So, you’ve had your lightbulb moment and found a way to convert something you’re passionate about into a viable business, which works…in theory. With funding more available than it has been in recent years, free courses and content on how to get business ideas off the ground available at the click of a button, and community-driven coworking and innovation hubs that point to a new, more collaborative era of creativity popping up across the UK, the start-up scene appears to be thriving.
Statistics suggest however that although over half a million new businesses get started every year in the UK, more businesses shut down than start up, which is less to do with the ideas being terrible and more to do with the fear factor that sets in as soon as we all start wondering how on earth to convert our ideas into reality.
For every business owner who has met the demands of starting, growing and paying for a business, there are many more that don’t ever finish the first draft of a business plan. In the powerful words of American essayist and philosopher, Henry David Thoreau: “Most men lead lives of quiet desperation and go to the grave with the song still in them.” The main difference between those that take the plunge and those that live a life asking themselves ‘what if?’ – fear. The idea of starting a new business is scary, let alone actually starting one—no matter how many positive affirmations you commit to, fears naturally arise as do challenges every step of the way.
So, what are the inevitable challenges that all start-ups will face and what can you do to break down these barriers to your success?
Money is likely the biggest issue for most people when it comes to starting a business. The idea of skipping out of your job on a Friday having slammed your resignation on your boss’s desk with a view to starting your new business on Monday is crazy, frankly, and probably not the path that many successful business owners followed. The bottom line is that to get going properly, you need money. Unless you’re touched by the hand of Midas and cash starts pouring in straight away, either from sales or investors, money is definitely going to be an issue sooner rather than later and cashflow issues will massively delay rolling out products, hiring staff, or sorting out a productive space to work.
Even though it might seem counterintuitive when you’re trying to minimise financial risk at the beginning, the last thing a startup needs is to hold onto the purse strings too tightly in its early days—exactly when it needs to be focusing its energies elsewhere. As a new business owner, it’s part of your job to manage the time and money needed to get to the next level without running out of either one.
That said, it would all be too much of a breeze if every person with an idea just sashayed into the bank and was given a pat on the back and a huge loan. In reality, entrepreneurs without investors have to jumpstart their businesses off their own backs and many find that a slow and steady process of building the business (perhaps with a small business loan, but without an enormous amount of debt) minimises financial anxiety.
Start by building your business up alongside your current job until you reach the point where you can safely make the transition. Which, yes, does mean you’ll have to work in the evenings and over the weekends, albeit in the short term. Once your business has some customers and is turning over some cash, you’re ready for outside investment and growth, which is the point at which you should think about leaving your job and moving into your flourishing business full time.
In order to raise funds through your bank or an investor, you’ll need to do a lot of ground work to validate your business first—raising capital to start a business is no mean feat, but it isn’t impossible either and there’s a lot more guidance and support out there than you probably realise. Start Up Loans is a government-backed scheme in place to help people start or grow a business in the UK, and they’ve identified 10 key questions you need to consider before you apply for funding that include reference to everything from your business plan to cash flow forecasts and exit strategies. Head to www.startuploans.co.uk for the full list of questions and lots of helpful hints and tips; you can also find a host of step-by-step guides to writing your business plan online at sites such as www.gov.uk/write-business-plan.
Lack of planning
“If we knew what it was we were doing, it would not be called research, would it?” The words of Albert Einstein, and a quote that should become your mantra when beginning your brand new business journey. Most people easily fall head over heels with their own business idea from the minute they think of it, which is essential, but can also lead to an over-protective defense of it and a fear of seeking validation from others who might not see it as quite as revolutionary. You need courage and a thick skin to start a business as well as a resilient and considerate attitude towards constructive criticism.
Share your idea with friends and colleagues that you trust will be truthful with their take on what you’re planning. Good friends tend to be more brutal than family members and will look at your idea from a rational and practical perspective, so don’t be afraid to approach them and work through any potential pitfalls.
Testing your initial idea through research is also essential; it’ll help you shape your business plan and fine tune how and who you plan to target, as well as help to clarify points on pricing. The internet and social media are hugely effective tools when it comes to determining trends and garnering opinions, but don’t underestimate the impact and importance of field research: speaking to your potential customers directly and testing your idea personally. Surveying, focus groups and face-to-face interviews are all areas you should look further into.
It’s amazing how many startups falter because they simply don’t place enough emphasis on planning: key areas like sales, development, staffing and funding aren’t afterthoughts and should be part of your business plan right from the beginning. Sounds weird, but you need to plan for the things you can’t plan for, too; it’s tough going attempting to prepare for every eventuality that the world may throw at you (oh, hey Covid-19…), but you need to know what your plan B is if events take an unexpected turn, even if Plan B is pretty vague. If your business plan doesn’t allow for surprises, then you’re chartering murky water, so leave no stone unturned when it comes to detail.
Finding the right structure and the right people
Sole trader, limited company, LLP or partnership? Gulp. There’s a fair few ways to structure your new business depending on how the decisions you make down the line will affect its growth.
