Seizing an opportunity before a rival, or making good a smart idea can be a road to riches. Peter Bartram meets nine directors who have done, or aim to do, just that, and an ex-venture capitalist who's giving ideas away.
1. Exploit low rates
Pramod Dhalwani, finance director of recruitment agency Veritas IT, cites low interest rates as one reason for its burgeoning revenues of £13.4m, a rise of 150 per cent in two years. Veritas hires out IT contractors to its clients. It pays the contractors weekly but gets paid by clients less frequently. Which means that, as the company grows, it has to finance a larger sum of upfront wages to the contractors.
Veritas has plugged the cashflow gap, Dhalwani explains, by invoice discounting (drawing money against outstanding invoices), usually at around one or one and a half per cent above base rates. Low interest rates mean invoice discounting stays viable. He says low inflation is also important because it helps keep Veritas's overheads down and has enabled it to build a cash reserve that was used to part-fund its acquisition of Paragon Information Technology in 2004.
David Molian, co-director of the business growth and development programme at Cranfield School of Management, says: "The single most important thing about low inflation for small and medium-sized enterprises (SMEs) is the cost of finance, which is seen as cheap and easily available." The private equity world has been exploiting this for years, leveraging takeover deals and management buyouts with ever-larger proportions of borrowing.
"The business environment is pretty benign for building a business," says Molian. "Low inflation is almost taken for granted now."
2. Going grey
Peter Beadles, managing director of Readers Offers Limited (ROL), an independent retailer of cruise trips in the UK, believes the over-50s represent the biggest growth market in the country. "More people are reaching retirement age, they are living longer, they have available capital-and they have the time to spend it," he says. ROL's results bear out Beadles' strategy; turnover this year should hit £40m, up from £12m two years ago.
The UK's "woofs"-well-off older folk-could have disposal income of £300bn by 2008, according to market analyst Datamonitor, which coined the acronym. Already the over-55s spend more on chocolate-£700m a year-than children.
The grey market is not homogeneous, but a collection of markets, notes Janet Kiddle, founder of market research consultancy Steel Magnolia, which specialises in understanding the over-50s. But this suits many SMEs, "because their size means their strategies for the grey market will be targeted," she notes.
Over-50s are canny spenders though. "Many mature consumers are marketing cynics," warns Daniel Bone, a consumer markets analyst at Datamonitor. So SMEs must focus on "trust, realism and honesty" when dealing with them.
And, as Beadles notes, the grey market doesn't respond to being targeted as old: "We've never indicated it as the market we're looking for. We just go in with a product that we know will appeal to them."
3. Seek emerging markets
Charles Wemyss, engineering director of Litre Meter, hopes to win £3m worth of business from Brazil's booming oil industry by 2008. It's an ambitious target for a company that will turn over only £1.7m this financial year. But Litre Meter has already racked up Brazilian orders worth around £500,000 for specialist equipment that measures the flow of chemicals injected into oil pipelines.
Wemyss is exploiting the business potential of the "BRIC" economies (Brazil, Russia, India and China). According to bank Goldman Sachs, the aggregate GDP growth in these countries will top eight per cent this year-almost four times that of the UK's expected growth. And the BRIC countries have supplied a third of new world demand in the past five years.
As Wemyss has found, you need patience and good planning. "One of our Brazilian contracts took more than 18 months to win," he says. "There were hurdles to get over, but we knew we would get it in the end."
4. Green transport
It was on a trip to India that the seeds of Dominic Ponniah's big idea were sown. "I saw the tuk-tuks and I thought 'we must get those in England'," he says. It took two years jumping through bureaucrats' hoops and £200,000 of investment but, this summer, Ponniah started Europe's first tuk-tuk service in Brighton, called TucTuc, taking advantage of the growing customer demand for green transport (his fleet runs on near zero-emission compressed natural gas).
Ponniah is planning to open a London service next May with 40 vehicles and he is ordering at least 100 from his supplier, near Mumbai. The following year, he's got his sights set on Bristol, Birmingham, Manchester and Edinburgh.
The tuk-tuks cost Ponniah nearly £5,000 each to fit out to UK safety standards, but he predicts turnover in London will reach £7m to £8m in the first year. "It is quite rapid growth," he says.
With such a rich potential market, competition won't be far away. Ponniah doesn't sound worried. "We've had to go through a very arduous process to get where we are and if anyone else wanted to try it, they would have to do the same."
5. Ethical is good
Managing director Jim Rowbotham is banking on oil-eating bacteria to power growth at Pexa, which sells Clean Cube, an environment-friendly cleaner and degreaser of engineering parts.
The bacteria live in the machine's biological filter and chomp their way through the grease that gets caught in the cleaning solvent-so it can be recycled time and time again with no damaging waste.
Rowbotham sees it as the key to future sales, with a potential to hit £100m, dwarfing the firm's traditional aerospace materials market. Clean Cube shows ethical business can be profitable and that it pays to be good. The last Ethical Consumerism report from the Co-operative Bank in 2005, showed that consumers spent £25.8bn on products and services that supported their values. The figure is growing at more than four times the speed of other household spending.
