In six months of trading our company has been through some pretty turbulent times. In the true spirit of supporting other start-ups small businesses, we’d like others to be able to learn from our experiences. In no particular order, here are five pieces of insight we gained in our first six months of trading. Each is fairly universal, so some or all should also apply to your business.
Building a business is a long and hard task and it requires a lot of patience. Anyone who expects to make an instant return is probably being overly optimistic or not taking into account all of their start-up costs. You need to account for everything you spend money on when starting your business, which could include a website, marketing/advertising, stock, premises, staff and quite possibly many other things. Even if you have a high margin product or service, it will take time to recoup all of your start-up costs.
This point closely links up with the first; you need to know your break-even point and when you need or want to reach it. Year-end targets are good, but you must work out how to meet them, because demand for a growing business is not linear. For example, if you want to sell 120 product units in your first year of trading, you might not sell the necessary 10 units every month from launch. That means you’ll later need to sell more than 10 units each month if you are to achieve your yearly target.
When you create your initial business plan you’ll probably look at what your competitors have done to get to where they are. It’s also likely that you’ll set goals to build a business around a similar (but hopefully better) structure. But don’t forget that while you’re doing so, your competitors will be trying to progress from where they were when you started. So keep an eye on your competitor’s activity and remember – they’re moving targets.
When building a new business you’ll need some capital behind you. Unless you’re in a space that’s really open to creativity and you can get a lot of free media coverage and word of mouth, you’ll struggle to gain momentum if you don’t have a reasonable start-up budget.
New businesses are a prime target for predatory salespeople (especially telesales). If you’re in the online space you can expect companies that host business directories, sell email data, run pay-per-click ad campaigns, etc, to contact you. Most of them will press really hard and rattle off impressive-sounding numbers, but the fact is these direct sales services rarely convert to sales. If you are thinking of investing in any of the above channels, do your homework so you are able to find the best service provider.
Blog provided by Pete McAllister of Intelligent Car Leasing.
As a newly fledged social entrepreneur who needed a constituted organisation, but who was also a headstrong and independent sole trader, having to think about boards of directors, reports, red tape, being told what to do and how to do, well, it was never going to be easy.
Previously, as a consultant, I’d seen far too many boards of directors and trustees who, rather than operate for the good of the organisation and its aims, were more about personal aggrandisement, power, status and a belief that turning up to meetings was enough (oh, and if they didn’t like the founder, they’d simply get rid of them).
So to even consider going into something that would possibly end up being the very means of my being sacked from my own project did not look that brilliant. Nevertheless, the pressure was mounting to become a robust trading vehicle for a social enterprise, something “proper” with which we could raise funds.
The whole point of any enterprise is to be a successful and viable business, and with the “social” aspect, the income then becomes a vital energy resource for helping to achieve the social purpose, not an end in itself.
Faced with the tangle of options, I began to find out more about community interest companies (CICs), charities, not-for-profits, limited companies, mutuals, co-ops and how they differed. In the end, making the decision was easy.
A CIC allowed me to be a sole director and be a paid member of the working team. This gave me a voice on the board, which is difficult for paid employees of a charity. This would help me to remain in control of things, while the locked assets offered security for the future. By law, when running a CIC all profit must go back into serving the community and the social purpose defined in the CIC’s Memorandum and Articles. It was the perfect structure and said on the packet what we were.
But to be able to apply for funding I needed another director and so began the quest to find people who would advise more than direct. The complexity was that the wonderful people alongside me were by law responsible for the financial and legal integrity of the organisation and therefore had a right to their opinion about how the company should be run. I found that really difficult and learned a great deal about myself and about how the label of “director” changes the dynamic of meetings.
I have put that learning to good effect in constituting Music For All Zimbabwe as a CIC. We have only two directors, Fidelis Mherembi, whose vision it is, and me. Whilst allowing Fidelis free reign in his visionary decisions, this structure also secures the purpose of the company, which will continue to serve its community even if Fidelis and I both 'snuff it'. Any locked assets by law remain in service to the social purpose and cannot be sold to line the pockets of the next directors. That security of the future and the freedom in the present makes it a solid foundation from which to build.
CICs are becoming increasingly popular for many reasons and it will not be long before there are 10,000 of them in the UK. The influence of this dedicated social enterprise vehicle being adopted will be interesting to watch over the next few years.
Blog provided by June Burrough, founder and former director of the Pierian Centre, which opened in Bristol in 2002 as a centre for training and self-development and became a CIC in 2008, before closing in December 2011, and co-director of Music For All Zimbabwe.
With all the hype surrounding crowdfunding, knowing what the different options are and which specific benefits they offer can seem difficult. To help you remember you can use the acronym DREIM, which stands for:
Of the five models, donation is perhaps the simplest to understand. Basically, it’s a form of philanthropy, whereby people give money to a good cause. Donors are left with the warm feeling that comes from knowing they’ve done something positive by funding a project with social value.
Within the arts, this has traditionally been represented by the concept of a sponsor or patron of an artist or field of creative work. There are many of these in crowdfunding, perhaps the most well known being JustGiving, but others include Spacehive, which is dedicated to social or community causes, and Unbound, a special model where authors ask the crowd for funding to help turn an idea into a published book.
