Summary of Key Findings Black MBA was a project funded under the Phoenix Development Fund and the EQUAL Community Initiative. It ran for approximately three years before getting into financial difficulties and going into liquidation.
the business failure of the Black MBA Association (UK) appears to have been was bought about by poor management linked to a classic example of over-expansion of a small enterprise ororganisation. It simply grew too big too fast and if it had been a private company would have been over-trading. But a third factor drove the organisation into this position - an over abundance of public sector grant money.
This last factor is the key issue of interest. Public agencies like to give funds to organisations with a “funding track record” and so encourage the very over-expansion that they often warn against. Black MBA Association (UK) for whatever reason gained the trust and support of major UK and EU agencies – and received considerable amounts of public monies as a result despite being a brand new organisation that was effectively franchising a US model of development within the black community. In return for receiving finance Black MBA provided feedback and data to the donor officials. This data clearly shows the pattern of events from the first quarter – and an official should have picked this up.
Government Agencies that fund voluntary or statutory bodies with public monies share a key responsibility to ensure that these are spent effectively and well. Stopping an organisation over-expand is part of that responsibility however much the voluntary body in question might disagree with that view, and criticise the Government officials concerned. And being able to recognise an example of over-expansion should be a skill-set held by all Government officials in charge of funding programmes.
Why a Business Failure?
Black MBA suffered from a plethora of initiatives that had been started and how many were still underway. This contrasts with some other PDF projects such as Ideaspark that focused on one or two main activities and stuck to them. The quarterly returns have no comments or information about the problems facing the organisation. But this is perhaps inevitable in returns to a funding body where the emphasis is on showing positive results.
- Entrepreneur clinics
- lifelong learning for wealth building
- community bank
- entrepreneur website and Entrepreneur online programme
- Entrepreneur expo
- Entrepreneur advisory service (also Financial advisory service)
- Entrepreneur experiential learning
- Entrepreneur scholarship programme
- Entrepreneur MBA scholarship programme
The review of the project showed the following “signals” in regard to the business failure that followed:
By quarter 6 there were continued efforts to bring control via management arrangements. Overall there was now a portfolio of the following initiatives underway however – all these are now resourced with staff and costs and burning cash, and only three programmes delivering to target
- Entrepreneur Clinic Programme: delivery exceeding targets
- Entrepreneur Clinic Programme: delivery exceeding targets
- Entrepreneur Experiential Learning: delivery partly under target
- Entrepreneur Scholarship Programme: delivery partly under target
- Financial Advisory Service: delivery partly under target
- Entrepreneur Online Programme: delivery partly under target
- Entrepreneur Expo: delivery partly under target
- Incubator – on target with delivery plan in place
- Community Bank - on target with delivery plan in place
- Strategic Position Entrepreneur Programme in Birmingham and the West Midlands - on target with delivery plan in place
- EQUAL Programme – exceeding targets and poised to undertake additional trans-national activities
Quarter 7: Reports suggest that situation is back under control but if you look at the detail then two major things are apparent. First there are now a huge number of separate initiatives running and second, almost all of these are themselves lost in more process, with meetings and discussions continuing at a lower level within the Black MBA. In trust the confusion just seems to have cascaded down a level.
Income and expenditure
Phoenix Development Fund £747,700
BMBA Association Inc. £198,143.
On the income side Black MBA had a very large grant of arond £750,000 from the Phoenix Development Fund. This was one of the largest awards that the fund made - out of 95 projects in rounds 1 and 2 four projects received more cash.
Black MBA was almost unique among projects at March 2003 in stating in the survey returns that they were overspending. This appears to have been due to under estimating staff costs.
The real damage to their project was done by failing to secure funding in the Building on the Best round. This had been necessary for co-financing their Equal and Objective 3 funds which together amount to over £500000. Normally both of these funding streams do not allow revenues (for instance from conference attendance) to count as co-financing. Instead a clean source of co-financing such as PDF was required.