But it's not always easy for companies to take decisions about ethical business, says Simon Webley, research director at the Institute of Business Ethics. "Once you bring in money from outside, you have other stakeholders involved and you have to conform to what your investors think is 'good practice'," he says.
6. Tiny technology
Dr Jenny Tillotson can already smell success. She hopes to raise £300,000 to enable her start-up firm, Sensory Design & Technology, to launch a revolutionary necklace that releases perfume when it picks up a sensory signal from the body, such as when somebody is stressed.
Tillotson, whose PhD was on "interactive olfactory surfaces", is using nanotechnology-techniques that work on the unimaginably small scale of atoms-to develop "emotional clothing". Her aim is to embed wireless sensor networks and microfluidic devices in items such as jewellry, clothes and shoes, working in tandem with individual molecules of fragrance.
There are already more than 100 nano-products on sale in Britain, including sunscreens, cosmetics, fuel additives, cleaning products and wound dressings. Nano gurus predict hundreds more in the next few years in areas as diverse as paint, glue, medical sensors and computer memory. "A lot of the technologies are being developed by new and exciting SMEs or university spin-outs," says Del Stark, chief executive of the European Nanotechnology Trade Alliance.
Meanwhile, Tillotson says venture capitalists are sniffing round her necklace idea.
7. Tapping a big resource
The summer's drought did no harm for quoted utility company Spice Holdings. Three years ago, chief executive Simon Rigby moved the company into the water metering business.
In its financial year, which ended in April, Spice's water services division accounted for £42m of the firm's £133m turnover and posted a 43 per cent profit increase. "The water division has the largest turnover and is also the most profitable," says Rigby.
The world market for water services is huge. There are still more than one billion people who use unsafe drinking water and 2.6bn people-40 per cent of the world's population-who lack basic sanitation, according to the International Water Association.
This year, Spice expects to install around 90,000 new water meters and replace a similar number. It has also moved into leak repairs. In the last year, it did £3m of repair business.
Mains water is drinking quality but only one per cent is drunk. So Rigby is looking at alternative systems, such as collecting "grey water" from supermarket roofs that could, for example, flush lavatories. Such efficiencies, he says, will probably be "the biggest development over the next decade."
8. Cashing in on the time-pressed executive
Directors who are too busy to do their Christmas shopping this year will be calling Danièle Hromek. Five years ago, Hromek founded The Busting Diva, a company which helps out professionals who are cash-rich but time-poor with those time-consuming chores that cut into their working day, such as shopping, getting clothes altered-even moving house.
With around 22 per cent of Britain's 28 million working population grafting more than 45 hours a week, there is a growing market for firms that provide services which save time.
"I took a client shopping recently and we were looking for an outfit for him to wear on a date that evening," recalls Hromek. "We not only found the outfit, but several other items as well. He'd have spent hours wandering round by himself."
Nigel Meaker, director of the Institute for Employment Studies, confirms that longer hours are a UK problem. "Most other European countries' working hours cluster around 35 to 45 hours a week," he says. "In the UK, we've got quite large numbers of people-particularly directors, managers and professionals-working very long hours."
There seems little prospect of the pattern changing. Which could be good news for Hromek and others who make life easier for workaholics.
9. Safety and security
At Tensor, the security products company, managing director Nigel Smith has ambitious plans for growth. Since it started in 1969, the firm has ambled to a modest £7m turnover, which Smith wants to multiply 10 times in five years simply by looking at ways of taking a more integrated approach to security.
A recent line of fingerprint recognition machines that uses biometric technology has sold well for Tensor, with more than 60 units shifted so far. But Smith says the big growth area will be in systems that can pull together a range of different security and control functions. "Companies don't want separate systems controlling access, attendance and fingerprint reading," he says. "They want one system that does the lot-a security system that handles everything."
David Dickinson, chief executive of the British Security Industry Association, sees business opportunities for companies that can deliver services that use technology and people in innovative ways. "For example, if a building has a security guard during the 'silent hours' [at night], in almost every case that job can be done better and less expensively by technology.
"But as good as technology is, it still needs human intervention. Innovation and delivery of service are going to be the growth route for the security industry."
10. Give it all away
When Stephen Dawson retired after 25 years in the venture capital business, he wanted a new challenge. So, four years ago, he set up Impetus Trust. It applies the management disciplines Dawson learnt in the venture capital world to charities, and works with them over the long term. The advice its top business supporters can provide is often as valuable as the cash they generously donate, Dawson says.
So far, Impetus has raised around £3m, of which £1.6m has been invested in charities such as Speaking Up!-which works with people who have learning difficulties-and the Eating Disorders Association.
"There are a number of new philanthropists using their wealth and business experience not only to create private foundations but to support emerging models in philanthropy and to test new approaches," says Theresa Lloyd, who runs her own charity consultancy and is author of Why Rich People Give.
She points out that demographic predictions suggest that one in five people born in the 1960s will be childless. "That means there is going to be a lot of money available for good causes other than passing it on to children," she says.