This is the model that most comes to mind when people think about crowdfunding. The crowd pledges money to a project and gets something in return, such as a poster or item of merchandise. The reward model is represented well on both sides of the Atlantic by the likes of Kickstarter and Indiegogo, but there are plenty of UK sites, such as Bloom Venture Catalyst and Crowdfunder, and these support projects ranging from artists to zoos.
This is where the project’s management (could be a business owner) offers a share of the profits to the crowd. Once money is made or the project is sold, the investors get a share (well, that’s the idea). This is risky, because start-ups often fail, so the likes of Seedrs, which specialises in this model, requires would-be investors to pass a test before they can invest. But the good news for investors (and entrepreneurs using this model) is the government has introduced the SEIS (Seed Enterprise Investment Scheme) and EIS (Enterprise Investment Scheme), which offer tax breaks for investors. There are restrictions and the best place to learn more is by visiting the HMRC website.
Equity usually means giving away some control over a project or business, of course. This could be difficult for some people, which is why this model of crowdfunding needs careful consideration before you proceed. When you give away equity you will also need to seek legal advice, which costs money and takes time. Investors generally look for growth businesses they can scale up and sell in the future.
This model is similar to getting a bank loan except you get the loan from the crowd and it is on your terms rather than a banks. As with equity, you may find a lack of enthusiasm in your business unless you can prove its potential for major growth. Another problem could be higher rates of interest. The headline numbers might look the same as a high street bank, but you need to consider fees charged by the crowdfunding platform and the payment processor. This all adds up.
Mixed is just as it sounds – a mix of models. For example, the Crowdbnk platform offers reward or equity, which is why careful consideration is advised before crowdfunding your project. Plus, you need to check the provider is FSA regulated (Crowdbnk is), which will ensure you are covered should they go bankrupt or if you find out a campaign is fraudulent.
Blog supplied by Chris Buckingham, lecturer and founder of crowdfunding research agency minivation.
We all make mistakes – it’s inevitable. In fact, it’s desirable. Unless people are pushing themselves, innovating and taking risks, a business could stagnate. What’s more, an inevitable part of risk-taking is that mistakes will happen.
And while you may not want to create an environment where mistakes are feared, you need to address them. Fortunately, it need not be an excruciatingly painful process for you or the person who’s messed up.
If you are tempted to ignore mistakes or brush them under the carpet, you may find that your business suffers and people never improve or progress.
Instead, if you deal with the situation, your business will benefit from fewer mistakes. Fewer refunds will need to be issued, there will be fewer quality control issues, fewer customer and colleague complaints, and less time spent rectifying the same errors. Also, the employee will understand clearly how to avoid making similar mistakes in the future.
It’s important to identify what type of mistake has been made. Is it major or minor? While a spelling mistake in an important document may not be a sackable offence, wilfully neglecting an important client is pretty inexcusable.
Similarly, is this the first of its kind, or an oft-repeated action? No one is perfect and mistakes do happen, particularly when people are undertaking a task for the first time. This, though, is vastly different from someone who persists in making the same mistake over and over, despite being told about it and perhaps receiving training intended to help them get it right. Identifying the type of mistake you’re addressing will inform what you need to do about it.
If you have identified that the mistake needs addressing, before offering an opinion, suggestion or sanction, fully investigate with all necessary parties three things – what caused the mistake, who was responsible and what the impact was. There will be countless times you will be grateful that you did so. It’s amazing how often things aren’t quite as black and white as they first appear. By investigating the matter objectively and fairly you’ll be better placed to take the next step.
Once you’ve established the facts, it’s your turn to be clear with the employee. Describe what you understand to be the mistake, its cause and where the responsibility lies. The employee needs to confirm that his/her understanding matches yours (if not, go back to the previous ‘fact checking’ stage). Then you need to explore why they made the mistake and what can be done to prevent it happening again. You need a firm commitment from your employee that they will strive not to repeat the mistake.
You must be clear and not gloss over the impact of the mistake on your business, but this doesn’t mean you need to be unkind. Acknowledge that everyone makes mistakes and express your confidence and encouragement that the employee’s future performance will be better.
It’s easier to deal with this type of problem if you have an open and trusting relationship with your employee. Investing in good relationships with your team is something you should do all year round. Not only will that make these types of conversations easier, but it will also help identify likely mistakes before they happen.
Don’t be afraid of mistakes. They’re a common fact of life and one that, with a bit of thought, can be easily managed. What’s more, accept that making mistakes need not be a bad thing. After all, in the words of legendary US basketball player and coach John Wooden: “If you’re not making mistakes, then you’re not doing anything”.
Blog supplied by Heather Foley of HR consultancy ETSplc.
With the giant cogs of the British economy finally whirring back into life, many businesses may experience significant growth in 2014. However, for companies to achieve successful and sustainable growth, they must expand with maturity. Here are my top five tips on how to go about it.
When a company grows organically, you create certain processes and people can get stuck in their ways. You may also find that when people take responsibility for things naturally, or by necessity, this can lead to them becoming possessive over one particular part of the company.
