Why you shouldn't
start a business in Jersey
(but you can if you are stupid)
I spend a fair amount of time on the island of Jersey. Lying 120 kilometers or so from mainland Britain and only measuring 119.5km2, it’s business landscape is very interesting.
Jersey is a self-governing dependency of the United Kingdom, and due to its proximity (it’s only 22 kilometers off the coast of France), it embraces both British and French cultures.
Like it’s smaller neighbor, Guernsey – which is almost half its size, Jersey focuses a lot on hospitality. But other industries are both well established and thriving.
But it got me thinking…
“Why aren’t more people looking at the Channel Islands for business opportunities?”
After all, it’s fair to say that the words “entrepreneur” and “entrepreneurship” are seen and heard a lot more today than they were even as recently as 10 years ago.
But why is that, do you think?
It may just be a sign of the times – the barrier to entry for starting a new business venture is lower today than it’s ever been. It may also be because – thanks to the internet and in particular, social media – we see and hear about the likes of Elon Musk, Bill Gates, Mark Zuckerberg, and others.
Regardless of the reasons for its increasing popularity, the ability to do what you love and on your own terms is an attractive proposition for many people.
But the larger question I’m raising in this article is really, should you launch your own start-up… or go the more direct route and acquire a business?
The Journey Of A Start-Up Business
The first step – and often the catalyst to the birth of a start-up – is finding the right idea.
That idea may be to disrupt or pursue a sector that’s become stale, slow in development, or fragmented. Equally, your idea may transform results, experiences, or possibilities, much like Amazon has and continues to do so.
Depending on the type of idea and in the industry in which it will operate, the start-up might require some seed funding. Therefore, you have to be able to clearly and concisely articulate the idea and its benefits to potential and willing investors.
As an investor myself, I can tell you that for this to happen, the idea must be both innovative and useful. However, above all else, it has to solve a very real problem that currently exists, and one which people will pay to solve.
To survive – and according to Michael Gerber, author of ‘The E-Myth,’ 40 percent of new businesses disappear within a year – the business will need to succeed in a couple of crucial areas…
Firstly, it’ll need to establish a strong market presence. Whether it’s the sector as a whole, peer businesses within the same sector, or potential customers, the new venture needs to be visible and recognized.
The second key area follows on nicely from the first. The business will need customers… period. No customers equals no sales revenue, and no chance of long-term survival.
And here’s the thing:
This can really only be achieved when everything is in place…
So, this means that the idea is clear and has been bought into by all concerned. The market research has been conducted, and there is a definite demand for the product or service. All internal and external processes have been set in motion to deliver a superior buying and product or service delivery experience.
In addition, the marketing strategy is in place and is already generating brand awareness, market presence, and most importantly, leads.
And in reality, there is no end to this stage. For the business to continue meeting the challenges of business in the 21st Century, let alone grow, it has to be firing on all cylinders.
This means continually improving product and service delivery. Bringing new products and services to market, enhancing marketing strategies and polishing processes. It also means ensuring previously high standards are maintained or exceeded.
Back to Jersey, however…
The business landscape for Jersey may surprise you.
Although a small island with what on the surface appears to be a limited market opportunity (even taking into consideration ALL of the Channel Islands), it’s home to a number of diverse, growth sectors.
In arguably the fastest moving sector – digital – Jersey has a host of e-commerce, cybersecurity, information and communications technology (ICT) services and intellectual property providers. And it’s growing.
Furthermore, Jersey punches above its weight when it comes to communication links with the UK and France. Fibre broadband has been installed into every home and business, delivering a superior, high-speed, and high-bandwidth capability across the island.
The six-year project, known as Gigabit Jersey, saw engineers use more than 2,000 miles of fiber-optic cable to connect over 40,000 properties. Now Jersey boasts the fastest internet speeds globally, putting them ahead of Singapore.
Couple that with the fact that Jersey’s data centers are preferred by many multinational businesses, global banks and large internet retailers, and it’s easy to see why the island is a desirable destination for business.
