Tag Archives: Finance

What is an MBA? – by EIBF President David Falzani MBE     

Benefits of Studying for an MBA

The MBA has been around since 1908 when the Harvard Graduate School of Business Administration was established in the USA. Across the world today, the MBA is the watchword for business career success, and prospective students are spoilt for choice as to where and how they study – from the world-leading schools like Harvard and London Business School (which was the first UK business school) to virtual online schools, from full-time courses to part time study.

MBA programmes prepare professionals for senior management roles in business.  Typically, MBAs are taken by those who have already been working for several years, but that’s not always the case.  Some people go straight from their first university degree to study for an MBA degree and this is the beauty of the business school offering; there are options to suit everyone.  This includes MBAs at premium business schools, like LBS or Harvard, and, for want of a better term, ‘mainstream’ business schools.  Courses are available either full-time (30-60 hours per week) or part-time (one or two days per week) and there are Executive MBA programmes for senior corporate executives and managers who study whilst working, and sometimes their study is partially or fully funded by the employer.

Requirements to Study an MBA
To study for an MBA, you will usually require an undergraduate degree.  Most MBAs require a 2:1 or above, but there are some that will accept 2:2 degrees so long as they are paired with an exceptional application and a set of relevant skills and experiences.  Some work experience is generally required; this being the case most MBA students are between the ages of 27 and 30. One important entry criterion to meet, particularly for top schools, is the GMAT exam score. The Graduate Management Admission Test, or GMAT, is designed to test your abilities across a wide range of areas. A good score will often facilitate entry into leading schools, and each school’s GMAT averages are widely published.

Benefits of an MBA
MBAs expose students to many areas of business including accounting, finance, marketing, people management and leadership skills, and full-time courses do so in an intensive, immersive way that challenges and stretches students’ perspectives and thinking.  The MBA experience often pushes candidates hard – the speed and sheer amount of work faced is sometimes described as a re-wiring of candidates’ brains, such that they can think critically and quickly analyse information, filtering out what is important from the irrelevant. The skills taught in an MBA programme enable you to read, assess, structure and plan rapidly; skills that will enable you to find innovative ways of dealing with big problems.  An MBA graduate also gains an up to date and razor-sharp ‘tool kit’ to apply to any business challenge. These aspects are some of the reasons why the MBA has become so highly regarded by employers.

People from all walks of life want to gain an MBA qualification in order to improve their understanding of business and to accelerate their career.  Developing your business skills is not only good for your personal and career growth, but it is also good for companies and organisations and essential for the economy – enhanced knowledge and skills leads to better solutions to problems which can increase productivity, as well as transform products and services that affect people’s lives.

If you are at that pivotal point in your career where you want to learn more about business and the decision-making processes, it’s important to know that as valuable as the MBA is, the programme is not a final destination, it’s very much the start of a longer journey.  In an MBA you will be introduced to many facets of business and gain a foundation that enables you to confidently delve deeper into areas of interest across a range of subjects as you need to.  Because of this solid framework, when you are back in the world of work, it will be easier to go deeper into subjects that are needed in your job. You will be able to understand business issues and explore them at a level you were unable to do before your MBA.

A Wealth of Choice of Business Schools
Every year thousands of professionals start their search for the right business school for them.  At the top of the MBA tree are the premium schools – these are equivalent to Ivy League ranked universities, which often have long histories, coveted brands, outstanding facilities and attract the best staff and candidates.  The institution’s brand, the quality of faculty and quality of student admissions are all perpetuated by each other, creating an institution designed to offer the very best environment for business education.

Gaining a qualification from a top international business school will open new opportunities.  However, their prestige and resources mean they command high fees – some can be as much as 10 times more expensive than mainstream business schools.  On the upside, their brands add considerable value to the graduates’ own personal brand, giving them an additional asset when they go back into the job market.

