Birmingham Post Article - May 2011

Lucas Markou, partner at Solihull-based accountants and business advisors Jerroms LLP, analyses the DNA of the successful entrepreneur

What makes a successful entrepreneur? My experience of advising this business elite suggests that a willingness to take measured risks and a capacity for hard work top the list.

But there is much more to it than that.

It's also about focus, whether on markets, present and future, or on cash.

Successful business founders concentrate on markets and competitors, rather than just on products or services for their own sake.

They recognise that it is the market that ultimately decides whether a business succeeds. Customer needs change and early stage businesses have the opportunity to be nimble in adapting what they have to offer.

Cash really is king for entrepreneurs as they invest in machinery and infrastructure and working capital while revenues are still building. As the business grows, there can be new challenges as more working capital finance is needed and banks remain cautious.

Entrepreneurs have to look at the best funding structure, including the mix of equiy loan. They have also to make sure that there are accurate management accounts and proper budgeting, for their own use as well as in the interest of good relationships with financers and stakeholders.

Successful business owners will usually be those who are willing to take advice, whether we are talking about strategic or specialist insight into future direction or such areas as tax advice.

For example, the early stage in the life of the business is the time to get the ownership structure right.

I always advise caution when an entrepreneur is tempted to issue more shares. It may be superficially attractive to use shares as a currency to pay for assistance, advice and support etc but a spread of ownership can cause problems as the business grows.

In any event, shareholder agreements defining the rights and responsibilities of shareholders and the route for exit or disposal should always be drawn up where shares are taken by anyone other than the founder/entrepreneurs.

Ultimate tax liabilities can be affected in a major way by decisions taken in these fledgling stages. For example, when a business is sold, entrepreneur's relief can cut tax bills for an individual to ten per cent on up to £10 million of lifetime gains.

A married couple can each benefit from this, saving up to £3.6 million compared with full capital gains tax liabilities. This saving can arise if the entreprise grows substancially and if husband and wife are both involved in the business, each with more than five per cent voting shares.

Relationships with key colleagues, staff members, customers and suppliers are also vital.

Few entreprises can survive for as long as 'one-man bands' and the good entrepreneur will know when to start building a team.