Fasttrack Your Progress By Buying A Business
The reason I like and recommend buying a business rather than launching one is a risk.
When you buy a business, you’re potentially buying a well-oiled machine. The idea has already been developed, and the concept tested. It’s proven that it can work and has a track record and a market presence.
You’re walking into a situation where processes are already in place, staff already know what they’re doing, and customers are already buying.
You don’t have to endure the stages of development, growth, and expansion that a start-up does. These stages could take between five and ten years. You’ve left the blood, sweat, and tears taken in achieving those milestones in the rear-view mirror.
There are several other benefits, too…
Buying a business means you’re buying an established brand. In any market, an established brand has its own presence, personality, and track record. If the previous owner did their job properly, the brand should also convey a degree of confidence and reassurance, too.
This not only helps you in terms of a reputation amongst customers, suppliers, and partners – which could lead to additional business, accolades, and other benefits. It may also be advantageous for finance or funding.
And of course, perhaps the most obvious benefit of buying a business is acquiring instant revenue.
Business is tough, all industries are competitive, and you’re only a bad experience away from a potential PR disaster. People are quick to take to social media to explain how a product or service didn’t live up to the hype…or worse.
And so, keeping customers – let alone acquiring them – is a tough gig these days. Now you can see how much harder it is for a start-up business. In most cases, they’re starting from ground zero.
But if you acquire a business – you’re already up and running and have foundations from which to build from. And that’s made easier by having revenue coming in, I can tell you.
And on the subject of money:
The financial benefits of buying a business go far beyond having customers and instant sales revenue.
One area that’s often overlooked is having a track record with suppliers. This means in many cases; you may well have healthy credit terms. So, you purchase something, and there’s no need to pay Pro-forma. You can pay after 30 days, 60 days or maybe more.
Having existing payments terms – which not only applies to money going out but also money coming in – can drastically influence your cash flow. Just imagine the effect of having all of your payments coming in within 30 days, whereas your payments are going out at 45 or 60 days.
So, how do you get started?
Well, first off, I recommend looking in a sector you’re familiar with.
You’ll know the industry, the jargon, the market, and movers and shakers. Having this knowledge helps when meeting and speaking with business owners.
If you’ve been in the industry for a reasonable length of time, you’ll also have connections. These could be current or previous work colleagues, suppliers, and other professionals that will all have their finger on the pulse of what’s going on.
And because of this, they may be able to refer potential sellers to you.
Whether you receive referrals through your connections, or you uncover opportunities from your own research, the first conversation you have should be to gather information. I would advise you to conduct this on the phone.
And here’s a top tip:
It’s a good idea to script out some open questions – questions that do not just have a ‘yes or no answer.’ And then you listen and note everything down.
The call could take anywhere between 15 minutes and half an hour. And by the end of it, you should know whether you’re interested in pursuing it further, or not.
If you do – the next step is extremely important:
A face to face meeting is totally different from a phone call. The other party can’t see you when you’re on the phone. They won’t necessarily know you’re reading from a script. When you go and meet them, you’ll need to ensure you’re ready and focused.
You should already have a clear idea of the types of questions you want to ask. You can have them written down on your note pad in advance. But you should ask questions and conduct yourself as naturally as possible.
As you did when you called them, you’ll want to listen intently. Most people love to talk about themselves, and so as long as you’re asking open questions, you should have plenty of opportunity to listen.
If the meeting goes well and the other party is still interested in selling, you can move to the next stage: heads of terms.
Head of Terms are not legally binding, but essentially confirm there is an agreement in principle between you and the seller of the business. They also ensure the essential elements you’ve agreed are committed to paper. This can alleviate potential misunderstandings further down the line.
They also help when it comes to drafting contracts. The appointed lawyer will use your heads of terms as the basis for their contract, and so there shouldn’t be any surprises for either party when it comes to finalizing the deal.
Before the deal can be formally finalised, you’ll need to undertake due diligence on the business.
But what is due diligence?
In simple terms, it’s an audit of the business you’re looking to buy.
And as it’s an audit, it’s designed to verify whether the business you’re buying is in fact what the owner says it is. Warts and all!