There is fierce competition to secure a place at the top business schools – because their brands are so revered.  Unsurprisingly, these schools are often 7 to 10 times over-subscribed for places, so getting-in requires some real work.  Candidates must be very driven and highly organised to maximise their chances. Having access to the necessary funds also helps – some will seek assistance with fees by applying for a scholarship (eg through charities) to supplement their private financing arrangements.  Many candidates have a risk profile that allows them to take on loans, confident that their future income growth will resolve any debt soon afterwards.

There are many fantastic mainstream business schools that do not cost the earth.  More and more, universities are developing high-quality MBA programmes.  Excellent business education is on offer but, being newer into the MBA market, these do not have the same historical pedigree and reputation enjoyed by their premium counterparts.

While those who attend the mainstream business schools may not come away with quite such a prestigious brand to append to their own, they receive a rounded business education (perhaps with less of the heightened level of induced stress that the premium schools engender into their programmes) and can use their new skills to further their career goals.

The Enduring Power of the Alumni
Apart from the new skills propelling your career prospects and salary (it’s not uncommon for business school graduates to double their pre-MBA salary), there is a huge ‘hidden’ benefit.  During the MBA, students develop a network of peers that become long-term associates and lifelong friends.  The business school Alumni is a powerful asset – because of their shared experience, members will reach out to each other when they need help or advice at any stage in their business career, whether that’s as a senior-level employee or as an entrepreneur.

MBA – A Cause for Celebration!
The tremendous success of the MBA is a cause for celebration: the diversity of schools (some offering campuses in several countries as part of the curriculum), programmes and study timetables allow many people to attain business education in a way that suits their ambitions and circumstances.  The timescale over which one can study an MBA has transformed access – there are full-time courses that run from nine to 21 months depending on the school, and part-time learning up to five years. Schools can be physical or virtual.  And, there are prices to fit almost all budgets.

It’s come a long way since its origins in 1908, adapting and evolving to meet the market needs. Accessible, flexible and current – today’s MBA is a truly wonderful platform to boost business education.

If you are an engineer considering an MBA, visit or scholarship page for details on how to apply for a £50,000 award.


Grooming your Business for Sale: Appointing a Corporate Finance Advisor

Deal Image for SMF Blog on Selling Your Company dreamstime_m_3095784

Preparing a business for an eventual sale is usually a long, arduous process made up of many different steps and unseen complications. Selling a business is nothing like selling a house or private property: it involves negotiations over every minute detail of the company’s infrastructure, as well as its day-to-day functioning. The larger your company is, the more complex this process will be. However, regardless of size, if you’re thinking of selling your company, you need to appoint a corporate finance advisor as soon as possible.  A business sale is fundamentally a results-driven process, and the results you reap will be largely contingent on who is involved in that process.

A sale: more than just a transaction
The first person you may think of consulting is your company accountant. Now, whilst accountants can offer some sage advice about selling the company (pun intended!) – and even nudge you in the right direction when it comes to finances – their role can ultimately be very limited.  The kind of advisor you are looking for is someone that understands the sale as more than just a transaction. This is where corporate finance advisor come in.

A corporate finance adviser acts as counsel on the different types of transactions that involve a degree of change of ownership within a business. Because they will be accompanying you through the entire sale process, the success of a future sale banks heavily on their abilities and experience as advisers. You therefore need to establish what qualities, skills and prestige you need to look for in a corporate finance advisor, and bear these in mind as you begin your search.

What to look for
You might already have an idea of what to look for in a corporate finance adviser. One of the most obvious credentials might include an adviser’s track record in your sector.  Taking this at face-value is not enough; you should try to break down that track record into its composite parts. What sort of results have they achieved in the past, and in what way? What returns did their past clients see from their work?  Do they have a history of strong successes, or just a few one-offs? Look at testimonials and referrals from past clients. It’s also worth looking into any public history of recent transactions they’ve been involved in.  The more you research, the better-informed your decision whether to hire them or not will be. If their track record is consistently successful, then it should tell you what you need to know about their knowledge of the industry and their contacts within it.

