This month's episode of The Ledger is a special one.
Last month, Dancerace announced our by Newable Capital – part of the Newable group. In this episode, Dancerace CEO Elliot Avison is joined by Chris Manson – CEO of the Newable group.
In our discussion, we talk about why Dancerace and Newable have joined forces; about the pressures and opportunities British businesses face moving into 2022; and why the pace of business is getting faster.
You can access the podcast here, or read the interview below. Enjoy!
Elliot Avison, Dancerace: Hello Chris, nice to speak to you. How are you today?
Chris Manson, Newable: I'm great, thank you – and looking forward to our discussion!
EA: Some of our listeners may be aware of Newable and what you do, but would you mind giving us an overview of the company and yourself?
CM: Newable is a company that exists to help other businesses to thrive; that's our purpose.
We are a profitable business – driven by making sustainable profits – but we make them by helping other businesses with products and services that they can't necessarily deliver for themselves. We do that across three areas: the provision of workspace; the provision of advice, and in delivering money into those businesses. In each of those three sections - money, advice and workspace – we've got a whole plethora of products and services to enable SMEs to navigate today’s difficult business landscape.
Overall, we've got about 900 employees across the UK – a good geographic spread of 50 offices up and down the UK, managing a broad range of investments. These range from our recent investment into Dancerace, right through the space industry, and stretch into more traditional manufacturing-type businesses as well. So, a really broad range of activities.
If anybody's interested in pursuing it, we've got a very good range of case studies of how we help businesses on our website at newable.co.uk.
EA: It looks exciting and it's one of the reasons why I was really excited about joining the group with Dancerace, as we've got our own great tapestry of history, and the future for Dancerace fits very well, I think, with the Newable vision.
CM: That's right, and I think it's important Elliot, as well, to stress the culture and values of the business.
Everybody in the Newable business – including Dancerace as we move forward – has got a real commitment to the values and social purpose of the business as well, which is about helping other businesses to grow.
Yes, we all come to work to earn a crust, but actually, it's more than that. You know, people get a great deal of satisfaction out of the help and service that they can deliver into their clients and that's a real motivating factor, I think, for everybody coming through the business.
EA: Absolutely. And did you find yourself becoming CEO of Newable? What's your journey?
CM: Well, thank you for the question and the interest. I started off as a chartered accountant. Before everybody switches off the podcast as a result of that revelation, I qualified but determined that that wasn't really my future going forward.
My instinct has always been as an entrepreneur, ranging from when I was sixteen and having a car cleaning business in central London, through to running university night clubs and what were then called raves, through to a more professional manifestation of that.
Through my career, I've built and run five businesses to date. Two of them were for other people. One of them was Lord Lloyd Webber's Really Useful Group, for which I used to look after the overseas shows –Phantom of the Opera, Cats, Starlight Express, Joseph and the Amazing Technicolour Dreamcoat and so on. At that stage, we had 49 productions running around the world, so you know, it was a real industry. The other business that I ran for somebody else was the reasonably well-known football club, Chelsea, where I worked for the previous owner, Ken Bates, and that was about building the stadium and the brand and really getting the club into position where it joined the top four. In the period that I was there, we won five trophies as well, and really set the business up.
On a more personal basis, I've also built and run three businesses for myself – the most successful of which was a television shopping business which grew from zero to turning over £250 million a year in its fifth year. I sold that to Virgin Media and then had a little bit of time off and was asked, when I came back to the UK, to come and run this business, Newable – to take what had been an existing set of assets and a series of really laudable ambitions and turn them into something concrete that could really help small and medium-sized businesses to grow.
That resonated very powerfully with me because actually, in all of those five businesses that I had run myself, I found it so frustrating that there didn't exist the help and support that businesses need, both through startup phase and, in Dancerace's case, where there’s already a successful business that wants to get bigger. How can it get to be better? That real frustration that I had felt resonated well with me and as someone who is moving into the second stage of their career, presented a real challenge in itself.
I'm very pleased that over the course of the last four or five years, we've been able to at least treble the size of what Newable does and its activities and over the course of the next four or five years, hope to do that again and leave a business legacy that really is the first word on everybody's lips when it comes to where should they go for support – whether that's in money, advice or workspace, as we move forward.
Sorry for the sermon. I get a bit excited.
