I was invited to join John Darvall on his BBC Radio Bristol show to discuss if this was a good time to start a new business? Of course it is, but then I’m an optimist like most entrepreneurs!
After a bit of banter about starting up a new business, he asked me for 3 Top Tips, we sort of skated over them so I thought I’d repeat them here and extend a bit on the chat on-air.
Talk to someone!
There are lots of people out there that want your business to success, more than want it to fail! Locally we’ve got the excellent BRAVE organisation that provide clear, simple advise to anyone thinking of starting their own business. Most cities will have their equivalents.
There are also loads, and loads, of business networkings and networking events. People do business with people (mostly), so get along to a couple and talk to other small business owners and company founders. It’ll help you understand the realities of being your own boss, as well as the perks.
You can also track down the many start-up schools, incubator facilities, seed-camps, etc that are all trying to assist you towards a successful business.
I’m not sure I quite got the right message over on-air about this. If, after talking to some impartial people, you are still passionate about starting a business, then sit down and work out why you want to be in business.
Are you looking to develop a nice little company that will keep you busy for 6 months a year leaving the rest of the time for skiing? Or are you looking to transform your industry? Or are you looking to build sufficient value to exit at £20m in 5 years with a minimum of 50% equity and no earn-out? Or are you looking to build a company that will grow ahead of inflation and still be here in 30 years time?
What is your strategic intent?
The other side to strategic intent is your risk profile. Are you willing to bet everything on one idea, or are you more cautious?
How risky can you afford to be? Work out how much money you have (redundancy payouts, savings, mortgage, etc), then work out how much you need each month to live and how you can minimise this (you don’t need to live in the dark eating value baked beans, but champagne & oysters are probably off the menu), then work out how long your money will last.
That should give you some idea on how risky your position is, and how quickly your business needs to be a success.
Plan your business
This is critical. You don’t need a 200 page, glossy book, but equally you need to be able to describe your business and what you’re trying to achive.
Describe your strategic intent (Mission, Vision, etc). If you don’t know why you’re in business, why should anyone care?
Describe your product / service. This is important but actually, less so than most people think. Is there any unique intellectual property (IP) that can be protected? Do you actually know how your going to make, store, distribute your product to markets? If its a service, what is it and what additional support do you need to deliver it?
Who are you going to sell to and why should they buy from you. Who is your market, where are they, what do they like, what don’t they like, why do you and your idea fill a burning need in their lives or businesses? Market Segmentation, this is good, do it.
Who else is out there? Just about any idea will have some competition. Either directly from other companies offering the same or similar solutions. If you have a one in a million idea, there are around 1,300 people with the same idea in China, 1,200 in India, 500 across the EU, and 300 in the USA. Of course they won’t all be thinking of launching a business, but one of those 3,300 people might.
Cashflow forecasting. Cash flow is king for a small business. You won’t be able to produce a detailed financial model of your business before it’s even trading, but you need to have some idea of the basic cash flow through the business and where your break even point is. What’s your burn rate (monthly cash spend) and runway (how long before you’ve spent all your savings)?
My reply about the Apprentice was wrong, their business plans weren’t rubbish because they didn’t have good advice; they were rubbish because they didn’t listen to that advice!
<Disclosure: I was introduced as being from the University of the West of England iNET (Innovation Networks) which is true, but I’m also on holiday and the original link was via here so link-love all round.>