21 Mar 2016
Turn on the TV and you'll hear about successful entrepreneurs who had the perfect plans for their business. Others say that running a successful enterprise is almost impossible.
These are the rules of engagement.
I'm here to break the myth of the entrepreneur.
It's true, there are lots of pitfalls and cul de sacs that can get in the way but building a successful business is achievable.
I've been fortunate enough to have worked in the inner sanctum for two of the world's greatest entrepreneurs. I have succeeded and failed for these masters, and I have succeeded and failed on my own. These experiences have given me a unique insight into what drives success in startups.
When 1 in 4 businesses fail in their 1st year, and only 20% make it through to year 6, some good practical advice is needed.
I have developed a set of rules that all successful businesses adhere to. If your startup isn't going to be just another statistic, you should follow them!
1. Your business idea must be "bullet proof"
Your first port of call is your idea. It doesn't have to be unique, it does have to be commercial.
Poor, non-commercial ideas will fail however well you execute them. So your first job is to make sure your idea is bullet proof.'
Make sure you think through your idea carefully and always be on the look out for ways to improve it.
I have developed a framework for reviewing business ideas. One of the most important rules is being able to answer the question 'why will people find this useful?'
2. Don't wait for the perfect anything
You don't have the time or money to perfect products or marketing pitches. Besides, how will you know if something is perfect unless you try it out on real customers?
You must get your offer as good as you can as quickly as you can, then test the product in a live sales environment. Refine and adapt it based on the feedback you get, then try again.
Once you feel confident that you have something that will work, do it! Pull the trigger and spend as much money as you have available to generate sales.
3. Wasting money in a start-up is a crime
Make sure you only spend your money on the front end of your business, i.e. those things that get people through the door and achieve sales. This includes your product and any sales and marketing initiatives such as advertising, brochures and press. At this stage, sales and customers come before everything else.
Don't waste money on things you don't (and may never) need at the back end of the business like computer systems, elaborate till systems or financial packages. Only spend money on these when customers are being impacted negatively.
4. Prepare for battle
Successful entrepreneurs like to pretend that their success is down to personal brilliance and an innate ability to see the future. It isn't.
Successful entrepreneurs devote a large amount of time to hard thinking and careful preparation. You must too.
5. Use PR to build credibility
When you're starting out, all you have is an idea but you have to open doors and convince people to do things for you.
You will only be able to achieve this if you have credibility. People must believe that you can do what you are promising, otherwise you are just wasting their time and money.
One of the things that I leaned at Virgin was that positive PR is one of the most effective ways to build credibility quickly. And the great thing is - it's free.
Learn a few simple tactics and you will be reading about your business in the papers in no time.
6. Everything is a negotiation
A start-up is simply a series of deals. Deals with suppliers, employees and partners.
If you can't negotiate, you will fail. So you'd better learn fast!
Once again, preparation is critical: what do you want? What do they want? And what is the point at which you should walk away?
Throw in some tactics and you should come out with what you want.
7. Securing funding is not just about getting your hands on any cash you can
Most businesses will need some form of funding but that doesn't mean you should simply take the first offer of cash that comes your way.
To succeed, you must to secure the right level of funding at the best possible price whilst retaining the necessary flexibility a start-up requires.
8. Cash is king!
It might sound like a cliché, but this must be your mantra if your start-up is to succeed.
It doesn't matter how much profit your accounts say you have made, unless you have cash in the bank, you cannot pay your suppliers and employees.
You need to keep looking for ways to preserve the little cash you have to achieve incremental sales, to get paid faster and to be able to pay yourself later.
9. Don't waste time, money and effort trying to build a brand during the early days of your business.
Don't waste cash attempting to build a brand from day one. Instead, you must focus on driving sales and meeting customers' expectations. If your start-up delivers on its promise in the early years, the brand will take care of itself.
I always develop a brand on a shoestring - business name, website, PowerPoint presentation and some business cards. These things will enable you to hoover up the goodwill you create and ultimately develop a valuable brand that costs you almost nothing in the early days.
10. Recognise when it is time to 'shoot the entrepreneur'.
There comes a time when you are no longer needed - your time to move on! The good news is that this is your time to cash in.
The trick is to recognise when this time has come, remove your self elegantly and sell the business.
I have seen many businesses either fail or severely reduce their value because the business founder can't let go.