One of my better decisions in 1996 was to come home from the USA and after 10 happy years with C&W leave in favour of a port-a-cabin start-up on a chicken farm in Leicester. These days the cloud has enabled companies to start-up with little capital investment, renting enterprise-level applications on monthly contracts and allowing staff to work from anywhere. If you can live on your savings for a few months you may even be able to get going without having to sell any of your company to external investors. Reduced start-up costs could be one reason why there were a record 608,100 UK startups in 2015, up 4.5% on the previous year which was itself a record year.
If you are considering taking the plunge, breaking away from corporate life and having a go at working for yourself there will be many thoughts occupying your mind right now so let me add one more.
What kind of entrepreneur are you?
This entrepreneur has turned something they love doing, into a business. They have no immediate plans to sell the business which exists primarily to fund their lifestyle. If they are doing well they will be approached by people who tell them they could be millionaires by expanding, getting new investors or preparing the business for sale. After several months of stress and expense it fizzles out and the lifestyle entrepreneur breathes a sigh of relief. I know many lifestyle entrepreneurs who have learned to be comfortable in their own shoes and resist encouragement to expand or recruit. If you are one, you probably know you are not attractive to professional investors because they need an exit to return a gain to their fund in a specific period. If you need money for growth or new equipment, then borrow it. Interest rates are low and most banks are happy to lend you money if you will give them a personal guarantee. There is also a government-backed scheme, offering loans of up to £25,000 at 6% interest.
2. Technical innovation
This entrepreneur has invented something new and started a business around it, building prototypes, testing, filing patents and copyrights and fund raising. If your technology is disruptive and capable of scaling, then this is probably the vehicle with the most potential. However, it can take many years to even get the product to market and then you will have investors to keep happy and patents to defend. Living in Cambridge I have worked with many tech startups and have several as customers. I admire their dedication, working sometimes for years on an idea before they generate even £1 of revenue.
This entrepreneur is good at building teams, sales and marketing and scaling operations, starting from scratch then picking well-known products and markets. These guys are not intimidated by entering an established market with a brand new start-up, especially if the sector has a high p/e ratio and is still in growth. There is nothing wrong with taking an existing idea and doing it better. Due to the speed of technical innovation in productivity tools like desktop, billing, communications and accounting it is possible to build your establishment quickly at a lower cost than your competition. If your risk profile or skill set deters you from a raw startup, then consider a Management Buy In (MBI), or Management Buy Out (MBO) if you currently work in the company you want to buy. With interest rates so low there is plenty of money around to fund proven management teams. Look for companies in your chosen sector where the business has stagnated or where the owner wants to get out or reduce risk. Make sure that between you, your management team and your investors you have a controlling interest in the target company.
Jola is run and funded by entrepreneurs and we attract like-minded Partners. Our cloud-based communication products, our culture and approach suit start-up companies and we are pleased that so many have chosen us. We deliver best-of-breed enterprise products at startup prices on monthly recurring contracts.
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