During the due diligence process, many aspects of the business will be under scrutiny: their accounts, customer contracts, historical records. Paperwork will be investigated thoroughly, and so this can take some time – anywhere from two weeks to several months, depending on the size and complexity of the business.
If you decide to skip due diligence or just quickly go through things, you may be making a grave mistake. You won’t have all the information you need and may end up buying a business that isn’t what you thought it was.
But if everything goes according to plan, you’ve just acquired yourself a business.
And after doing this for 25 years, here’s one factor that I recommend you make a note of:
A business is only as strong as it’s people.
Even the sharpest and most creative business strategies can mean little to nothing without the talent to implement and execute them. That’s why being surrounded by a team of bright, dynamic, passionate, and fun people is a huge asset.
By acquiring a business, you’ll also acquire an experienced team of employees. This will save you thousands in recruitment and training costs. The staff will also already have a grasp of the culture of the business.
Given that you won’t need to recruit or train staff, you’ll have more time to spend on developing them and briefing them on your strategies for the business. This, in turn, frees up more of your time, so you can concentrate on the aspects of the business you’ve prioritized.
And whilst the existing staff are already accustomed to the business and the way it operates, they now have to become familiar with a new owner. That’s where you come in. Because whilst they don’t need training, they still need to feel valued.
In fact, a recent survey revealed the three areas that directly affect workplace engagement:
- Having a connection to the company’s vision, mission, and goals
- Seeing an alignment between performance and compensation
- Feeling valued and appreciated for contributions to the company
Much of the hard work has already been done for you when you buy a business. But you do need to keep nurturing.
In Jersey, in fact across the Channel Islands, there’s often slight nuances when it comes to company culture. You need to understand them, and whilst you probably want to impart your personality on the culture, you should be mindful of doing too much too soon.
There’s, of course, another aspect of the staff you inherit. You may not want or need some of them.
So, what do you do?
Well, as the new owner, you are therefore the new employer. And so, if you are going to reduce the workforce, it’s your responsibility to inform and consult with any employees who may be affected.
I believe when it comes to delicate matters like these, it’s always best to be upfront and address the situation swiftly. Ultimately, having recently acquired the business, the last thing you want is poor staff morale.
Now, when businesses are sold, all the existing staff that transfer to the new company is protected under the Transfer of Undertakings (Protection of Employment) Regulations 2006. It’s more commonly referred to as TUPE – and it’s easier to say, too.
TUPE protects the terms and conditions of employment for each staff member. This includes retaining a period of continuous employment. So, although the business has now changed ownership, each staff member’s start date remains the date they began their original employment under the previous owner. This is important to know.
My advice: the legal and technical intricacies of TUPE are constantly changing, and so I would always recommend discussing everything with your lawyer before acquiring the business.
Equally, there are specific guidelines for any existing staff that you’re keeping on.
If you want to change the terms and conditions of their employment, you must get their agreement first. Not doing so leaves you at risk of being sued for breach of contract or constructive dismissal. And the mess and expense that comes with that entire scenario.
You may think all of this sounds complicated. And sure, some of it is – which is why it’s always best to seek professional advice.
But it’s still a LOT less work than starting a business from scratch.
Perhaps the “stupid” in the title of this article is a little harsh. Or, perhaps it isn’t. But regardless, I still firmly stand in the corner of buying a business over launching one.
It’s not any less entrepreneurial. There are numerous examples of entrepreneurs who bought businesses rather than starting their own. You only need to look down most high streets, and you’ll see two of the highest-profile examples, in McDonalds and Starbucks.
Have I sold YOU on the idea yet?
Would you rather risk everything, investing hundreds if not thousands of hours of blood, sweat, and possible tears, to launch a business that has a high probability of failure?
Or would you prefer to acquire an established business that’s already serving customers and delivering good quality products and services?
Now over to you:
Are you interested to know more about buying companies?
Do you currently own your own business?
Let us know your thoughts and leave any questions in the comments below and I’ll be sure to answer them as soon as they come in!