EA: Consider me converted! On a smaller scale, we've believed since Dancerace's conception that the type of finance we support and the products we provide ultimately do a lot of good. We did a lot of work in the noughties in underserved regions to introduce working capital products and services to help grow SME businesses. I suppose from a value perspective, it's essential that your business has something at the core to hold onto. I would love to contribute from our angle towards that general Newable vision.
To that point then: a month or two ago, we completed investment by Newable Capital into Dancerace. This has changed the structure of the company after such a long period of time, with it being a family-run business started by Anthony Avison, my father, and now onto its next leg or ‘second phase’, as you put it.
From your perspective, what about Dancerace appealed to Newable? The typical trend for investment companies right now is to go for new, startup fintechs. What opportunities do you recognise in Dancerace over those alternatives?
CM: There are a number of aspects, Elliot, and lot of them revolve around you, frankly and the skills and judgement and talent and potential that you and your management team demonstrate.
As to ‘why Dancerace?’ rather than a startup operation; I'm not sure that's necessarily the right question actually, because we do back startups, but in another part of our business where we match angel funding with startup organisations. So we do invest in businesses through funds that we run in that area, but in this part of our business –Newable Capital – what we're interested in doing is finding businesses like Dancerace that have a great track record of energy and growth over a sustained period of time, and a demonstrated ability to be profitable. Newable's support, whether that's through infrastructure, HR, digital capabilities, marketing capabilities, our wider network, and our capacity and willingness to invest ahead of the curve, enables us to give businesses like Dancerace a seismic advantage – a seismic shift, if you like.
That’s the real sweet spot for this part of our business: identifying businesses like Dancerace that have got a great product and a great opportunity, i.e. the market is right for expansion, and where we can really tip the balance by our willingness to invest in the team, in the infrastructure and in products and services, in order to build a sustainable and long term business going forward. Our horizon, I think, is probably slightly longer or at least we like to think that we have a longer vision than, you know, some of the other finance partners that people might look to.
I guess that's a question back to you, then, Elliot: why did you choose Newable as your partner of choice going forward? From our perspective, I think Dancerace is in an exciting area. It's got a great product and it's got a great team, and that trifecta made it a very attractive investment opportunity for us.
From your perspective, I'm hope that you'd agree that Newable's infrastructure is going to give you a big advantage going forward.
EA: Yes, absolutely, and I think it is a combination of factors. The requirements of the business have not changed for many years. We have been pushing our own capital into the business to grow and develop new products for our customers and have also been growing our headcount and providing more services to an evolving market. When I presented that proposal to Newable in early discussions, we saw a lot of nodding heads, a lot of agreement, and a lot of shared vision and values for that – and essentially an understanding about how that’s potentially the right way to go. You offered a lot of support from the very early stages, so very, very encouraging.
Also, as a company we're looking to change the pace. We're looking to get investment and advice from a very large group of individuals. You can't do this with twenty people, but with 900 people within the Newable group, there's an enormous opportunity to leverage there as well. I think as a business, we've grown under our own steam for a long time but actually, it would be nice to have a jet of hot air to push us a little faster along and I think generally, the market needs it. It's an interesting economy right now, and we're right in the heart of the financial services. In providing systems, we can see the growth of businesses. We can see the decline of businesses as well. We can see businesses failing as well as growing and I think that there's an enormous opportunity right now which I think is good for Newable and for Dancerace. So far, everyone I've met has been really lovely, so that does help.
CM: It's interesting to describe us as providing a lot of hot air there, Elliot. I think I know what you meant.
EA: Yes, I'm not quite sure why I'm referring to a software company as being steam powered. It's a little bit more sophisticated than that most of the time. Actually, that does lead me to my question about what Newable's strategy on software investments. Is Newable considering further and expanding in the area of software?
CM: Potentially, yes. I think in Newable Capital, in particular, we have a portfolio of businesses that we’ve invested into and – as we're speaking frankly – caught between two stools.
From a portfolio perspective, you want a spread of risk, so you wouldn't necessarily want to focus all of your energies into one specific sector, but that's counterbalanced by the fact that obviously one acquires a certain amount of expertise and experience in a particular sector that then naturally inclines you to lean towards that. So, we certainly see software as being an attractive area for us moving forward, but we do need to balance that with the need to spread our portfolio reasonably broadly as well.
