Start trading before you seek external funding
In 2001 I founded an investment management company and recruited 14 entrepreneurs with time and money to invest. Hundreds of start-ups sent us their business plans and for 60% of them that’s all their business was – an idea and a spreadsheet. We would often ask ourselves “if you cannot persuade family and friends to invest seed money or put in cash yourself to test the concept and financial assumptions, why would we?” Is there a market for this product? Is this the right price? Can I make the revenues, margins and profits in the plan? These are questions you can only really answer once you have started trading.
Generally, we avoided companies that were still in the concept phase. The one thing that’s certain about any business plan is that it is wrong. This is not usually a show-stopper but most investors will want to see where it is wrong and real evidence of progress before they will put in their own time and money.
Don’t do it on your own but don’t choose a clone
Companies grow faster when several Directors with complementary skills have significant equity interests in the business.
A common mistake people make is choosing to go into business with individuals exactly like them. Many promising start-ups have failed because the two techies at the top cannot sell and great friends have fallen out because they are both fantastic salespeople and both want to be the boss.
The first thing to do is work out what your own unique ability is. Your unique ability is defined as the one thing that you are great at, nobody does it as well as you and you love doing it. You should aim to work in your unique ability 80% of the time and everything else you should plan to give away. Now I appreciate that in start-ups everyone has to ‘muck-in’ in all departments but over time this has to change and as the leader of the business you must learn to eventually let everything else except your unique ability, go.
When you are deciding on your business partners ask them to define their unique abilities too. Avoid going into business with people where their unique ability is broadly the same as yours.
Don’t be shy! Talk to people, ask questions
I am always surprised at how few questions new entrepreneurs ask. Maybe they feel that being an entrepreneur is about doing things by themselves and learning from their own mistakes. Maybe they think we are all in competition and other entrepreneurs would resent giving them advice. Maybe they don’t know what questions to ask or they view seeking advice as weak. You can glean useful pieces of information from chatting with the right people. This might save you from making a mistake that could cost time and money
For example, I have worked in business communications in the UK for more than 30 years and subsequently I know a lot of people and a lot of suppliers. New entrants pop-up every year that I am not so familiar with but I certainly know most of the suppliers to avoid or at least not to use for certain products and services.
Choosing the wrong suppliers, partners and professional advisors can handicap a fledgling business and these mistakes are easily avoided just by asking the right people.
The team at Jola have been starting and running businesses successfully for years. If you are interested in working with likeminded suppliers, contact Jola.
