying interest on current accounts above base rate. I felt that it didn't matter how clever the instruments were, basic common sense had to apply.

Essentially if money was being lent cheaply, and deposits encouraged expensively, then there was a bad debt charge waiting to happen. If profits continued to grow, then the banks were in denial of this problem, and it was going to bite in the next couple of years.

Of course, back then I didn't understand the full extent of the problem. I do now..., and I'm frankly amazed at the herd mentality and crass stupidity shown by highly intelligent, massively paid people.

I have read extensively journalists' assessments of how and why the credit crunch occurred. This slideshow (with some strong language) is the best explanation I have seen. Enjoy.

Entrepreneur Action: a trickle of answers

We have been following the failure of Entrepreneur Action closely. Sion Barry, writing in today's Western Mail, has taken us some way towards understanding what went wrong. However there's still no indication of what is going to be done to help those companies hardest hit by this failure - those who were relying on the Welsh Assembly, through Entrepreneur Action, to help them make their business dreams a reality, and in many cases had parted with £5,000 for the privilege.

The following paragraphs have been taken from the Western Mail article as we continue to seek answers to our four fundamental questions on behalf of all those who have lost out. Of most concern is the assertion that it is the Assembly's failure to support a rescue plan which led to the liquidation. In our view, the Assembly had no obligation to help Entrepreneur Action survive, but we are concerned that the Assembly has known for some time that failure was likely, and should have prepared an action plan to help those companies who were going to suffer as a result. Whilst there may not be a legal obligation, we would argue that there absolutely is a moral obligation.

Entrepreneur Action, which ceased trading last month, owes creditors £330,000. It has a total of 88 creditors, from HM Revenue and Customs to a host of small and medium-sized companies across South Wales.

The two businesses, holding company Entrepreneur Action and the company established to administer the £11.4m contract awarded in 2004, Entrepreneur Action High Growth Services, (EAHGS) are now in the hands of liquidator Begbies Traynor.

Its creditor report shows that EAHGS has liabilities of £330,000 with the biggest creditors in financial terms including Barclays Bank, which is owed £64,583 and HM Revenue and Customs with nearly £100,000.

How much money did Entrepreneur Action and its associated companies receive from the Welsh Assembly over its life?

Unknown

What remuneration did its management team receive in that period?

The liquidator’s report to creditors shows that in the financial year to the end of March 2007, EAHGS made a loss of £190,000. The accounts also show directors’ remuneration of £77,261.
The directors of the two companies are Deborah Hackett, Robert Carter and Ian McPherson. It is unclear as to the nature of the split on directors’ remuneration and whether they were in addition to any salaries.

However, the directors’ loan account of Entrepreneur Action indicate that both Ms Hackett and Mr Carter are creditors to the value of £56,600.

Why was liquidation the only course of action available to the Board, and how did they allow the company's financial position to deteriorate to such an extent that this became the only option?

In Entrepreneur Action’s director report to creditors, criticism is made of the Welsh Assembly Government regarding its “management style” over the project. The report added that EAHGS back in 2006 expressed “serious concerns to WAG, including “the development of bureaucratic ‘13 stage’ sign off process for invoices”.

Between October last year and January the report says there was a significant deterioration in the financial performance of EAHGS. This, it is said, was due to what it described as an acceleration in the general economic slow down.

“There were fewer ‘quality’ inquiries being received that would meet the eligibility requirement of the high growth programme,” it added.

With a decline in clients, EAHGS attempted to broker a rescue plan with the Welsh Assembly Government, which resulted in an accelerated payment of £132,000, which “briefly staved off a negative cashflow and a breach of the companies’ overdraft facilities.”

However, the report said the failure of WAG to support a subsequent rescue plan meant it had no alternative but to cease trading on February 19th, when steps were immediately taken to liquidate both EAHGS and Entrepreneur Action.

What action is being taken to protect the interests of those companies which paid £5,000 but had not received the full extent of the support they were promised?

No answers forthcoming.

Entrepreneur Action - the deafening silence continues

Let me remind you of the four questions we asked two weeks ago:

• How much money did Entrepreneur Action and its associated companies receive from the Welsh Assembly over its life?
• What remuneration did its management team receive in that period?
• Why was liquidation the only course of action available to the Board, and how did they allow the company's financial position to deteriorate to such an extent that this became the only option?
• What action is being taken to protect the interests of those companies which paid £5,000 but had not received the full extent of the support they were promised?