If you’re not planning on employing anyone except you then you’re likely best off as a sole trader, but that does mean that any business debt will be met from your personal wealth if the business fails.
A partnership is great if you’re going into business with someone you know well and is common when sole traders wish to expand, but liability will affect all partners and can lead to messy ‘break ups’.
Registering a limited company at Companies House gives your business instant credibility and makes it easier to separate your money from the company’s money, but you’ll need to be really on top of your admin.
And, limited liability partnership (LLP) models are effectively a hybrid between limited companies and partnerships, which allows for flexibility, but does not give the same tax advantages. Research every option extensively and seek advice about which is best for you.
Equally important is the synergy of your team, which should be comprised of people with complementary capabilities and an identical focus to your own. Choosing the right people to work alongside will cement and enhance your team culture from the get-go and although there’ll likely be a big pool of motivated individuals that share your passion, selecting the most suitable can be challenging, especially for a startup that may not be able to offer competitive pay rates from the outset.
To tempt the right people to join you, it’s handy to remember the adage: birds of a feather flock together; certain skills will be crucial for your business to survive, let alone grow, but the right attitude, vision going forward and commitment to adapt as the business takes off are all essential qualities too.
As time passes, you might realise that you’ve hired the wrong people—this is easily identifiable as glaring cracks will show once the startup expands, but is a pain in the neck to put right as firing and rehiring will always hold up progress. Lay out your hiring strategy clearly and carefully as part of your business plan so that each key hire works in harmony with the goals you’re trying to achieve; also, be humble, swallow your pride and switch things up if you think you have the right people but in the wrong roles.
The corporate world is a pretty fierce one and competition is inevitable no matter how big a fish you are in your particular pond; even more so for a startup that, in the first year at least, will be doing its best just to tread water. That said, it’s the ability to strategise, and at best thrive, in a competitive environment that will keep you on your brand new toes; punch above your weight with confidence (but never arrogance) and you’ll gain recognition and respect among your peers and the thousands of new and expanding businesses that you’re pitting your business wits against.
The marketplace is crowded and constantly growing, so you won’t be the new kid on the block for long, but new rivals can move the goalposts overnight. Always be mindful of how you stack up against the competition from a potential customer’s point of view, so you can identify what makes your company culture different, your brand individual and your products special, but be equally careful not to define yourself solely in relation to your competitors because it’s essential that you have faith in what you’re bringing to the table, too.
Know your market inside out, always keep an eye on your ever-changing competition and think on your feet in terms of how to adapt to stand out and you’ll find the right balance when it comes to the ‘them and us’ in your industry; startup culture is by nature competitive, but it’s important to collaborate with your competitors where possible to build a strong support network to learn from each other and share lessons learned for positive growth.
Attracting customers and winning their trust
Marketing your vision from its very inception is never a bad idea—testing the waters at the idea stage is a great way to finetune who your potential market is, connect with them, gather *and most importantly, listen!* to feedback, and even start taking orders for the finished product. It’s getting the word out that can be tricky. There are two types of major marketing channel: active, or outbound, and passive, which is also known as inbound.
Inbound marketing, such as blog posts, provides customers with important information about your field of business, but can take a bit of time to attract traffic and convert that traffic into results.
Outbound marketing includes paid marketing channels, such as Facebook advertising, and is particularly useful when it comes to reaching your potential customer base, and therefore growing your business quicker, when you’re absolutely sure of their needs.
Every startup should set aside time and money to invest in both inbound and outbound marketing channels and, pretty simple but true, the best way to identify what’ll work for you is to take a look at the competition and research what works for them. Talk to their customers too and find out what factors made them sign on the dotted line; when it comes to research, a) you can’t do enough and b) startup success is absolutely about the sum of its parts.
Most importantly, remember that the customer is always king/queen and winning and keeping a customer’s trust is the most crucial challenge that every business, especially a fledgling one, faces.
Replete with word-of-mouth power and their own social media sounding posts, customers are the ultimate force behind any startup’s success (or failure) and a highly satisfied customer base is a loyal one that can propel your business towards excellence and a healthy bank balance in no time at all. From the outset, work aggressively and strategically to implement a company-wide customer-centric culture and you are a massive step more likely to attain a healthy and sustainable level of growth. Oh, and always come clean and say sorry when you mess up. Everyone messes up occasionally. That’s life.
There is a massive amount of detail to think about in starting your own business, as well as practical processes to put in place, but if there’s one trait successful entrepreneurs have in common it’s the ability to set realistic targets. Start by working out what your overall company mission is and break that down into smaller, achievable tasks that serve as vital stepping stones towards completing the bigger picture. Smaller goals will make your company’s overall aim more digestible and less intimidating, and starting from the conclusion and working your way back to the introduction will automatically steer you in the direction of where to actually begin. If you’re a perfectionist, learn to adapt—not everything has to be perfect for you to start building your own website, or talking about your business idea to anyone who’ll listen.