Written by Chris Manson, CEO of Newable. Chris is also a highly successful entrepreneur himself – prior to joining Newable, Chris founded and scaled 5 SMEs including his most successful, Sit Up TV, which he sold to Virgin Media for £194m in 2005.
Is now a good time to set up a start-up for the first time, and if so why?
In many ways, there has never been a better time to start a business. The pandemic has highlighted many potential cost efficiencies for new SMEs. For example, the accelerated shift to remote and hybrid working – for many industries there is no longer a need to have an expensive, centrally located permanent office. Historically the long-lease HQ was the biggest business expense but start-ups can now benefit from flexible working options that significantly reduce costs and risk.
Aligned to this, the increased shift to cloud-based software is positive, with a raft of cost-efficient platforms that can help SMEs work smarter, from accounting to customer relationship management.
What can cause start-ups to fail?
Late payments can be a huge issue for SMEs. Over £23bn worth of late invoices are owned to Britain’s SMEs at present, which could be catastrophic for some businesses. You should conduct extensive due diligence on your customers beforehand and try to ensure a smooth working relationship. You may wish to take advantage of products built to help ease this relationship such as invoice discounting. Early communication is key, follow up late payments with a letter, an email and a phone call before things escalate, as debt recovery and legal action are both costly and protracted and should be a last resort only.
What are your top three tips you would give to new start-up founders before they begin their journey today?
- Understand the changing needs of your market. Each market will now be facing unique challenges, and opportunities, but a trend common to almost all industries is the shift from offline to online. To minimise social interaction, the need to have and use online products and services has risen and while there are many solutions to help us with our day to day life, there’s still a long way to go. Customers will expect fantastic digital solutions, and the companies who can deliver these will thrive. However, the charge to digitalisation won’t be the only change within your market – so keep an eye on the changing needs within your market.
- It’s good to be green. Aside from getting national and international updates on the status of the pandemic, one of the few non-COVID related news items has been how the lockdown was positively affecting the environment. Even though the fight for a greener and more sustainable planet has been years in the making, the last year might have inspired more entrepreneurs, investors and even big corporations to join the movement and start to make a difference. Reports are suggesting the pandemic has caused a major shift in consumer behaviour, with more than a third (36 per cent) of those surveyed saying they’re now buying more products from companies with strong environmental credentials.
- Help is out there. It may feel as though you’re on your own during your start-up journey, but this is definitely not the case. There is a plethora of help for start-ups in the UK, from access to advice, grants, and start-up loans. Start-up Loans of up to £25,000 can give you a much-needed boost if you’re just starting out, or looking to scale up. The British Business Bank’s Finance Hub also provides more finance options for smaller businesses. Innovate UK supports businesses to develop and realise the potential of new ideas through funding and research collaboration. At Newable, we run over 300 free events each year which aim to help SMEs at every stage of their business journey, from product development, new market launches, digital marketing and much more. There is help and support available for your business.
What personality traits does a good start-up founder need today?
Founders need deep expertise in their subject matter and an ability to run a business rather than to just develop a product. After that, a willingness to seek help from other people is vital. Swallowing your pride, realising you can’t do something yourself and hiring the right talent is important. Some founders are closed off and struggle with this.
What are the most common pitfalls to avoid?
Inaccurate forecasting is among the most common issues. Founders need to model the business under worst case scenario assumptions, not the best. Always assume that things will cost twice as much, and take twice as long as you first think. Prepare for challenging market conditions as a priority – if things improve, that’s a bonus.
The old cliché ‘cash is king’ still rings true. You might be due big profits but you need to ensure you have enough regular liquidity to pay your costs such as office rent, suppliers and staff.
Deal with problems quickly – don’t put them off, even when it’s difficult. For example, you will almost inevitably make recruitment mistakes – if 2 out of 3 hires are good hires, you will be doing well.
How can founders think long-term?
Don’t give away your equity too early. The team that delivers you real and lasting success may not be the same team as you start out with. You need to preserve equity in order to reward those who come along later, but still make a real, valuable and tangible contribution.
What is the best advice you have been given?
Go with your instinct. You will of course have to have a viable business plan, potentially to persuade outside investors, but also to act as a guide rail for your nascent business. But in the end, it will come down to your hard work, determination, ability to learn on-the-job, capacity to build teams and sheer bloody-mindedness. If you have all five of those, you have a fighting chance.