These questions remain unanswered, primarily because journalists and the Welsh Assembly appear united in their belief that if they keep quiet long enough, it will all go away. Only Dylan Jones-Evans in his blog, reproduced (with a less inflammatory title, in my view) by the Western Mail, has voiced any concerns. An extract follows:

"Given the close links between the company and the Assembly’s Economy and Transport division, I would expect that Assembly Members will be looking for answers as to why a business with a cast iron contract for millions of pounds with the public sector could end up in such a position.

Certainly, the way that the Assembly has quickly washed its hands of the company should prompt an inquiry into why a £15 million programme of business support has failed. More importantly, it throws into doubt much of the current approach by the Assembly towards business support and, in particular, its strategy for the future."

Yet there is still silence. Where are the answers? Where is the commitment to an enquiry? Where is the accountability?

In my view, this kind of support model (at least in the way that I believe some of it was provided) has some fundamental problems:

• Let's suppose a support agency employs a large number of self-employed consultants, paid an hourly rate for their advice to start up and early stage companies. These costs, plus a margin, are recovered out of funding provided by the Assembly. What incentives are there to say "NO" to companies or individuals who lacked the fundamental building blocks of a good business? The incentive is quite the reverse, keep them on the books for as long as possible, even if there isn't a future for them, because this keeps money coming in.
• It is in the support agency's interest to overstate the prospects of each company coming through its doors. Not only could this strengthen the argument for a greater slice of funding, but which official would be brave enough to query this and potentially undermine the positive statistics about entrepreurship in Wales.

I'm certainly not suggesting that either of these things did happen, but I do believe that this kind of model emphasises all the wrong things. If a business has good fundamentals, then support should be forthcoming, whether financial, strategic and/or managerial. Each business needs three things - a good idea, a market for that idea, and good people who can make it a reality. The private sector already works on this basis, and the public sector should be reminded to work in the same way.

Collective Thought works precisely on this basis. We are able to deliver individuals with proven track records to work with your company, and we don't charge a fee. We take equity in the business - if your business doesn't succeed, we don't earn anything. We share your risks, and as a result are as committed as possible to making you a success. That's the model for business support.

xénos facilitates Six Figure investment into bioscience company

The following story was published by xenos in January 2008.

A Welsh bioscience company that has developed a natural food supplement it claims can protect against electro-magnetic forces from power lines and cell phone transmitters, helping improve sleep patterns and enhancing complexions, has received £125,000 investment through xénos, the Wales Business Angel Network.

Asphalia Food Products Ltd of Pontypool has developed a supplement using ingredients that are rich in a powerful natural anti-oxidant five times more powerful than Vitamin C.

"Natural levels of melatonin decline in the body after reaching 50. Our supplement helps to improve sleep,acts as an anti-ageing agent, enhances complexion and protects against radiation from UV as well as non-ionising EMFs from power-lines, cell phones and their transmitters," said Roger Coghill, Managing Director of the company.

"The public is only vaguely aware of the many benefits of melatonin, but it is routinely requested in health stores which have previously been unable to supply it. Forecast UK sales for this unique product are £2million within three years.

"In order to take the business and new product forward, Asphalia Food Products Ltd needed a cash investment. xénos matched the company with a business angel who has invested £125,000 and taken a 20per cent stake in the company.

xénos, matches business angels (high net worth individuals) to companies seeking investment for business opportunities. The angels, often former company owners/managers, also bring management and mentoring experience to the business they are investing in. Since it was formed in 1997, xénos has facilitated more than £14 million of private sector investment.

Mr Coghill added: "We're delighted to have found an investor that has not only provided us with financial investment, but who will also be actively involved in and support the company's development,"

David Maas of xénos, said: "Companies like Asphalia Food Products Ltd often require an injection of capital to push their expansion plans forward. By matching a business angel to the company we have been able to provide the necessary cash investment while bringing additional management experience to the business to help drive its new product forward."

Small Business Owners Slay Dragons Den

The following article was published by Kashflow on 2nd February 2008.

