Advice from the champions of company growth

This year's Growth Company Awards gave industry accolades and national recognition to the cream of the crop in the UK's enterprise market. GrowthBusiness uncovers the secret to their winning ways – the pearls of wisdom they offer entrepreneurs.

Achieving the commercial success and respect that wins you or your company a coveted industry award must be among the key ambitions of any budding entrepreneur. Such trophies can open the doors to new business and significant corporate partners.

If you hope to join the ranks of the leading lights in business, you could do worse than learn how they’ve done it. In particular, the annual Growth Company Awards always provides instructive examples for those setting out on the road to fortune.

Organised by GrowthBusiness’ sister publication, Growth Company Investor, the awards are bestowed upon companies involved with AIM, the fast-growing branch of the London Stock Exchange. Each year, every single AIM-listed company is canvassed for its views on its advisers, producing a shortlist from which a panel of experts selects the winners and runners-up.

Here are some of the key pieces of advice from this year’s business growth champions.

Service is the key

Adam Hart of investment group KBC Peel Hunt, AIM Nominated Adviser of the Year, says the key to the firm’s success ‘is that we are service-led.

‘We are not a transaction house (though we do a lot of transactions). We look for a comfortable relationship, not a combative one.’

Nominated advisers (Nomads) are central to AIM’s system of self-regulation. ‘It’s often a case of working with client companies to teach them what is possible and what is not,’ he explains.

With a boom of new companies coming to the AIM market, Hart warns, ‘There’s a huge amount of IPO work for companies like ours and that could make it easy to lose touch with your existing clients. But keeping in touch is part of being a Nomad and if you don’t do that you’re not fulfilling your obligations.’

Client service is clearly also a priority for Numis, winner of the AIM Broker of Year award, and for Baker Tilly, voted AIM Accountant of 2006. Chilton Taylor of Baker Tilly argues, ‘AIM chief executives must appreciate our combination of partner-led and solutions-driven services,’ as applied not only to public company flotations but audit, tax and other corporate finance services.

Mark Turner of solicitor DLA, winner of the AIM Lawyer of the Year award, says the firm’s ‘fully-integrated service’ model has helped greatly with business cross-referrals between departments. But he adds that DLA’s global reach, with offices ‘all over the USA’, in the former Soviet Union and around the world, is a central factor at a time when AIM is making an increasing impact abroad.

DLA is advising on a ‘big float’ from China, he hints tantalisingly. It has handled nearly 50 floats in two years and also advises Nomads, including KBC Peel Hunt, Evolution and Canaccord. ‘Nomads are taking their duties a bit more seriously these days,’ says Turner.

Picking tomorrow’s winners

At least as important as advisers are the people who might back your venture and the analysts they heed. Philip Dorgan, head of research at broker Panmure Gordon, was named Analyst of the Year and Close Brothers won the award for Venture Capital Trust Fund Manager of 2006.

Patrick Reeve of Close Brothers, whose Technology & General VCT won the award with colleague Andrew Buchanan’s AIM VCT, says his fund maintains ‘a balanced portfolio of principally unquoted companies. We like low-risk, even boring asset-based, income-generating companies, such as pubs or healthcare providers,’ he explains. He spices the mix with ‘smaller amount of high-tech, leading edge’ hopefuls.

‘There are still a lot of opportunities around,’ he suggests, adding, ‘You have to take a lot of time and trouble over private companies. But that is what we are paid for.’

Richard Plackett of Merrill Lynch Fund Managers maintains that Merrill’s UK Smaller Companies fund was voted Small Cap Fund of 2006 because of a ‘fantastic record’.

‘We try to invest in companies that can grow substantially over several years, which are profitable, cash-generative and undervalued,’ he adds.

Merrill follows management teams, provided their companies display ‘salesmanship, an ability to handle growth, clarity of objectives, barriers to entry, cash generation, good track records and strong balance sheets.’ But, he warns, ‘we are ruthless about selling shares the first time they disappoint.’

Leading the field

Paul Latham, co-founder and finance director of Lancashire-based Debt Free Direct (DFD), winner of the 2006 AIM Growth Company of the Year award, is clear about the ‘three pillars’ on which he and chief executive Andrew Redmond have built the company. Through ‘building awareness, providing best advice and suggesting appropriate solutions’, DFD has earned an AIM market value of £160 million in barely six years of advising people mired in serious debt.

First came detecting and seizing a new business opening. When leading independent accountancy group Lathams was bought by specialist finance house Tenon in 2000, Redmond, the firm’s insolvency expert, and Latham himself bought out the part that became DFD.  

‘We spotted IVAs (Individual Voluntary Arrangements, a legal device to stave off bankruptcy) as a growth area,’ recalls Latham. ‘Burgeoning consumer debt pointed the way.’

The ‘key to tapping this opportunity was generating awareness among the huge number of over-indebted consumers,’ he stresses. DFD advertises ‘in a range of media reaching the over-indebted’.

At this point, the second pillar comes into play. DFD puts new clients through its ‘Best Advice Model’, a computer algorithm based on their financial profiles, which will produce a range of possible solutions. The company will select ‘the least drastic’ solutions, which could range from debt restructuring to IVAs or bankruptcy, and offer free advice on which of these courses a client should take.

That leads to pillar three – ‘the appropriate solution’.

Only if the client opts for an IVA does DFD get paid – by the creditors, not the client – and so it is as well that the vast majority do choose this route. DFD, whose interim profits of £1.7 million exceeded the entire previous year’s figure, has lobbied for the minimum allowable IVA size to be cut from £25,000 to £15,000 and Redmond is optimistic this will happen.

Leslie Copeland

Leslie Copeland

Leslie was made Editor for Growth Company Investor magazine in 2000, then headed up the launch of Business XL magazine, and then became Editorial Director in 2007 for the online and print publication portfolio...

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