Here is the first of a two part series of top tips to help start-ups avoid the common pitfalls.
It’s never the optimal time, or the wrong time to start your own business. A benign market helps but self-belief is the key ingredient that you need in abundance.
Well-meaning friends, family (and of course the doubters) may voice their opinion, but it’s your self-belief and single mindedness that will win the day and get things off the ground.
Sadly, riddled with indecision over timing, the market and self-doubt, many great businesses never leave the kitchen table idea stage. Make your decision and in the words of Nike, “ Just do it “.
2: The Paradox of Choice
Our experience in recruitment spans nearly two decades and we’ve seen many embryonic start-ups spend too much time agonising over choice. Choice of CRM software providers, location, branding, logo, website, company name, the list goes on. Such stunted businesses get hung up on names, domains, software and marketing, often only to return to the start again.
You can avoid this death spiral by being clear about your core values and mission, target market and ‘your story’ for clients, candidates and staff. Being unshackled from politics and inflexibility can far outweigh corporate life, but does have a ‘sting in the tail’. Here you were supported with procurement, HR, software, technology, marketing and accounts teams. Replicating this, now becomes a multiple choice decision for the new business owner.
The Paradox? – Less is more. The longer it takes to study the best whiz bang gizmos, the longer it takes to do business.
3: Mind the Pennies
You rarely need to buy at full price, there is always a more competitive option and only buy what you need or explore pay-as-you go offers so you don’t get locked in. Sites like Fiverr and Elance can help you get projects done, or find knowledgeable partners who know your industry and have done it before. APSCo, for example, have a diverse marketplace of support partners offering exclusive discounts and added value services to support businesses of all size.
Look at a Regus Gold Card for meetings and other office services, rather than a costly rent lease – Other office space providers are of course available!
Be honest with yourself, before you become Chief Sales, Head of Marketing, CFO and Procurement Manager. Ask yourself what you are good at and look at how you can use your network and/or buy in skills to help with the rest.
There will also be many SME clubs for similar companies in your sector who will have support networks. Some of these networks have group buying power, active referral groups, forums and helplines.
4: Get a buddy
It can be lonely at the top. It’s invaluable to have someone impartial to brainstorm and help with perspective. A critical friend, supporter, coach, sponsor, it could be a fellow entrepreneur, friendly competitor, or industry specialist. It’s key they know your sector, your journey and where you want to go.
Some will do this for a fee, others prefer equity, or a mix of both. Whatever you choose, do make sure they are impartial, flexible and their knowledge is current. We advise our clients in the first instance to try and secure a ‘critical friend’ on a fee basis, over and above a non-exec who pitches up to the odd board meeting, collects a fee and perhaps takes a chunk of your equity.
There are some great non-execs out there but one size doesn’t fit all. We would advise caution and if you feel a critical friend would work for you, try not to agree long term or equity-led agreements in the early days, or you could end up paying or giving away more than you bargained for. Why not go for an initial 3-month agreement instead and test the relationship
5: Don’t give the farm away early
In the early days, it is tempting to attract people to join as employees by dangling shares. Some advisors and even suppliers may ask for equity. This is an entirely personal choice and there is no right or wrong. However, unless you use an EMI or share option scheme or typically a very convoluted or heavily biased shareholder’s agreement, (which often detracts from the intended benefits) equity is likely to last for the business lifetime or until you transact. Equity in a start-up is a cheap option but could be a long-term costly decision.
We have seen some start-ups offer equity to attract ‘big billers’ and a number have given away as much as 40% to employees who are just not in it for the long haul. An unstructured share scheme will make it difficult and expensive, not to mention legal and emotional when you want to lose initial shareholders. Some dodge tough decisions leaving ex-staff with equity which is not a great place to grow a business from
If you do this pursue this, make sure your Articles are well crafted, you have a tailored shareholder agreement in place, not just a cheaper boiler plate version and that you understand the impact of your minority shareholder rights. Our advice is to always think: who, why, when. Some companies are stuck with well-rewarded minor or non-critical staff, where retention or transaction bonus would have been more appropriate.
It is acknowledged that SMEs are the engine of financial and employment growth in all major countries. They are better at adapting and innovating and for many potential employees they offer a more fulfilling proposition.
SMEs and Start-ups alike have already tapped into the potential provided by people requiring flexible working solutions, the self-employed, the working mothers and the grey demographic of experienced semi-retired baby boomers.
In 2015, 5,110 new recruitment agencies launched in the UK based on some recent research from Sonovate. With increasing numbers of companies registering every day, there is a wealth of knowledge and experience available for the start-up entrepreneur and the new SME business.
Couple these with an improving financial outlook, 2016 is set to be the Year of the start-up.