Anyone who has ever started, or even just worked in a small or medium-sized enterprise, will have had the experience. You’re talking to a bank, a large accountancy group or a mainstream firm of solicitors and a question pops into your mind: “How would you know what I’m talking about? You’ve never run your own business, let alone started one.”
It’s sentiment that Phil Mitchell, a commercial finance and tax advisor, knows only too well. So much so that he launched his own consultancy, Harbour Key, so that he could offer advice not just from a position of technical competence but also from practical experience – with all its highs and lows.
“We set up the company due to a desire to run our own business and offer clients practical and commercial advice, including technical tax advice,” he said to Real Business. “Prior to setting up the business, we all worked in large firms doing a similar thing and thought it was a bit of a soft option advising clients on their business and the risks and so on, while having the comfort of employment and no experience of running our own business and fully understanding the issues they faced.”
Today his team of seven, including two fellow founders, based in Cheltenham, offer services including tax advice for businesses and individuals, remuneration advice, company secretarial and business funding.
The business is self-funded and is growing organically. “We’re winning more clients and therefore fee income is increasing which we are able to invest in new employees and IT to support growth,” commented Mitchell.
His decision is set against a background of falling numbers of accountants. According to the Financial Reporting Council there were 6,962 accountancy firms registered in the UK in 2013, a 4 per cent drop on the previous year. Not only that he but he started off in the recent downturn.
“We were all in full time work, but saw a need to give advice to small and medium-sized business, including startups, who wanted more from their accountants than just annual accounts,” he added. “Even in the downturn, businesses want and need advice that adds value to their business and the need for this proposition would improve as the recovery took place.”
Mitchell believes that his own experience of leaving a secure job in a large company, and taking a step into the unknown, givens him an empathy with small businesses and entrepreneurs that many advisors from larger firms simply don’t have.
“We didn’t go to the banks for lending at the start, only to open a business account,” he explained. “We obtained the initial funding to set up the business from a business angel, who we were able to pay back within 18 months. One of the big issues brought to us by our clients was lack of funding, support or difficulties with their banks. As a result, the first client seminar we ran was titled ‘Where to go when the bank says no’, which explained alternative funding options such as angel investment and pension backed lending – a lot of which we had looked at both when we set up and subsequently as part of our growth.”
Learning their trade
From their own personal knowledge and the challenge of seeking investment to start Harbour Key in the middle of the economic downturn, Mitchell and his team learnt about alternative types of funding and routes to funding. “We’ve developed a specialist understanding of the Enterprise Investment Scheme and Seed Enterprise Investment Scheme, which we now use when advising clients.”
Even when the new firm was up and running it met challenges. It had to find new business premises when its first serviced office was converted to residential use by the landlord. This required Mitchell to find an alternative at short notice, and manage the associated costs less than two years into the business.
Harbour Key’s biggest break has been making a connection with one of the UK’s largest financial advisor firms, and passing their due diligence checks and selection process, he said. This enabled the company to work with the larger firm’s advisors on a national basis.
“Our business has been built solely on referrals from existing clients or trusted intermediaries, and as our client base and reputation as the ‘go-to’ place for tax and business advice develops we expect to see continued growth,” Mitchell explained. “As a result of referral work our client base is national and we have not concentrated on the local market, which is very competitive. However, as our reputation has grown this market is now opening up. We currently have a team of seven people and in the next two years intend to grow to twelve.”
Giving advice to startups and SMEs is the bread and butter business of Harbour Key. But alongside the tax and finance issues he advises on, Mitchell advocates client care as the key to a successful business.
“Build strong relationships, understand their business and their needs and don’t hesitate to raise difficult issues or challenge long-held views,” he suggested. “It’s easier to win work from existing clients to keep the business ‘ticking over’ while spending time seeking and winning new clients.”
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