Small businesses, recession-busters

Fruit For The Office was ground-breaking when Ox started it through placing
stickers on his father’s stall in London’s Piccadilly 10 years ago, and its
success made him a finalist in the mobile phone company O2’s recent X awards
for entrepreneurs. But he feels that the new service could do even better.

Ox, 29, is not exactly following the career his parents would have chosen for
him. Tom and Lesley Ox struggled to send him and his brother to a good
school in the hope that they would not have to join the family greengrocery
business that has been trading in London and Essex for more than 100 years.
However, after just a term at university, Ox left and joined his parents.
Once there, he quickly saw the benefits technology could bring to a business
that still largely operates in traditional ways.

Combining the experience gained through being in the trade for generations
with a readiness to invest in new thinking, the family firm has, in Ox’s
words, “gone a bit corporate”, and grown to about 16 people, with
his father using his vast experience to act as buyer, and his mother in
customer service.

The main benefit of www.fruitand
veg.co.uk
? Ox is convinced the outlay on the domain name will quickly
pay off ? is that it will enable chefs and others in the catering trade to
order supplies online at any time of the day or night and have them
delivered hours later. But he is also augmenting the service by working with
a chef to develop such services as recipe ideas and recommendations of what
fruit, vegetables and herbs are in season.

Ox funded Fruit For The Office from the sale of his flat and is confident
that, with the solid foundations of having been in profit from the first
year, he and his team can make the new venture pay off in the short term.

Stephen Fitzpatrick is another example of the pragmatic approach adopted by
many entrepreneurs. With parents who ran their own company, he set up his
own business ? an online rental property listing service ? that did well
enough for him, like Ox, to reach the final of a competition for
entrepreneurs. But when it did not develop as he wanted, he went into the
City and developed his skills while looking for a new opportunity.

He has now teamed up with Kris Black, who was previously at the smoothie
company Innocent Drinks, to launch an energy company ? ovoenergy.com
? that is seeking to win business from the big suppliers through a
combination of superior customer service and a simplified tariff with the
added allure of a significant renewable energy offering.

Since launching in September, the company, based in Gloucestershire, has
exceeded its targets, and now employs about 30 people. This rapid growth has
created an issue that the founders did not expect to encounter when starting
in uncertain economic times ? problems with finding the right people.

Fitzpatrick and Black deliberately sited the business in an area where they
did not think there would be competition for the sort of people they needed
to hire, but are still finding it hard to find the right candidates. “Because
the business is growing so quickly, we need people that are adaptable,”
says Fitzpatrick. “They may be in one role and may need to change area.
We are looking for people willing to work really hard and who have a
commitment to quality.”

He says he is well versed in both those attributes thanks to his time in
banking. “The City teaches you about hard work,” he adds.

That experience also gives him an insight into how would-be funders think. As
a result, ovoenergy is for the moment entirely privately financed with no
debt. While he accepts that opportunities to expand may bring about the need
to raise capital, he was determined to avoid seeking funding at the outset: “The
longer you can wait for capital, the better the valuation you get.”

Fitzpatrick is sure he and Black will learn lessons to add to those he learnt
in his earlier venture. But for now, they have found the recession a good
time to start out.

They deliberately chose the energy sector because ? on the consumer side ? it
was relatively recession-proof. They also felt they could make inroads
through a different approach. Then they found it was possible to negotiate
good rates for the services they needed ? whether offices, consultancy or
software. They were even able to hire good key staff who were frustrated in
their current jobs.

As with many businesses being set up these days, ovoenergy was focused on
growth from the start. Energy was an attractive industry because it was the biggest in the world and was changing.

As they develop their businesses, Ox and Fitzpatrick and Black might want to
consider the likely route indicated by CultureMap, the think-tank focused on
small- and medium-sized businesses. Co-founder Katerina Damilos says: “As
companies grow (to the 50 employees threshold), they seem to become less and
less tolerant of failure and less able to cope with it. Businesses with
50-100 employees seem to reverse the trend. The biggest (more than 100
employees) are the most fearful of mistakes, but seem more able to cope
after failure occurs.”

She adds that this pattern makes sense if these size bands are seen as step
changes in the development of a business. “Fifty employees is an
important mark that distinguishes micro-businesses from the rest, and one
can see a constant battle for survival and achieving established status.
Failure, therefore, is not an option, and mistakes should be avoided.
Businesses with more than 50 employees have momentum, can more easily
support mistakes and therefore possible failure.”

On the other hand, the largest SMEs, which are morphing into more corporate
entities, are understandably less tolerant of mistakes (because there is
more internal competition, there are more reporting structures, and there
are culpability issues). But if failure does occur, there’s safety in
numbers, so it’s easy to imagine that it’s easy to pick themselves up.

“Start-ups are more likely to see mistakes as an opportunity to learn,
but are less likely to cope with failure. This again makes sense considering
how many start-ups fail to grow. They seem to fizzle out after serious blows,”
says Damilos.

Another finding is businesses with mostly male workforces are more fearful of
mistakes than those with female workforces. CultureMap has seen this trend
in earlier exploration of entrepreneurship and risk perceptions. While male
businesses conform to the aggressive, riskier stereotype, female businesses
are often more nimble and able to micro-manage risk and failure (which is
sometimes an inevitable outcome of risk).

Finally, when types of business owner are analysed, it is found those who
started the business driven by a single-minded idea are also more tolerant
of mistakes and able to cope with failure. These might include entrepreneurs
pursuing a personal passion, or who have a “big idea” or who even
want to do something for the community or to “give something back”.

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