It’s an age-old cliché but there is ‘no I in team’, and employees putting themselves in charge of certain things and then being unwilling to relinquish them could be very unhealthy for the company. Therefore, as you grow and start to hand over responsibilities correctly, it’s important that you…
As processes grow, they often become more complex or require more detailed monitoring and management. For instance, in the case of officebroker.com these areas include the likes of pay-per-click advertising and database administration.
When we were smaller, these responsibilities were handled in an ‘all-hands-to-the-pumps’ type approach. However, to maintain their integrity and maximise their potential to influence service levels and revenue generation, boxing off these responsibilities into defined roles can be hugely beneficial. However, to specialise you need…
Specialising means handing over ownership and sometimes relinquishing the day-to-day knowledge that you gain from this interaction. This means you have to put trust in the person taking ownership. Sometimes this can be difficult, as you are very familiar and efficient in how you complete a task – but given the right support your successor will flourish and in many cases a fresh perspective can help to improve it. Nevertheless, for trust to be built you need to develop effective…
Growing companies are often built around a nucleus – be they the owners, investors or trusted employees. Stay mindful that those who were there on day one will often have a sense of ownership toward the company, built around their involvement and the part they have played in helping it grow.
As the company grows and new team members arrive, it’s important to understand that their connection and attitude may be different. To keep them engaged, communicate clearly and find the “currency” that works for them (eg financial rewards, success, acknowledgment). And finally…
Change brings challenges, but similarly, challenges bring change and it’s all too easy to resist them, have knee-jerk responses or fall back into old habits when they present themselves. You need to keep thinking forward and give the changes and people delivering them every chance of success. That said, never lose sight of the past nor ignore what it has taught you.
Blog supplied by for Liz Yorke, Director of Global Operations at officebroker.com.
As the recovery begins, it's a sobering thought that because they have become reconditioned by a common ‘batten-down-the-hatches’ approach to recession, few companies are likely to be engineered for growth. The repercussions could be fatal.
The danger is no longer 'boom and bust' - but ‘boom and rust’. Proactive organisations will grow, but more pedestrian businesses risk stumbling into terminal decline. There is the real possibility that if business owners/managers remain in a risk-averse mindset, they will preside over organisational paralysis that not only prevents growth, but also allows competitors to seize market share.
After five years of surviving it's an understandable response, but it leads to an uncomfortable truth – many UK businesses have forgotten how to grow.
So, as the 'green shoots' of recovery begin to take root, what should businesses be doing to reinvigorate themselves and create a platform for growth? Experience suggests that many will be doing the very thing they should most avoid – focus solely on profit.
The alternative approach will send chills down the spines of accountants the world over, no doubt, and it may appear to defy common business logic, but the best advice for business owners seeking growth through the upturn is don't just focus on profit.
There are tried-and-tested ways to keep your business small and stressful and the most common is to obsess about profit as the markets recover and hold on too tightly to the P&L. This approach will prevent you from creating the headspace required to innovate and grow. You may well stay profitable, but you'll also stay small.
In the longer-term, the most successful businesses will facilitate a fundamental shift from a focus on profit to a focus on 'multiple'. They'll look at the long-term value of their business and switch attention from the P&L to the balance sheet. And crucially, they'll shift their focus from income to assets. After all, income follows assets.
As well as traditional 'balance sheet' assets, there are ‘intangible assets’. And the key to long-term growth - and driving the value and multiple in a business - is to focus on the intangibles.
Intangible assets generally boil down to culture, talent and systems. They're the people and processes that drive equity value and combine to form your intellectual property. The challenge is to structure your business culturally and organisationally so that it drives value, grows sustainable revenue streams and supports your long-term ambitions. Creating and building upon the right cultural platform to empower staff to deliver these common objectives - leaving senior management free to plan for tomorrow - is critical.
The economic upturn should present a clear catalyst for growth - but business owners must not allow their desire for short-term profit to dictate caution about long-term planning and investment. Now is not the time for 'logical' product innovation and extension based on understanding today's marketplace – taking baby steps will only keep you small. Today's green shoots represent the ‘teenage years’ - and to exploit them, businesses need bold innovations if they are to capture whole new markets and appetites.
To progress, owners should consider pursuing an asset-based strategy. The challenge is to understand the ‘rocket juice’ in your business – the core intellectual property that powers your current product and channel. Once you identify it, you'll be well placed to innovate into radical new product areas and channels that are more lucrative and less competitive.
The most successful companies at this point in the economic cycle will always be outwardly-focused - and they will look for partners that can help stretch and stimulate their thinking. Business coaching can provide an independent perspective on how companies can invigorate their core intangible assets to drive value, increase their multiple and stimulate sustainable growth.
The most common way to keep your business small and stressful is to focus obsessively on profit. But there are also innovative ways to engineer growth and the best is to concentrate on intangible assets, and to work with a partner that can help to revitalise your company and create new platforms for growth. After years of austerity, UK businesses may well have forgotten how to grow, but they need to get their memory back - and quick.
Blog supplied by John Rosling, CEO of business growth consultancy Shirlaws (UK) Ltd.