It bears the characteristics of the three things that we're looking for: where a market is attractive, whether a product is attractive or potentially requires further investment but has the ‘glimmering’ of being attractive, and where the management team running that business is attractive. Those are the three primary criteria and software obviously can meet all of those, and we then operate on a case by case basis. Certainly Dancerace was very attractive to us for those reasons.
EA: Yes, it's certainly an interesting space. There’s a lot of investment being thrown into software, I think, on the guise that someone's going to find the next big thing. It certainly has been, for the last few decades, an area of extreme growth, but I think there are a lot of opportunities out there for other sectors that I do think get overlooked when software is seemingly, sort of, the big growth sector. I certainly know it comes with its challenges, as I'm sure you've gone through yourself. It's not the easiest sector, but it certainly is an exciting one.
Looking at the marketplace and the economy, as I said, we've got a reasonably ‘inside’ view and actually, on my last podcast earlier this year, my guest John Brehcist referred to our sector as being very, very closely linked with GDP. So, we see the decline or the growth of receivables as being almost correlated directly to the growth of GDP in the country, but that's only one view of growth and how the market is doing. An interesting one, at that, but one lens.
How do you view the state of the economy?
CM: I can't really see how the current period is going to ever come to an end, really, as the pace of change continues to accelerate as technology moves forward, but also as geopolitical movements seem to speed up through technology itself. Things that might have taken five to ten years to manifest themselves in customer behaviour suddenly seem to take one, two or three years to manifest themselves.
I think what we'll see – and we're already seeing it – is that the lifespan or longevity of companies and or the products they deliver become shorter and shorter and shorter. So, if you look at the well known examples of tech businesses that dominate the world economic landscape, didn't exist twenty years ago, and there’s a question mark as to whether they will exist in twenty years or whether they will have been superseded by something else. I think broadly, in the context of change and accelerating change, that's both a threat but also, for a nation like the UK which has always thrived on change, a big opportunity.
This is exacerbated by third party events. At the moment, COVID, Brexit and the implications of that, and in the very short-term horizon, what all of our experience and client feedback is telling us is that people are actually beginning to experience supply chain issues and as consumers, we're beginning to see that a flow through to supermarkets and so on.
I do believe that those are short term changes, but I wonder whether the impact of COVID might actually help to accelerate a ‘reshoring program’ where the experience of the last couple of years makes us challenge whether the previous trend of moving towards optimum economic efficiency of manufacturing overseas – in China or other parts of the far east – and then shipping those products across to here in order to achieve the best possible price. Whether consumers’ balance of value versus some wider notion of good means that actually, that pace of change towards globalisation will either speed up or will begin to reverse, and we'll see some reshoring of that activity and therefore, whether small and medium-sized businesses in the UK haven't actually got quite a big opportunity there to move forward.
I think with respect to Brexit, it's obviously a slightly political hot potato still so I'll be careful about what I say there, other than it's difficult to disentangle what is a Brexit-related difficulty, versus what is a COVID-related difficulty, versus what is a difficulty occasioned by people moving to more working from home, and being more technology-focussed and so on. It’s difficult to disentangle all of those trends and to really identify what relates to each one.
My view – but then I'm not just a glass half-full person; my glass is always positively overflowing – is that that offers great opportunity, both for our business, Newable, for Dancerace itself, but actually for the SMEs that we serve. That’s the area of greatest opportunity, because the initiative and the culture and the workforce in the UK, despite politicians inevitably sounding alarm bells, it is and has proved over the course of many decades to be as resilient and effective as any other parts of the world, and we should be confident in our ability there. I'm desperate not to sound like a Boris Johnson broadcast, but I think our job is to identify those opportunities collectively, and our job at Newable is to help people to identify them and to develop them. That’s what we exist to do. I think there are lots of opportunities, both in international markets, but even if international trade begins to subside a little bit because of environmental concerns and indeed, logistical concerns, there are other ways of capturing that kind of internationalisation, and I think that's what we need to focus on.
EA: You mentioned at the end there about environmental concerns. I think that's probably the third variable that you can't disentangle from Brexit, COVID and the environment. So, whilst supply chains have dried up because of lack of manufacturing because of COVID and people not being able to work, actually, to a certain extent, we've seen a positive impact environmentally as a result of that, and all of these changes have created voids in the market place. Where there's a void, there's an opportunity, and there's a small business ready to come up with a good idea to ease or lubricate the friction between the old and the new.