Duncan Bannatyne and his fellow Dragons Den panellists will be crying into their millionaires breakfasts as nearly 65% of small business owners say that they would turn their back on an offer from them as they dont believe it represents good value for money. Duncan, Peter, Deborah, Theo and James are all out!

The Dragon’s Den flames have been put out by nearly 65% of small to medium sized enterprise (SME) owners who say that they would turn down a deal from one of the Dragon’s. The research, carried out by UK based accounting software company KashFlow revealed that business owners do not believe that the deals put on the table by the quintet represent good value for money and would instead turn to banks or private backers for a more reasonable rate or split of the business.

Just under 750 business owners took part in the research and KashFlow also discovered that when it came to reasons why small business owners would accept an offer from the Dragon’s 36% said it was for the experience they would bring to the company.

A further 27% said they would accept in order to try and grow their company, 24% said they would only accept because of the positive public relations opportunities, 6% said they would only accept if they had no option and a few jokers said they would accept an offer from Duncan Bannatyne just to get a discount off his gym fees.

KashFlow commissioned the research to try and get a better understanding of small companies financial requirements and speaking about the findings Duane Jackson, Managing Director of KashFlow said, “Many business owners don’t realise that if they just kept a better eye on their business expense and cash-flow they would probably not need to approach television shows for funding and could get a much better offer either from a private financial backer or the banks”.

He continued, “When KashFlow was looking for private financial backing I would have never dreamt of going on television and giving away 50% of my company just for a bit of extra publicity and I think many business owners realise this after they have appeared and this is why so few deals complete following an offer on camera”.

A good example of a business owner who went up against the Dragons and won is Ling Valentine from LINGsCARS.com. She turned down an offer from the dragons and her comment that “Chinese eat dragons for breakfast” became a cult hit with business owners across the UK.

Ling (34) said, “I had two joint offers from dragons Bannatyne and Farleigh. When I refused their first offer demanding a massive 30% of my business, they reconsidered and improved their offer. But they always wanted too much. I flat refused both of their offers. LINGsCARS.com has more than doubled turnover of cars to £28 million in 2007 and I’m really glad I walked away. Businesses who jump at their first offer must be desperate or barmy.”

Entrepreneur Action

The Western Mail reports today that Welsh business support agency Entrepreneur Action has gone into liquidation.

There is a terrible irony that an organisation that advised small and growing businesses on how to be successful can itself fail.

We are extremely sympathetic to all creditors and member companies affected by this collapse, and believe that there are very serious questions to be asked about how this was allowed to happen given that it received a significant amount of support from the Welsh Assembly government to deliver those services. Coupled with this, companies entering its "high growth programme" were asked to pay £5,000, for which they were promised support and consultancy worth up to £40,000.

The Collective would like to know:

• How much money did Entrepreneur Action and its associated companies receive from the Welsh Assembly over its life?
• What remuneration did its management team receive in that period?
• Why was liquidation the only course of action available to the Board, and how did they allow the company's financial position to deteriorate to such an extent that this became the only option?
• What action is being taken to protect the interests of those companies which paid £5,000 but had not received the full extent of the support they were promised?

Are you Mr N Rock?

Is this you?

Mr N Rock owns property. He has borrowed money from banks in order to fund his property purchase. As the value of his property portfolio has grown, he has used this uplift in value to fund more property purchasing (and hence taken on more debt). Sounds good, doesn't it?

Here's the problem. He's committed to buying more property - his day job doesn't earn enough to fund his lifestyle, so he has to use some of the value he extracts from each property to cover his costs, and he only becomes richer if he keeps extracting as much residual value from each property and then reinvesting it in more. The ever increasing pile of interest is serviced (barely) from the people living in the properties, so that's ok...isn't it?

Not any more. He's just discovered three problems.

1. His friendly bank doesn't want to lend him any more money, nor will they increase their exposure against his existing properties. No new properties, no way of supporting his lifestyle;
2. The value of his properties isn't going up any longer; in effect, when you take into account inflation, his capital worth is diminishing;
3. One or two of his tenants are having problems making their rental payments. It seems their costs have gone up - energy, fuel, other borrowings...now he has a problem making the interest repayments.

In our view, this is why the UK government has been so keen to support Northern Rock. It's just a bigger version of a large number of the UK population, and if it fails, so might we.... none of us can afford that.