Here Comes The Sun!

Standing in a large field wearing steel toe-capped boots in a chilly September wind isn’t our usual idea of Chesterton House-style hospitality, but it’s what we and around 30 clients and friends were doing this week. So what was it that had captured our interest?

We were guests of Foresight Investment group, owners of one of the UK’s largest solar energy farms, which happens to be located just a few minutes drive from our offices near the village of Wymeswold.

In fact it wasn’t until towards the end of the visit when the site manager invited our party to climb the small hill that overlooks the former airfield site of the farm that we fully appreciated the scale of this silent power station. Despite being home to an amazing 140,000 solar panels over a 190 acre area, the development is unobtrusive from the adjacent roads and I suspect that few local residents appreciate its scale either.

Looking out over a sea of solar panels

We had earlier been welcomed to the site by Nick Morgan of Foresight, and he had explained the investment merits of this form of energy production, with its stable and highly predictable revenue stream. Richard Urwin, Investment Director at Chesterton House, told the assembled group about the benefits arising from an index-linked income stream and why this farm had been included in our clients’ investment portfolios.

Site manager Arnoud Klaren then went on to share details of the site, how it was constructed, and how it harvests energy from the sun to generate a constant stream of electricity for the National Grid. With a potential output of 34 MW of electricity, the site produces enough energy to power the equivalent of 10,000 homes.

Except, of course, when there is no sun, which remained conspicuous by its absence. The grey skies got greyer, the wind got colder, and the boots got less comfortable as we stood and listened. We were pleased to hear that the panels still generate power even under the very darkest of daylight skies, but we were denied the opportunity to hear the inverter – a large caravan size metal box that turns the solar direct current into the alternating variety required by the grid – really sizzle, as Arnoud assured us it does when the sun shines bright.

It was obvious that the unseasonal chill hadn’t dimmed everyone’s enjoyment of the event, however. Arnoud fielded a wide range of questions with clear and enthusiastic answers, and we all learned a great deal about both the practicalities and problems of modern ‘clean’ energy generation as well as the financial implications involved.

As the world focuses on reducing its carbon emissions this promises to be one area that is ripe for continuing innovation. An obvious problem with solar-generated energy is what happens at night, and Arnoud described some of the ideas that are being developed to be able to create a stable energy stream, from the use of batteries to store surplus power, to using lakes that use surplus power to raise water in daytime allowing it to fall and generate hydroelectric power as required overnight. As the number of alternative energy generators increases, with consequent falls in installation costs, it becomes more economic to investigate these ideas and create workable solutions. Watch this space!

As the cool breeze continued we were pleased to retire to the Windmill Inn in Wymeswold which provided us with an excellent buffet lunch in their welcoming warm surroundings. The comments we received then and since confirmed that everyone had found this an enjoyable and very informative way to spend a morning.

We’re grateful to Foresight for this opportunity, which we may repeat in the spring. If you’re a client of Chesterton House, or you’re interested in the possibilities of using solar power in your portfolio, and you’d like to come along next time please drop Jenny a line at jenny@chestertonhouse.co.uk and she’ll get in touch when we’ve fixed something up.

And let’s hope that next time the sun comes out. I would love to hear that inverter sizzle!

 

Build Recurring Revenue

Andy will be speaking on the subject of ‘Profit’ at three ‘Love Business’ breakfast workshops to be held in Leicester, Nottingham and Derby on the mornings of 23rd, 24th and 25th June 2015 respectively, and he has written a series of blogs to set the scene for the workshops. If you’re in business entry is free. Each one will be packed with dozens of ideas around the theme of doing great business in the new age of the millennial buyer. Click here for more details and a registration form.

Most businesses survive on their next order. If the order doesn’t materialise, their business is dead.

But it doesn’t have to be this way. There is usually scope to focus on building recurring revenue as the route to higher profits, greater predictability of income, and more capital value in your business.

What product, service or benefit will your customer enter into a contract with you to provide? Could you make your life – and, more importantly, your customer’s life – easier by agreeing the details now?

I’m constantly amazed by how many businesses completely fail to capitalise on this future revenue stream. For example, for many years we have used the services of a heating engineer to carry out an annual gas safety check on property we own.

Has the engineer ever suggested a regular contract to guarantee that this important check will never be missed? Perhaps offering priority attention in the event of breakdown or emergency? Maybe even special ‘favoured customer’ terms on other work?

You can guess the answer.

We’ve periodically required our offices to be refurbished and painted. Has the contractor ever offered to schedule future work in advance to an agreed schedule on a regular monthly payment scheme? If so, might there have been other work that could have been included on the schedule – other properties, or maybe our home?

I’ll let you speculate on whether this ever happened.

When we’ve taken a car for service, did the garage recommend a service plan to cover the cost of future work and guarantee a high standard? No – although the very same garage offers a five year service plan on a new car we bought from them.

I could go on and on (and as my wife tells me, I often do!).

But you get the idea.

Some businesses don’t lend themselves to this type of regular-payment arrangement, but in my experience they are the exception, not the rule .

So let’s say you achieved this, and were successful in getting a substantial part of your work onto a recurring, contractual basis. What implications would that have for your work scheduling? For your staffing needs? For your ability to seek efficiencies in delivery as a result of your new focus on consistently repeated processes?

Being able to predict revenues, costs and profitability in advance, what effect would there be on the value of your business to a potential purchaser?

Of course, if you’re going to make promises you need to match them with great performance. Don’t offer what you can’t deliver.

But for many customers seeking great service from a business they can trust, entering into a long term contract is one less thing to worry about. And one more step towards your highly successful business.

Income Less Expenses Equals Profit

Andy will be speaking on the subject of ‘Profit’ at three ‘Love Business’ breakfast workshops to be held in Leicester, Nottingham and Derby on the mornings of 23rd, 24th and 25th June 2015 respectively, and he has written a series of blogs to set the scene for the workshops. If you’re in business entry is free. Each one will be packed with dozens of ideas around the theme of doing great business in the new age of the millennial buyer. Click here for more details and a registration form.

I have a friend and long-standing client who is focused on cost reduction in his business, and has been for years. Over time his business has become more efficient, leaner and better run.

His problem is that, in all of that time, his turnover has remained stationery. He now delivers his service for less money than he did ten years ago. His business is slowly, inexorably, strangling him to death.

He hasn’t learned the lesson that Ken Blanchard expressed in his seminal book, ‘Big Bucks,’ the third of his cardinal rules of business. It’s a simple rule, and it says ‘Income Less Expenses Equals Profit.’

Now you might imagine that is just what my friend is practising. If you do, you’ve missed the most important part of the equation.

There are two variables in play here; Income and Expenses. One has limited application. The other is completely without limits. Which will you spend your time working on?

Let me expand. You cannot cut your expenses by more than 100% of their current level. The more you cut, the harder it will be to grow. A business spending nothing is unlikely to move forward (although if you know of a way to run a business with zero costs, I’m all ears!).

Income, on the other hand, can be expanded exponentially without limit. Yes, this expansion is likely to mean higher costs, but my point is that the fastest way to more profit in your business is more income, not lower costs. That’s why the world’s great companies devote so much of their revenue to marketing and revenue expansion.

My friend lives in the shadow of the stigma of failure. Yet unless he changes his ways, failure is inevitable. In your business, are you prepared to countenance the risk of success by focusing on growth?