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Fully focused on owner-managed business

For owner-managed businesses, things have never been better. Or at least, they are the best they have been since 2008. That is the conclusion of the 2015 edition of the Allied Irish Bank (GB) annual Owner-Managed Business Outlook report, which shows that far more owners of these businesses are positive about the current economic environment than they were in 2014. They expect the economic situation to improve in the next year and are optimistic about the prospects for their own businesses.

The report, which was based on a telephone survey of 300 senior financial decision-makers at owner-managed firms in June and July, found six in ten (62 per cent) expect the economic situation to improve in the next year, and nine in ten (90 per cent) are optimistic about the prospects for their own businesses. Two-fifths (44 per cent) of those surveyed were “positive” about the current economic environment in the UK, an increase of 7 per cent on the previous survey, which was carried out as recently as October 2014.

Perhaps the most significant result was that 8 per cent of that 44 per cent described the situation as “extremely good”, well up on the 37 per cent who said the same just nine months previously. Even more positively, over half (52 per cent) of the 300 executives said they expect the economic situation to improve over the next year, a figure that rises to almost four-fifths (77 per cent) among bigger businesses, with a turnover of £51 million to £100 million.


When it came to their own businesses, the firms were also optimistic. More than six in ten (62 per cent) said they expect their sales or revenue to increase in the next year and the same number thought profits would also increase.


It is possible that these results might have been even more positive if the survey had been carried out a few weeks later, as by far the biggest macro challenge respondents identified was the Greek eurozone crisis, which at the time was in full swing and looked like it could lead to a breakdown of the euro and even the European Union. One in five respondents (20 per cent) identified Grexit and its related issues as the biggest problem, double the next biggest challenge.

With that issue resolved, at least for now, it is fair to assume that owner-managed businesses might be feeling even more positive. “What the research is saying is that everything is pointing in the right direction for owner-managed businesses,” says Allied Irish Bank (GB) head of customer proposition Steven Cochran. “They feel there is economic stability and the macro issue of the eurozone appears to have been resolved. It all points to the conclusion that now is the time to make investment for growth.”


Indeed, these businesses are investing. Asked what sources they were using to fund growth, almost four-fifths (79 per cent) said they were self-financing, a notable increase on the three-fifths (57 per cent) who said the same in the 2014 survey. The second-biggest source of money was bank financing, with six in ten (59 per cent) saying they used it, well up on the five in ten (47 per cent) of just a few months previously.

These figures show two things: one, that firms are indeed investing for the future and, despite the widespread belief that banks are not investing in businesses, many are able to secure bank funding. Indeed, just a fifth (22 per cent) said that access to finance was a potential risk for their business. That said there has been in increase in non-traditional methods of investment. Almost a quarter of respondents (23 per cent) said they were using “alternative” funding sources, including crowdsourcing, a figure which had more than tripled from the 7 per cent who used this in 2014.

Allied Irish Bank (GB) is a single-minded business bank which is focused on owner-managed businesses

Even more (27 per cent) said they had used funds from “private equity”, including angel investors to fund growth, more than double the figure (13 per cent) who were doing so in 2014. Whether that is because they can’t secure bank funding or assume they won’t be able to and never ask, is not certain. But it is clear bank funding is at a lower level than in the past. “If we had asked this question ten years ago, you can be sure that more would have been using bank funding,” says Mr Cochran.

Any perception that owner-managed businesses do not have valuable relationships with banks would be wrong. Over three-quarters of those surveyed (76 per cent) said the relationship with their banking partner was “important” to them. More than 40 per cent of firms said they were looking for new lending facilities, although this figure fell to 24 per cent for smaller businesses, with a turnover of £5 million to £10 million.


Another finding that chimes with this is that two-thirds (65 per cent) of smaller businesses were “satisfied” with their banking partner. Overall the figure is 81 per cent which could suggest that, as they grow, businesses find partners they can work well with. But it is likely that mere inertia lies behind it. As time goes on, all too often businesses settle for being simply satisfied and take a “better the devil you know” attitude.

Allied Irish Bank (GB) wants to change that. Unlike the high street banks, which are jacks of all trades, it is a single-minded business bank which is focused on owner-managed businesses. It values its customers’ businesses and has a vested interest in their success. At this point in the economic cycle, businesses should be looking for investment. It would be a shame if they compromised on growth because they have settled for a second-best bank.


Owner-managed businesses have to deal with a multitude of complicated and sensitive strategic issues, so why not approach an experienced bank for some friendly advice

Can a bank be a strategic adviser to an owner-managed business? It sounds promising in theory. But do banks really want to talk about stuff like succession planning or whether to open an office in a new region?

“We love it when clients come and talk to us about issues like this,” says Steven Cochran, head of customer proposition, products and channels at Allied Irish Bank (GB). “We constantly surprise them with how enthusiastic we are and what we have to contribute.”

Bank managers have unique strengths as advisers. “Take succession planning,” says Mr Cochran. “I’ve dealt with customers who have lost their parents and are thrust into the front-line during that traumatic time. I’ve also helped parents who are still around reduce their workload to two days a week. These experiences mean I can give guidance to other clients who are facing similar challenges.”

We can play devil’s advocate, if it will help. We’ll let you pitch your idea and say ‘convince me’. Together we can analyse the strengths and weaknesses of your plan

Growth advice is a forte of bank managers. “We work every day with companies wanting to talk through their expansions plans. One day we might talk to a nursing home with two locations and they want to analyse whether to open a third. The next day it might be a logistics company building a presence in the north of England. Our business managers learn from every interaction and can bring these insights to the table,” he says.

AIB (GB) has specialist teams who can be consulted for complex problems. Whether a client is thinking of raising funds via an equity scheme or is considering asset finance, there are experts ready to offer sophisticated advice.

The trouble is, says Mr Cochran, many business owners are shy about asking their bank for advice. “Please come to us,” he says. “There’s a myth that the bank has a file labelled ‘silly ideas the customer had’. We don’t. We see our relationship as a collaboration and both parties benefit when we have these conversations.”


Even off-piste subjects are OK. “We can play devil’s advocate, if it will help. We’ll let you pitch your idea and say ‘convince me’. Together we can analyse the strengths and weaknesses of your plan,” he adds.

Above all, AIB (GB) wants clients to know they will get a warm reception, no matter what they ask from their bank. Mr Cochran concludes: “We can be as enthusiastic about our clients’ businesses as they are. I’ve felt it myself many times. Our message is to come and see us. Work with us on your problems. We would love to surprise you with what we can offer.”