Top 10 sources of external advice for tech businesses
Beyond the traditional sources of professional external advice such as tax and audit, what are the most valuable areas of expertise to have working with your tech business?
That, in a nutshell, was the key question in our new survey of the sources of external advice that tech businesses most rely on to help them deliver on their key goals and drive success. The responses provided a fascinating insight into the most pressing priorities and issues animating fast-growth businesses today, and also point to a changing advice landscape that is evolving rapidly as technological and commercial change also continue to accelerate.
Setting aside perennially important advisers such as tax and audit (which were left out of the survey), the top three sources of expertise were clear: commercial law (including IP, corporate, and employment law), finance providers (such as private equity and other investors) and non-executive directors. Beyond these top three, a clear second tier of favoured advisers emerged too – banking, sales and marketing, and talent management.
Legal advice is especially important in the context of tech, where businesses often develop valuable IP that needs to be protected, licensed and monetised, with additional complexities presenting themselves as an upscaling firm expands into new territories and jurisdictions. Changes in legislation, Brexit and GDPR were among the other areas cited where legal advice was considered essential.
‘In an entrepreneurial, growing business spending money on legal advice can feel like you are unnecessarily diverting vital funding from more important projects,’ comments Tom Lingard, Partner and Head of Intellectual Property at Stevens & Bolton LLP, a full-service UK law firm with particular expertise in the tech sector. ‘But getting things right at the start, particularly in regards to company structures and IP protection, not only prevents expensive disputes when the stakes are even higher, but also adds credibility and value in the eyes of potential investors. So it’s great to see tech businesses recognising that.’
Fast-growth businesses can also have significant human resource issues to manage, as accelerated growth requires the rapid building of teams and an expanding organogram. Here again, legal advice on employment law is essential, and the number of tech businesses surveyed who put talent management among their go-to advisers (27%) is also significant.
Financing was another obvious priority, as scaling businesses look for investment-backed growth. ‘A PE investor will provide more than just capital,’ says Paul Morris, Head of Growth Advisory at BDO UK. ‘The ability to support the business in areas such as developing the product roadmap and scaling sales teams will be key in unlocking growth potential.’
The role of the non-executive director is increasingly important in growing businesses too, providing tech companies with an invaluable external perspective on business strategy and performance that can help prevent them becoming too internally focused.
"The right non-exec will bring the experience of having dealt with many of the issues currently facing the management team," comments Paul Morris.
Respondents added that expertise of this kind is also often available for free – albeit not customised – on social media. ‘Twitter is full of experienced executives sharing amazing insight,’ said one. ‘The bar is being set increasingly high for advice on how to grow a business by globally recognised experts who are willing to share their insights via podcasts, Twitter and elsewhere,’ said another.
Building the sales engine
Many tech companies are product and research-focused in their infancy, and so may well need external support to scale up the sales and marketing function as their growth trajectory steepens. Sales and marketing expertise (27%) and the emerging role of the Chief Revenue Officer (13%) – who, as one respondent put it, can ‘define a recurring revenue model and then build the revenue base’ – have a big part to play here for many businesses.
‘Tech companies have an innate desire to build new products and new concepts and share them with the world,’ says James Ker-Reid, founder of Sales for Startups. ‘This means that they are able to innovate and iterate on highly creative ideas at a fast rate. But what is more challenging for tech founders is to build a revenue model that is built on sound commercial sense and will systematically scale as the company grows. This is further worsened by the constant balance between a desire for further funding and the need to build a better product.’
The smart collection, manipulation and application of data is the fuel of many a tech success story, one way or another, which brings with it challenges and opportunities, as our survey reflects. We see the rise of the data analyst (13%) but a similar emphasis on cyber security (13%) and reputation management (12%) – just outside the top 10 and often related to data breaches and cyber issues.
The rise of soft skills
Perhaps the most interesting entrant to the top 10 is leadership coaching, which suggests a growing awareness of the role of nurturing culture through soft skills – such as leadership, team-building and communication – in growing a truly sustainable business.
‘There’s a growing realisation that leadership is not a skill you can just buy off the shelf – to be an effective leader, you have to work hard to develop your own understanding of who you are, develop your own style and try things out,’ says Simon Westwood, leadership and communications consultant. ‘Flexing your leadership in different circumstances is key.’
'History is littered with people who had fantastic ideas but were never able to maximise their potential because the soft skills or the leadership was missing,’ he says. ‘So it’s very encouraging to see businesses taking the idea of leadership training and coaching seriously.’
