Starting up a business is not an easy task. It can be time consuming, demanding, exhausting and if not managed or well planned can be hugely de-moralising. 50% of all new start ups fail within the first year and that’s a statistic that is growing. Starting a business in a recession to most would seem like a crazy idea but at the same time economic conditions also present highly prized opportunities that if calculated correctly can reap huge benefits in niche sectors and/or even find access into already dominated markets. Having been involved with a few start ups in the last few years as well experience from starting a couple myself whilst working for a major company in a highly demanding and influential role, I have a few tips i’d like to share with anyone considering their own venture.
Obviously firstly there is the idea; whatever it is you think could be a sustainable business it needs a concept, it doesn’t necessarily have to be a new product, new market or even necessarily a new idea it’s all about the execution and delivery of that idea. Different types of businesses whether its retail, service, consultancy or products there is always an opportunity. Below i’ve created a list of do’s and don’ts which I highly recommend considering if you’re looking to start a new venture.
1) Evaluate the location of your business.
The first and foremost consideration you should make is location. Now this will largely depend on whether your a bricks and mortar business or online. The obvious benefit to being an online service or trader is location doesn’t necessarily apply. The only main decision you have to make is whether to operate from home or from an office. The cost savings from working at home can be very rewarding but at the divide between home and work life can easily get blurry and cause extra stress and pressures by ‘not leaving your work at the office’. Remember you still need some ‘you time’ to stay sane whilst getting your start up off the ground.
2) Do good research…this point is imperative.
Without a doubt the biggest down fall for most start ups is poor research. Do your research right and you can’t really go wrong. Effective research leads to more questions that need answering whether it’s price, objectives, suppliers, competitors, market and even location. The first and second points almost go hand in hand and your research could well certainly have an impact on point 1. Good quality research will help you to write an effective business plan of which is one of the most fundamental and important things you can do. It can be boring and mundane but following a logical business plan structure you can really identify whether this idea of yours is actually going to be worth the investment. Research requires more than just knocking on your friends and neighbours doors, in fact I would avoid doing this at all as their opinions will only be warped because they don’t want to offend you. Unless you know someone that is always brutally honest you want to find people that will challenge your ideas, speak to people, get opinions, is it viable, can it work? Don’t just speak to agencies because they only want one thing… your money, if an agency is worth it’s salt they will politely give you some advice and tell you to come back once you’ve done your thorough research. Of course some of that research will involve getting estimated costs so you can plot a projected profit and loss account and growth forecast which again is a crucial and fundamental element to getting your head straight.
3) Don’t rely on your own social circles.
This is critical, by all means talk about your ideas with your friends, but their opinions will only be warped because they probably don’t want to offend you. Unfortunately this is just the nature of many people because they don’t want, or don’t understand how, to give you some honest feedback about your concepts, achievements and ideas. Even after you’ve done your research and got your business off the ground do not rely on your friends to help market, promote, and even buy from your business. Don’t be daft, they don’t want to give you their money, they’re probably not even all that interested. It’s a tough thing to over come at this point but you really are on your own and it’s hard – but perseverance a bit risk and dash of luck will see you well on your merry way to being a successful business owner. I’ve lost count of the number of times clients have come to me saying ‘I’ve got a great idea because 3 of my friends said so and one of them wants to be my business partner’, which leads me onto my next point.
4) Don’t go into business with your friends.
Whilst I highly recommend getting help and support from some sort of business partner I would not encourage friends to start a business together, more times than not I’ve seen this destroy friendships and ultimately it’s the business that suffers. You’re biggest friend is yourself. The other person will always have their own opinion and go off on their own tangents causing problems and it’s just not worth the hassle. Now I will add that there are many successful joint ventures out there that have been the brainchild’s of friends working together. Don’t get me wrong having a partner in crime is a highly valuable asset – but if it’s your idea from the go they will never 100% buy into it and be loyal and only ever challenge it, unless of course you stroll around some very loyal social circles and there is some degree of personal investment which is equally and visibly split into the business. If you have clearly defined terms and parallel working ethics/attitudes then the risk for error is vastly reduced. In short, you have to take some common sense here and decide whether the potential stress of having to babysit and partner is best or do you have someone who is in 100% and is committed to your aims and objectives? That’s your decision, oh and not to mention division of shares.
5) Getting the price right.
Whether it’s products or services, getting your price right is critical. Now most people go for the easy route of simply making it cheaper than the nearest competitor but that’s not always possible nor is it profitable. Price can be split into two definitions of value, these are; a) the physical cost value in how much a customer has to give from their pocket to receive your product or service and b) the intrinsic value for the customer whether that’s driven by service, quality of the goods, delivery times, after sales communications, reliability, branding and reputation. Adding value to a product or service is just as good as discounting it from the competition just so long as it’s clear to the customer.
6) What is your USP?