It’s worth asking how many projects an adviser is currently involved in. With bigger companies, there’s a chance that they will be working on up to 20 projects at any one time. As well as this, larger advisories may start you off with their more experienced staff, but by the end of the sale’s timeline, there’s a chance they will have handed your sale to some of their less-experienced staff lower down in the company hierarchy.  This will obviously damage the ‘grooming’ process, as, ideally, you want the same advisers to work with you from beginning to end. In this case, it might be better to look at smaller corporate advisories who work with less clients at any one time. These will also tend to have smaller but more focused and targeted teams, which will be able to work much closer with you.  The downside of this is that smaller companies may not have quite the same level of prestige as larger advisories, which could make things slightly more difficult when it comes to dealing with aspects of the sale that rely heavily on an adviser’s reputation.

If looking at a smaller firm, it’s worth checking to see if they have won any awards, or examining evidence of collaboration with other professionals (such as reputable private equity firms or large law firms).  You want an adviser to ideally have quick, direct, and most importantly, confidential access to, and contact with, the different potential interlocutors involved in the sale. This should also reinforce their record of market knowledge, and tell you more about their track record generally.

Another factor of consideration is adviser fees. In this interview, Chris Hale of Travers Smith says:

“If you are looking at a deal with an enterprise value of more than £100m, you would expect the corporate finance adviser to be charging a 1% fee if they are on the sales side, and perhaps ratcheting up to encourage a higher price to a number larger than that, [above £120m] if the target was say £110m they might be getting another 0.5% and then ratchet up even higher than that once you get into the really deal glory territory.  Once you are below £100m the percentages become much more variable. The smaller the deal the less relevant the percentage is. It’s the absolute number that you need to be looking at. So if you are dealing with a deal below £10m the percentage fee might be 5% but what you actually want to look at is the £ number and whether that’s what you think is good value for what you are buying from the advisory firm that you are appointing.”

However, Bob McNaughton (in the same interview), reminds us:

I don’t think I have ever chosen an adviser for their fees. I have chosen them for their capability to do the job. What I would add on fees is [that] I definitely agree they should be incentivised to maximise performance.”

So, while fees are an important consideration when selecting an adviser, they are not the defining factor.  At the front of your mind should be their reputation and know-how; what kind of results they are likely to bring to the table; and, most importantly, their capability, knowledge, and experience in your industry.  A corporate finance adviser is a vital component in preparing your business for sale, and it’s on the basis of these sorts of criteria that you should consider them before hiring anyone.

Raising Money for Your Business Venture

Pound symbol fo raising money for your business blog August 2014

Start-up businesses are often cited as the key to a healthy economy. Indeed, many entrepreneurs work hard to break into new sectors of the market, honing their product, their management and their new company to perfection. Despite this, though, many start-ups – particularly in the tech industry – struggle to attract that much-needed early capital necessary to get their business successfully up and running. This is due to a number of reasons: the macro-economy being a major one, which can affect investment at every level from bank loans to government schemes.   If a company is looking to break particularly fresh new ground, initial investors may be hard to attract as they may be reluctant to take a risk.

Thankfully, there are variety of options for anyone looking to raise funds for a new business venture. Only you can tell which will be appropriate for your business, and by examining your options and the advantages and disadvantages of each option, you will gain a clearer idea of the next step your start-up company can take in securing early capital.

Seed money – friends and family
“Family and friends can be a good source of finance for your business, but it’s important to treat this type of funding as you would a formal finance deal.”

When you’re starting out, it is essential to secure some sort of early-stage capital or ‘seed money’ to get your start-up functioning as a business. This should be seen as a preliminary stage in a funding roadmap, and its function is really to make your business venture more attractive to other, wealthier investors.