We’ve seen technology and software responding when there's been change in the way people work. The internet really massively helped, for example, but now I think you may see 3D printing do something similar. That may be a massive industry to help plug the gap of manufacturing goods. With 3D printers, you can create almost anything. You’ve got a broken door handle, you can build your own. On a more macro scale, that could be revolutionary to the UK, especially given how much we outsource; now we can go back to in-sourcing or on-shoring our manufacturing.
I'm probably a half glass empty kind of guy, but there’s an energy about what's going to happen and people don't know. The government doesn't seem to know, and the economy seems to be doing unexpected things. So, I think the next few years are going to be very exciting.
CM: I think that's absolutely right. Just take one example there, Elliot, around the reaction to COVID when everybody was short of PPE and tests. Having just been fortunate enough to go abroad in the last month or so on holiday, a whole business has sprouted up around testing and management of the travel process within government protocols and so on. It's slightly boring, administratively, having to go through that process, but look at the businesses that have sprung up. Even doing something as prosaic as that gives you a sense that actually, we can as a society, as an economy, react to any set of circumstances and create products and services that work well to get complicated things done, efficiently and quickly.
That’s what I mean about the process of acceleration. It’s quite a complex scientific endpoint that’s being achieved, which is that we're gathering all of that data about people on behalf of government in order to allow certain economic things to happen, and people have created businesses out of that overnight.
Actually, if you replicate that across thousands of different streams of activity, it does give you great encouragement about the ability of a society like the UK's to be able to react to and turn what has been adversity into an opportunity.
EA: Yes, I've reflected on this before – about how the whole country went from working in offices to not going outside or doing anything, yet the world still continued. Several years ago, when scientists were warning that we needed radical environmental change within ten years, I thought 'that's not going to happen, because things take so long.' Actually, I think it's given quite a lot of encouragement to people that when we put our minds to it, the infrastructure is capable of getting things done.
To bring it back round to SMEs, I think they're the key. A lot of small businesses have popped up. Look at Etsy and you’ll see people who started making COVID masks – some of them a little bit dubious and not as advertised. Those small, micro-businesses represent real change.
CM: I think that's an important point where technology has helped to promote the power of the individual or the small entity versus the big corporate. Twenty years ago, it would have been impossible for anybody to set up and manufacture and sell stuff other than in a market stall in their local town. Now they can do that anywhere. It would have required a partnership or, you know, some corporate to plug it in to their network to get things sold. That has been absolutely revolutionized, and gives licence to creativity and opportunity by SMEs to be able to develop. The obverse of that is, of course, that once they have developed a product or a service, they need to keep innovating in order to keep pace because there's no comfort in the status quo any more. That’s both an opportunity and a challenge.
EA: Indeed. The economy is getting back into shape and the government loans have now stopped being offered and there's concern in our industry about what the impact will be. In terms of businesses looking for finance, or businesses looking for investment, how do you think the last two years has impacted the view on SMEs or investment or borrowing or lending money?
CM: Well, I think the introduction of the government loan schemes were necessary and I might dispute some nuances of the way that they were introduced and the way that they were managed, but broadly, the thrust is that that is generally perceived to have been a success. I would accept that and say that it was necessary and indeed an absolute requirement for the UK economy bouncing back in a way that really, probably wouldn't have seemed possible. That is all good but the unintended consequence of that has been of course that it's very much disrupted the market going back to where it was previous to that.
Not unsurprisingly, many lenders have reduced their level of support that they're prepared to lend into certain sectors and so for some sectors, that presents a real problem. We’ve certainly noticed that the unsecured market remains really subdued. Now, again, we're trying to unpick the reasons for that. To what extent is it because everybody who needed an unsecured loan managed to secure one under the government schemes? Did the flood of government money swamp those who were prepared to provide it?
Lenders need to wait until the waters recede a little bit and clarity is restored. They're not prepared to lend in these circumstances, and it's difficult to know what’s the cause and what’s the effect, but certainly for an SME looking for unsecured lending now, it's a more difficult environment than pre-COVID and particularly in some sectors.
One of the challenges that we have, through our broking and certainly for listeners to this podcast, is urging people to develop those products and services as quickly as possible in order to support those SMEs. So I think we need to keep a careful eye on the monthly trends in that area to see exactly what the unintended consequences of the government's intervention have been.
