We recently brought you our video with 5 essential tips to secure funding for start-ups and small businesses and essential business tips for pitching to investors.
The third instalment in our ‘Essential business tips’ series covers essential points in the starting up of a business process.
Half of all start-ups fail within the first five years, with that in mind here are four tips to help you beat the odds.
Tip 1: Evaluate your idea objectively
If you can’t identify at least one true USP then it might be time to re-think your product or service idea. Don’t just rely on family, friends and your immediate network.
Daniel van Binsbergen - CEO of Lexoo, has this advice for budding entrepreneurs:
Make sure you interview at least 20 target customers before creating your product. Ask how they’ve actually approached the problem your product will solve in the past, instead of asking for their opinions on the future. This way you learn how customers actually behave, instead of how they think they might behave. They are often very different!
Also, listen more than you talk during customer interviews and don’t try to sell your idea. People are generally nice so there’s always a risk they’ll just say what they think you want to hear. The goal is always to find the truth, even if it’s uncomfortable.”
Ask yourself some tough questions about your idea:
- Are you offering something useful?
- Does it satisfy a need?
- Are you solving a real problem?
- What is in it for your customers?
- Will someone pay for it?
- Are you really passionate about it?
- Why would anyone else care?
In short, what are your true USPs? Isabel Lizardi - CCO & Founder, Bare Conductive Ltd, advises “Go through the whole user-journey step-by-step. The only way to make something great is to prototype”.
Bonus Tip: Sometimes crowdfunding could be a good way to gauge interest in your idea.
Tip 2: Research your opportunity
Fully research your opportunity before you start. Your may have validation that your idea is great. You need to research your market size, audience, competitors, development & execution cost and realistic price points. You don’t always need to get into big data research to do this. There are plenty of free resources and platforms like Google, Facebook and Twitter offering free insights that will all help you assess your opportunities.
Kelly Culver - Digital Marketing & Events Manager from Fruitworks, has this advice to add on how entrepreneurs show research and develop their pitch:
When developing your pitch, you must keep it simple with no industry specific jargon, not everybody understands it! Identify your USPs and why you are in business, what your business aims are. Prioritise points with the most important at the beginning, as this is where their interest is piqued. Avoid using filler adjectives like amazing or unique, we’re all amazing or unique in our own minds, you have to back it up with facts and figures. Finally, always end your pitch with a call to action like taking a business card or scheduling a follow-up call.
The things you will need to research:
- Is your niche market sizeable and will it deliver a return?
- Is your sector in growth or decline?
- Competitors (direct & indirect)
- direct = same product / service
- indirect = same sector / target audience focus – could deliver your product / service
- Development, delivery, operation & go to market costs
- What are realistic price points?
- how much will you be able to charge / how much will you have to charge
- Your audience demographics
Dr. Nicholas Allott, Founder at nquiringminds, suggests checking
Where does money change hands, how often, how many layers, how much, what margin?
Tip 3: Plan for Execution
Action always beats thinking. A start-up begins with a great idea, but all too often, that’s where it ends. Ideas have to be implemented well to turn them into a successful business. Good execution requires a plan and good operational decisions come from good people. You need to assemble a team to execute on your idea. That’s why investors invest in entrepreneurs, rather than ideas.
Joseph Zipfel - Investment Manager at Startup Funding Club, states:
While a strong pitch deck will carry you a long way, Investor are investing in people before investing in business plans. Therefore, the entire purpose of an Investor pitch is convincing them that you are the entrepreneur in whom they are going to invest their money. It is crucial to differentiate between customer and investors, your pitch to the investors should not be same as the one to your customers. Investors want to see a return on their investment, they do want to know the endgame, ideally in 3-5 years’ time. Give them an example of a company that would consider your business an attractive acquisition.
- Assemble team of skilled co-founders that shows passion, commitment, dedication
- Consider recruiting some relevant advisors
- Get right expertise in-house - build your team around technology, operation, sales
- Consider outsourcing to experts – marketing, finance
- Incentivise entire team for delivery of milestones
Brian Donnelly, CEO and Founder, Synapse Information Ltd, comments on planning for execution and assembling a great team:
Never compromise on this. You need fantastic, motivated people and you need show them how much you value them. Give them stock and competitive salaries. Once you have them, give them everything they need and then give them free reign to create.
Tip 4: Map your finances
Cash is often the root of all failure. In fact, 42% of start-ups fail because they run out of money, so make sure you map out a long term financial plan. By Creating a long-term financial plan this will help you to avoid surprises in the future.
Clive Lewis - Head of Enterprise at ICAEW, gives this advice:
To run a successful business you should keep on top of the numbers – sales, gross margins, overheads, payroll, costs, net profit and most importantly cash flow and bank balance. If you are not good at record-keeping accounting software can deliver all the information you will need at the push of a button. If you don’t know where to start, then a conversation with a chartered accountant will point you in the right direction, so you are fully “in control”.
Include the following:
- How far will your personal start up cash take you?
- When will you need your first investment?
- When can you expect your first revenue?
- Do the figures add up?
- A realistic, long-sighted plan will help you avoid surprises
- Look at figures from competitors to work out what sort of demand you will have.
- What will your production costs be like?
- How much will you need to charge for your offering to make it viable?
- Will your target customers be able to afford it?
- What will your margins be like?
- How much repeat custom will you get?
Peter Lilley, Director & Co-Founder, iGeolise Ltd states:
You can get grant money or investor money, but the very best money is client money. We wanted to get there as quickly as we could and we now live on commercial revenues.
Finally Jim Duffy - Founder of Entrepreneurial Spark, has these motivational words:
Since founding Entrepreneurial Spark I’ve had the opportunity to work with over 650 entrepreneurs across the UK, and it’s amazing how many startups I see facing the same hurdles when starting out, regardless of sector and location. Entrepreneurs face a rollercoaster journey of highs and lows when refining and evaluating their business, but you need to be in it to win it. With the right mindset, determination, and #GoDo attitude, you can conquer the obstacles you’ll face along the way and come out the other side with a viable, successful business.
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