‘In a tech business, where growth can happen very steeply, a leader needs to drive success and set direction, but also to help create a culture people want to work in. I see more and more businesses prepared to seek help with learning to deliver more effective leadership, to achieve long-lasting change by creating the conditions for success – bringing people together round a shared purpose and making the best of individual experience and skills.’
Finance provision was one area that businesses considered to be more important now than five years ago. ‘The start-up scene is ballooning, so the competition for cash (certainly VC money) seems fiercer,’ said one respondent. ‘Having a partner that can reduce friction points and get you in front of the right kind of potential investor is very important.’
Pointing to the growth in consolidation of businesses in many industries, one tech business commented: ‘To start a new company now requires a lot more capital.’ Another respondent pointed to the growing importance of a ‘supportive banking partner. Markets are volatile and companies need confidence to invest.’
Asked about areas of expertise which are likely to matter more in the short-to-medium-term future, businesses nominated cyber-security as a clear priority, followed by talent management and data analysis. ‘For most organisations, cyber security has become the number one area for external expertise, because the risks are beyond doubt but real expertise is extremely scarce or non-existent within most organisations other than major enterprises,’ said one business. Another respondent put it more starkly still: ‘The internet is incredibly insecure.’
Andy Hague, CEO of information security specialists Cyberfort, agrees that the issue has reached a tipping point in terms of awareness. ‘With things like GDPR, the Data Protection Act 2018 and forthcoming ePrivacy regulation, data protection has gone mainstream,’ he says. ‘Businesses are realising at last that the issue is mission-critical not just to their future success, but to their very survival in some cases.
‘GDPR will have a positive impact in my view because it is making companies take responsibility for any data they hold, right down the supply chain. So people are taking data a bit more seriously at last. The vast amount of security breaches are physical in nature, often a matter of not doing the basics right. And with the mushrooming of the Internet of Things, the situation is only likely to get worse before it gets better as we’re creating millions more potential points of vulnerability.’
The challenge of sourcing the right talent was another common theme. "Recruitment is going to be critical, especially in tech," said one respondent, especially as there’s a sense that "the old model of recruitment is no longer valid".
‘For tech organisations, the war for talent is the difference between being at the cutting edge or risking falling behind,’ says Laila Howard, Talent Marketing & Insights Account Manager at Resource Solutions. ‘It’s more difficult than ever to capture the attention of, recruit and retain top talent in this sector. We’ve found that employers rely on our expertise and research to provide key insights into where the best talent is, what they want from an organisation and how to best reach them.’
Data analysis and monetisation was another clear priority for the near future. The issue? ‘We are collecting vast amounts of data but don't always know how to use this to make commercial decisions,’ said one tech firm. The opportunity? ‘Data is a major asset that a company acquires and develops – [it’s about] having the skills to monetise the data.’ Data analysts are already helping here by ‘enabling businesses to become more agile, make quicker decisions and reduce risk’.
Understanding the evolving customer
Another area of growing engagement with external advice is in understanding and responding to what one business called ‘the era of the “promiscuous customer” in a subscription economy’. Customer behaviours and expectations are changing rapidly, and businesses need to adapt fast in order to ‘penetrate the buyer headspace’. For some, this meant a need for more advice around market knowledge and customer analysis; for others, it’s about pricing optimisation. Several voted for industrial/service design or customer experience because ‘customer expectations of product design are higher – call it the iPhone effect’.
Other areas of expertise that businesses see growing in importance include unconscious bias training, social media, and procurement and budget management expertise – because "there isn't the fat that there was previously".
One final, slightly mischievous, question we asked related to those external sources of advice and expertise that businesses considered least effective. While it would be unfair to single out specific groups – especially as many thoughts here were clearly anecdotal – some of the key frustrations with consultants and outsourced experts did emerge. These included:
- Experts who require so much hand-holding that most of the work ends up being done in-house
- Experts who aren’t really able to understand the needs and culture of a specific business
- Experts who are resting on their laurels or whose approach has been overtaken by newer methods and systems
- Difficulties in measuring or quantifying the impact of expertise on the business
- Experts who provide strategic insights that are unrealistic as the adviser has no responsibility for actual delivery
Some respondents suggested that experts are only as good as the care businesses put into selecting them. ‘Any consultancy will be ineffective unless it provides laser-focused specific expert advice,’ advised one. ‘All advisers have their uses – they just need to be managed,’ said another.
About the survey
Survey data was gathered by BDO UK LLP over a period of 3 weeks on October 2018, with responses from 52 UK limited companies in the tech space.
Tony Spillett, Tax Partner and Head of BDO's UK Technology & Media team - 25 years advising high-growth tech businesses.