It is not clear from the return on what basis the parent organisation National BMBA association was able to fund the project at the rate of £18000 per month.
So what happened. Seems to have been mix of three issues:
- Poor management within the Black MBA Association (UK)
- linked to a classic example of over-expansion of a small enterprise – it simply grew too big too fast,
- fed by an over abundance of public sector grant money.
- lack of monitoring of cash flow and issues set out in returns. .
- The project also suffered from being a national project in an increasingly regional world. To succeed without PDF funding from January 2004 required that a significant number of RDAs would support the work at regional level. This is very hard to organise because RDAs have a tendency to support regional projects and are reluctant to pay into a national pot to support a national programme. Inevitably a London based organisation will often be seen as serving London rather than the country as a whole.
Annex 1 Caselets
Client story 1 - Books Talk Too
Books Talk Too is an audio book company that specialises in Black interest talking books. It is the UK’s leading provider of Black interest audio titles. The ‘books’ range from fiction to factual and religious titles, autobiographies and motivational books. These are all available on cassette and CD. The purpose is to satisfy an untapped segment of the talking book market by being a one-stop-shop, off-line and on-line, for all black interest audio titles. It is aimed at those busy professionals who are time constrained, the infirm, visually impaired, children, drivers or those who are just too busy to read. Books Talk Too is a London based company, which operates by direct mail and via the Internet. Some of our customers are Libraries, Institutions, Societies, Professionals and businesses.
Before launching Books Talk Too, Morton Patterson had a successful career as an IT Consultant – advising clients on how to use IT to benefit their business. However, he had a burning desire to start his own business. Something in him felt he needed to seize the opportunity. With careful planning, he resigned from his job, and took a leap of faith to pursue his dream. To date he has no regrets and feel it is one of the most pivotal decisions he has made in his life. His thoughts on Entrepreneur’s Expo, IDX 2002: “I picked up a lot of contacts and even more customers there, and my new brochure went down really well. The support from the organisers was terrific and the response for Books Talk Too even more so.”
He has gained confidence, business planning expertise, valuable contacts and recently a large order from an independent book store in Leicester.
Client story 2 - Emagine Interactive
"Emagine Interactive is an innovative web design and development company, dedicated to providing you with cost effective internet and branding solutions to meet your needs and create a successful internet presence. Emagine Interactive works closely with clients, establishing their needs, goals and vision. Translating your existing business literature into a professional web site, presentation or redesigning your existing web site. Main services include web, flash multimedia and logo design, programming, e-commerce and web site management. By combining your knowledge of your business and our expertise in strategic planning, design and development, our aim is to empower you to professionally and uniquely communicate your message, setting you apart from competitors. Helping you to increase your competitive edge, your profits and give your customers a good reason to choose you again and again."
Have gained confidence, business planning expertise and valuable contacts
Client story 3 - Dalgety Teas
Dalgety Teas manufactures authentic flavoured herbal teas from the Caribbean, including Cerassie, Lemon & Ginger, Peppermint, Lemon/Fever Grass, Honey & Ginger, and Ginger & Sorrel.
Mark Dalgety observed the rapid worldwide growth of the herbal tea market, but noticed that there was no representation of Caribbean flavours. He founded the company in 1995 to give the world a true taste of what the Caribbean offers in herbal teas.
From its humble beginnings of packing loose Cerassie Tea in Mark’s pare room at home, the company has now expanded to its own factory units and a range of six flavoured teas, which can be found in over 2000 independent ethnic grocers and health food shops, selected Tesco, Sainsbury, Asda and Safeway sotres; and a small, but growning export market to the USA, West Africa and China.
In 2001, Dalgety Caribbean Products was formed to launch Caribbean Plantain Crisps, Cassava Crisps and the new Dalgety West Indian Extra! Extra! Hot Pepper Sauce.
Has gained tools to implement more strategic approach to expanding the business, as well as the upskilling of key members of staff.