Finding your USP(Unique Selling point) is critical to getting the general public interested and involved in your brand. Without a USP you become pond life in a sea of mixed messages and marketing communications struggling to reach the surface and be heard. Get your USP right and the customers will hear your voice. More often than not it requires more than one USP to make it tangible. This could be anything from free delivery or charitable donations to incentivised buying or promotions. Your USP could even be that your product is so new and revolutionary it sells itself, though be warned even the greatest product still needs marketing to be heard and vice versus the biggest budget and best marketing is pointless if the product is ultimately crap.
7) Do determine a reasonable budget?
There are various cost saving exercises you can undertake to minimize risk but ultimately successful business is all about managing cash flow. Without cash flow your business is a dead duck. From the research you should be able to determine an accurate business plan within which you should include a profit and loss account and a cash flow forecast. There’s loads of online resources for this if you have no idea what this is or how to create it. But you need it, seriously, and if you haven’t yet I urge you stop everything and do not continue until you have. Your cash flow forecast will ultimately determine whether or not your business has the potential to be a success or failure and you can substantially reduce risk. have you ever watched the Dragons Den? I find it remarkable how many self confessed entrepreneurs stand in front of the dragons without any clue or concept of the financial state of affairs within their own business. Financial reporting may well not be the most fascinating aspect of business but it’s critical to growth and success. By determining cash flow you can plot your budget in-goings and out-goings and have a firm grip of how much you can actually spend on that marble boardroom table or Facebook advertising campaign. From that you can then determine whether that expense is actually worth it in terms of the future profitability of the business.
8) Nurse those teething pains.
Does your business have room to grow? Is your product or service just a stepping stone to a greater objective or does the product/service itself have opportunity to evolve into something? At this point you should really consider the shelf life of whatever it is you’re trying to do. That can be answered in two stages firstly, is there a growing market/demand for it and secondly is there opportunity to expand? If the answer to both those questions is yes then you can be pretty assured you have a reasonable shelf life for this product or service and you should really think at least 5 years ahead as to whee you want the business to be positioned. The questions that come into that are what do you need to do to sustain at that level be it location, size of office/depot, resources such as employees, assets and cash flow. Again these can all be determined by considering these questions whilst creating a cash flow spreadsheet. Just as the business grows you will experience problems whether it’s space, processes, departmentalisation and even management – problems will arise and you will have to overcome them, some of the time problems only become apparent once you get to a certain stage.
9) Risk management can be cheesy.
Managing and reducing risk is one of the best long terms ways to ensure a sustainable business and this can stem right from the business plan to organisational structure and processes. Limiting risk should not be overlooked. I’ll never forget a valuable piece of theory I was taught whilst on a family ski holiday a few years back about ‘latent errors’ or ‘The Swiss Cheese Model’ and the same principle can be applied to business, originally propounded by British psychologist James T. Reason. Most risks or accidents can be traced to one or more of four levels of failure: Organisational influences, unsafe supervision, preconditions for unsafe acts, and the unsafe acts themselves. Now in terms of modern business unsafe acts also classifies as unsafe for the continued growth of the business not just physical harm to say an employee or customer.
Imagine a piece of Swiss cheese, it’s full of holes created during its stages of fermentation. The cheese as a whole is the business but cut it up into thin slices and you have a business modeled by a series of barriers (The slices of cheese). The holes in the cheese slices represent individual weaknesses in individual parts of the business, and are continually varying in size and position in all slices. The business as a whole produces failures when all of the holes in each of the slices momentarily align, permitting (in Reason’s words) “a trajectory of accident opportunity”, so that a hazard passes through all of the holes in all of the defenses, leading to an inevitable failure. Through risk management the holes can be closed up/filled thus leading to a relatively risk free business. As growth continues new layers are added with new points of failure causing complexities and too must be filled to move forward.
10) Have a plan and stick to it.
I’ve seen many people have a plan but so often they get an idea and divert from the original course. Now there’s nothing wrong with evolving what was the original plan, that’s called development, taking a completely different course should only really be done if you have to start again. In short, make a decision and stick to it (Unless of course there are some serious financial consequences that are forcing you to change tack). In my own experience I have a problem of too many ideas I often find it difficult to stick with one and run with it. This blog has been one of the only things i’ve stuck with but even then it’s had it’s ups and downs in the past couple of years and gone through various guises, that’s my curse for being a bit of perfectionist. Stick to your guns, even when the decisions are tough and especially when negotiating with suppliers…never take the first quote as the final price as there’s always room for negotiation. Running a successful business takes a intuition, thick skin, motivation, resilience, cash flow (had to get it in again) a cool head, a bit of luck and balls! if you’ve got the idea I urge you to do it as the rewards more often than not outweigh the investment of your time and money.
Hopefully that’s given you a few useful pointers to help inspire and kick start your venture on the right foot. I’d love to hear what you’re up to so do please leave a comment below and I look forward to seeing you make your cheese grow.