How did you come to set up Runagood?
I left corporate life in 1988 to become a business consultant, and I was appointed by the Thatcher government to lead their work on small businesses. The first job was to set up the Training and Enterprise Councils, and the second job was to set up 110 Business Links, which worked out of the Training and Enterprise Councils. Throughout that period, we had quite a large team of consultants, and directly or indirectly we worked with a million businesses, and more than 2,000 consultants whom we had to train. By 2010, the international competitiveness of very small businesses in the UK had risen from 21st to 7th place.
But in 2010, the government pulled all the support. The difficulty was that very small businesses simply could not afford classic day rates. In London and the South East, you’re looking at £500 per day. Government research shows us that the average small business spends between two and three thousand a year on business advice of one sort or another. At £500 a day that’s about a week’s work. Over the course of a year, a week’s worth of consultancy is going to achieve nothing. In the days we were doing these government projects, it was easy to spend £30,000 over the course of a year. All the possibilities had then gone for small businesses to get consistent, sustained advice.
The thinking was if I took all the stuff we had learned and developed over 22 years to make all these small businesses improve their performance, and we could somehow automate it, that would make it affordable and accessible. Over a period of eight years we developed the artificial intelligence that we’ve now got.
How does it work?
The software does what any consultant, for the last 50 years, has done with a business. We had the database, of a million small businesses, we had the performance statistics, and we also had the methods that we had as consultants to apply all this stuff to them. And it proved to be easier to automate than I thought. We then looked at how would be reach 5.5m small businesses. If we had a £10m marketing budget we could probably do it, but we didn’t, we had a 50p marketing budget, because we spent all the money on development. We concluded that we needed to engage accountants to act as what we call Runagood business centres. So it’s got a premises, it’s got a presence in the community, meeting rooms and offices, and we can put a banner up. Because of the very high speed at which this AI works, one person can handle hundreds of clients. That’s what brings the prices right down.
What sort of savings are we talking?
What a standard consultant charges £500 a day for can now be done for £5 a day. It’s an extraordinary difference, and it’s because the consultant doesn’t have to spend time anymore. What he or she does is sit down with a client or a prospect ask them 19 questions. That generates a business dashboard in about 10 minutes. The business dashboard allows them to see exactly what’s happening with the business – where it’s strong, where it’s weak, where its value is low but it could be high.
Now there’s only five success measures that really matter in a new business: am I taking on new customers, am I looking after the ones I’ve got so they’re coming back, am I using technology to be efficient, are my people productive, and am I profitable. Those are the five things that the dashboard measures. Then it will compare what this particular company’s output is to what the benchmarks are for that industry. It will then say based on this your marketing may be 100% so congratulations, you’re doing a good job on bringing in new customers, but look, your operation’s at only 40 percent so people aren’t coming back to you, there must be a problem with your products or services.
We find time and time again, an under-investment in systems.
What would you say to accountants who are worried about technology taking their place?
Sadly, most of them go and look for another accounting practice to merge with. That will let them last a few more years, particularly if the partners are in their 50s or 60s. The vast majority of accountants we get signing up with us are in that 10 percent of accountants who are quite entrepreneurial, that had already concluded that their future had to be getting into broad business advice. Our stuff lets them get into marketing, operations, systems and people work, which has the potential to multiply by five times the revenue they could get from a small business, and to become the only trusted source of advice for that small business. What accountants have really got going for them is they are the only advisers who are trusted. If you ask any small business who do you trust, they will say my accountant. But they are paid to be cautious – the whole nature of accountancy is therefore changing.
A couple of months back we started marketing to consultants. They go out to accountants and say: “be a Runagood business centre, and I will work with you as your AI business adviser, and between us, we will convert all your existing clients over to the new way of doing things, and I will go out and find new clients, because I’m good at selling.”
What is next for Runagood, and technology in the industry generally?
Now we are developing an enforceable code of practice, because obviously we’ve got to protect the accountant, and he’s got to protect his clients, therefore we’ve got to control the consultant. And we’ve got to get both of them doing is thinking long-term subscriptions for low amounts of money.
Once they’ve been through the business dashboard process, which we advocate that they should do quarterly, what our adviser should then be doing with them is running the next piece of software, which is a forecasting tool. What it says is, on your present rate of travel, this is what your business is going to be worth in the future, at any given point in time. But if it performs to its benchmark, it should be up there somewhere. They can see that if they improve their marketing, they could get another £50,000 of sales. If they improve their operations, they get another £100,000 of sales through repeat business. If they improve the productivity of their people, their profits will jump up, and crucially, if they invest in business systems, their profits could improve radically, through better efficiency. The idea is that quarterly, they’ll get that insight, about their own business. Then the adviser will use the forecasting tool to help the client decide at what point in the future they want to exit or sell, and for how much money.
They then move to an automated business plan, and the business plan then suggests all the detailed actions, all the targets to set, and so on. And the final and third stage of the software opens up 5,000 action plans, so the adviser will then say we now need to choose which of these 5,000 action plans to start with. The idea would be to try to implement one per month.
“The system does all the work.”
What role does the adviser play?
What the adviser then has to do is decide with the client am I going to mentor the client through the implementation of this, which means the client can call me anytime he wants for advice, am I going to coach, which means am I going to push them, by regular intervention to actually do stuff, or am I going to be a consultant, and go on site and do stuff for them.
Because it’s a monthly subscription system, they can navigate through those, and there will be times when there is a bulge, they’ll become a consultant, and then they’ll back down, and they’ll become perhaps a mentor for three months, and then they’ll be something else which needs a bit of a push, and they’ll move up to being a coach, to implement a different action plan.
You can do a business dashboard in about 10 minutes, you can do a forecast and plan in about 10 minutes, and you can choose and set up your action plan implementation in about 10 minutes. The accountant will make a recommendation. You can see that if the accountant is only putting in one hour a month, on the coaching, even at a 100 per month that’s a £100 per hour, which is a pretty good rate for a small accountant. It also means they can handle a huge number of customers. A small business adviser using our stuff and working about 30 hours a week can handle 100 clients at once.
If he wants to be a workaholic, he can do 60 hours a week and 200. The system does all the work. And then you’ve got quality time to genuinely deal with that client and their needs. That’s where the real skill is going to come in, based on experience.
Do you have any competitors in the market yet?
They are all watching us, because it’s cost a huge amount of money personally to get this to where it is now. They clearly don’t want to do the same, until they can see if this is going to work or not. We want a Runagood business centre in every town in the country, and we want five business advisers working out of that, and I hope I’m not being stupidly optimistic when I say this, but I think it would be super hard for anyone to catch us now. We’ve spent eight years developing this, and trialling it, and we’ve already put a thousand small businesses through this, we’ve got 50-odd accountants now using it, so it works, but we are in the early stages.