One of the most common (and easiest) ways of getting early seed money is through ‘friends and family’ investment. This involves asking those personally close to you for funds. One advantage is that friends and family are often more accommodating and flexible than other investors: this could mean longer repayment schedules on loans than usual, or the investor not asking for security in exchange.

Although this might seem like an informal arrangement given your relationship to these investors, you must see them as exactly that: investors. This means you must formalise every step of friends and family investment, and treat these investors in a professional and business-like way. Failing to do so can harm not only your relationships with these people but your business as well.

Once you’ve secured some early stage capital and your business is up and running to the extent that it is attractive to other forms of investment, you can begin to look at attracting other forms of funding.

Angel investment
“A Business Angel investor uses his or her personal disposable finance and business or professional experience to invest in the growth of a small business, generally in start-up or early stage” (UK Business Angels Association).

Angel investment is perhaps one of the more well-known ways of securing early stage capital. It does, however, require much harder work than grants or friends/family. Angel investors are generally very experienced business people and are looking to see returns from their investment just as much as you are. This means your start-up venture has to demonstrate some true potential. However, once you have an angel investor on-board, his/her resources and experience can be invaluable.

Angel investors will expect ownership of a portion of the company, and will often provide you with invaluable advice and guidance through the start-up process and beyond. There are many different angel investor groups nationwide, such as the UK Business Angels Association and the Angel Investment Network. Make sure you do your research and try to best present your business in a way that ‘angels’ will find attractive.

Venture capital and private equity

Whereas a business angel is an individual investor using their own funds, venture capital comes from a common ‘fund’ using other investors’ money and is run by paid professionals. Venture capitalists raise this money by offering investors a place in the fund, which they can then see a return from once the fund is closed and the investments eventually sold. Because it can be seen as a ‘pooling’ of many different investors’ cash, the investment amount is likely to be much higher than that which you may receive from an ‘angel’.

However, venture capitalists will often demand a seat on your board of directors and some are more interested in already successful medium-sized businesses, rather than early-stage ventures.

Government schemes, bank loans and crowd funding

It can be tricky to attract venture capitalists or angel investors to your new venture, and, regardless, it’s important to try and attract funding from a variety of sources. There are hundreds of government schemes, including loans and grants, created specifically to help get new businesses up and running. These can be reliable, low-risk sources of investment. Such a scheme might also give your venture some additional early prestige, again strengthening your case with other future investors.

A relatively new form of capital funding known as reward-based crowd funding is particularly popular with tech start-ups. These can be easy and fast ways to gain perhaps all of the funds you need. It’s been popularised by sites such as Kickstarter, and there have been a number of success stories, such as the Cube 3D printer. However, attracting funds through this method often hinges on the creation of a specific product popular and innovative enough that consumers want to see it on the market. It may not be very effective if your company focuses on things like tech-based services rather than products.

Bank loans were traditionally seen as one of the first steps taken in securing growth capital. However, since the banking crisis, banks are less likely to loan new ventures substantial amounts of money, and they usually ask for considerable collateral or security in exchange for the loan. You should have a strong business plan to justify any investment in your business, whichever source you pursue and this includes a bank loan – a common reason for failing to secure bank financing is a weak business plan. Bank loans can be a secure source of investment and can be very useful to your business in the long-term, but acquiring a substantial bank loan could be harder for a start-up than seeking other forms of investment.

And finally, keep an eye on print and online media aimed at businesses and entrepreneurs as they sometimes run competitions to win funds to support new ventures. While entering such competitions takes time and effort, they provide lots of benefits. For example, they compel you to think hard about your business idea which in turn can help you hone your proposition. If you are among the lucky winners, you will benefit not only from the prize money (which usually comes without strings), you will also gain media exposure allowing you to promote your business to a much wider audience, including prospective investors and customers.

Ultimately, raising capital takes far longer than you might initially think, and it’s important to think of it as a multiple stage, or even continuous, process. Getting advice from someone you trust with suitable experience would be a good investment.