The numbers don’t lie: setting up your own business has never been more popular. A record-breaking $5 billion has been poured into US enterprise technology startups alone in just the first quarter of 2017 (80% up on the previous quarter). Meanwhile across the pond in the UK, StartUp Britain says the highest ever number of new businesses have been registered with Companies House.
So, you won’t be the first person with a burning desire to quit making money for other people and turn that killer idea into the business you’ve always dreamt of. A report from the Global Entrepreneurship Monitor (GEM) reveals that 27 million working-age Americans are starting or running new businesses (a record high) with the Office For National Statistics data (March 2017) recording 4.8 million British men and women doing the same. So, in order to avoid the startup snares and make a long-term success of a new venture, follow our seven top lessons from those who’ve learnt the hard way.
1. Avoid Being The Guy Who Doesn’t Know What Problem He’s Solving
‘Too many startups have innovative new products and great brands but haven’t thought about what problem they are solving for which sales channels,’ warns Barney Mauleverer co-founder of food and drink distribution firm Fresh Marketing. ‘Growth and profit motivates most buyers – what is your start-up’s raison-d’etre? If the business objective is not clear from the outset then it is hard to know where to point the tiller. Not being clear enough about what it is that you are selling, and so failing to get that message across to potential clients or customers, can send firms to the floor before they’ve even got off the ground.’
2. Don’t Fail To Factor In A Lack Of Readies
‘Cashflow, or a lack of it, is the killer of most startups,’ warns Tim Wright, startup consultant with Twin Tangibles. ‘Forecasts are often way too ambitious and don’t factor in a delay in payments, which are all too common.’ On the money front also consider your margins between your outlay and your income very carefully. ‘Try not to compete with others solely on price but instead aim to offer something new, different or innovative, whilst all the time ensuring your margins are good enough to sustain the business on low volume in the early stages,’ says Wright.
3. Get Into Crowdfunding But Know It’s Not The Whole Enchilada
‘Crowdfunding does provide startups with a potential source of funding that was not previously available and that in itself is important,’ says Wright. But it will never be the sole source of funding for any business and in truth it offers much greater value in other ways, such as helping you start fast and if necessary fail fast. It provides exceptionally valuable information, for example on customer and market insight. It can build awareness, develop key networks and connections and act as a proxy PR exercise. ‘The process of running a crowdfunding campaign is much like starting a business and so they are exceptionally useful and mutually supportive bedfellows.’
4. Don’t Try To Go Too Wide, Too Early
‘Begin in the smaller concentric circles to make the mistakes and prove success before rolling out,’ says Mauleverer. In the case of a business-to-business start-up, instead of appealing to individual shoppers Mauleverer suggests that a ‘loyalty card’ approach works well with both. ‘Find a champion customer to drive locomotive volume, revenue and profit but above all to build a case for the others. A handful of customers working well is far better than lots that aren’t. Also pick your battles carefully, don’t have too many fronts and stick to what you are good at until you’re robust enough to look at the next project.’
5. Ignore Networking At Your Peril
It’s time-consuming, but neglect pressing the flesh, in person or through social media platforms like LinkedIn, and you’ll soon fall by the wayside. New research carried out by The Economist Intelligence Unit and Singapore’s Infocomm Media Development Authority found that entrepreneurs who engage in active networking from the very start have a much higher chance of getting positive returns, in the shape of revenue growth and profitability.
In a study of 1,000 new entrepreneurs, almost 80% considered online and physical networking their single most important means of support in the early days. It provided everything from help with financing to guidance in dealing with regulations. Continuing to attend conferences, host events and use online forums is also considered essential further down the line when looking to expand and discover leads into new markets.
6. Don’t Be Lukewarm – Love Your Startup Like Your Baby
Entrepreneurs who create, nurture and devote their love and focus to their startup, as if it were their child, are far more likely to succeed than those who keep it at arm's length. Finnish researchers who compared the brain activity of new company founders (non-fathers) with a group of dads who weren’t entrepreneurs discovered that beyond the business nous and marketing skills, successful startups require a lot of love.
‘Entrepreneurial love is strikingly similar to paternal love,’ says study lead author Liro Jaaskelainen, from the Department of Biomedical Engineering and Computational Science, Aalto University School of Science, Finland. When the emotional responses of both groups of men, who either had businesses or children that were around four years old, were measured, the entrepreneurs scored higher than the dads in the amount of love they felt for their companies compared to the feelings for the children.
7. Don’t Trust Your Business Plan Is Good Enough – Insist On Watertight
Your business plan serves as your ‘beginner’s guide’ to starting up. It serves to give you direction and keep you on track along the journey, so it should define what your company is about, who your customers are and break down your overall mission into mid and long-term goals and targets. ‘At our company we have clear quarterly targets combined with a long-term roadmap,’ says Frank Jan Risseeuw, CEO of money management start-up Yolt.
Don’t skimp on getting your business plan watertight, costed and questioned by a financial advisor who's been through the startup process before. ‘It is important to find investors who are committed to your long-term purpose and who challenge your objectives,’ adds Risseeuw. ‘And to employ people who are committed and willing to join an unknown journey.’
WHAT NEXT? Successful entrepreneurs may be coy about admitting it, but there’s a whole lot of luck involved in taking a startup from an idea to the marketplace. Working on instinct sounds haphazard but research shows that those founders who do make it, do so not because they’re trained to do so, but because they trust their instincts. So go for it, but take the first step by getting enterprise scheme advice and following the checklist of business registering requirements in the US and the UK. Oh, and check out RISING’s guide to financial freedom ... https://goo.gl/oKxeok