EA: Do you believe that it’s partially the government's responsibility to do some of that analysis?
CM: Yes, I think – to be perfectly honest – they inevitably have moved on. The political agenda I think will, as you alluded to earlier, focus on the media coverage of the non-repayment of some of the loans that they made under those government schemes and unfortunately, the consequence of that will be that it will scare off SMEs from applying for loans and potentially scare off people coming into the market in order to provide that lending.
That's a negative that we need to think about as we move forward, and does government have a role to play? I think really, it played its role during a period of national crisis. I'm broadly of the view that where government is not necessarily the best at understanding the needs and aspirations of small and medium-sized businesses, it's equally probably not best placed to devise solutions to it. I think we need to allow the market to do that. There are things that the government can do in order to encourage that through the use of guarantee schemes and providing data and so on, but asking the treasury to micromanage the sector is, I think, difficult in the long term – but I do think it needs to recognise that its significant intervention has had ripple effects and therefore, it may need to make some continued short-term interventions in order to smooth those out.
EA: Yes, I was going to suggest the same. From my perspective, at least, I think that various schemes were implemented without consultation with lenders. I'm sure there were backchannels, but it certainly didn't seem like it was in the best interest of unsecured lenders, for example.
I think now with the British Business Bank's involvement, an ongoing consortium to discuss ideas would be useful. You mentioned about rapidly accelerating products for unsupported industries. I think that's probably a collective problem rather than one that will lead to independent lenders or individual banks to come up with products. Instead, it could potentially be a collective program to try to protect the supply chain. Making money on lending to a good business that's strong and stable is fine, but if the businesses that support them are unsupported, this ultimately changes their financial outlook. If the supply chain fails on a business, you can't detect that on their internal financials.
I don't know the answer to this, but last year was very exciting in a dark way, to watch what happened as CBILS and the other schemes emerged in the space of weeks. We built one of our new products around this concept – to support lenders to handle increased volumes of applications via digital onboarding processes.
CM: Well, you're absolutely right, and I think there have been some themes that have emerged from the responses that were devised in a short period of time – I won’t call them knee-jerk responses – that could deliver permanent solutions for areas where it’s of national importance to get lending going again. Government guarantees, for example, are a good way for government to intervene in the marketplace because they don’t use up the whole of a government’s capital. To be fair to the government, the provision has been almost world-leading in that respect.
EA: Yes, and a lot of countries followed suit. Our second biggest market for us is Australia and they had very, very similar schemes. I don't think they were quite as generous as the UK, but were a close copy which was very complimentary. It's going to be very important that we have a plan going forward. On that note: what do you believe that are the biggest opportunities for the future of the SME marketplace?
CM: WI think I'm slightly at risk of repeating myself. I think there’s an enormous amount of opportunity available to businesses and as an organization, we’re trying to design and come up with products and services that can enable other people to take advantage of those as quickly as possible. I think that constant and continual reinvention and refinement and improvement of products and services is really the key.
We’re seeing big changes in consumer behaviour. Some of those are prompted by environmental concerns, as you mentioned. Some of them are prompted by supply chain issues, outside of their control, and some are prompted by improvements in technology. The question really is: how do we capitalise on and rationalise each of those changed opportunities?
I think the only common theme that one can take from that is to say that there's an obligation on all of us to look at the products and services that we develop and to test them continually against the marketplace, against our customer's expectations and say, 'Are they still fit for purpose? Will they still be fit for purpose in twelve months’ time, in 24 months’ time, in 36 months’ time?' Because I do think that window of visibility is contracting.
We see this in people's own professional development. People used to talk about working for a company for maybe ten years or fifteen years or twenty years. That's probably changed. Peoples’ expectations and requirements and horizons have become much shorter and I think that's true for companies, as it is for individuals. We need to think about shorter term horizons and to deliver ourselves the flexibility and the resource to be able to move quickly. If we can do that then we'll be in a good position going forward.
I would close on that point about UK SMEs. When we look at the day that Boris Johnson announced the first lockdown, we were really uncertain about what the future held for any aspect of business. We've been so resilient through that period and, as you said, everybody's managed to keep on working and in some cases, improve productivity, improve products, and improve services. We should really take comfort from that and think, 'Okay, well actually, that's a really good learning experience for us all as SMEs as we move forward.' If we can do that, then I think there are big opportunities for SMEs as we go forward.