8 THINGS EVERY ENTREPRENEUR SHOULD KNOW BEFORE STARTING A BUSINESS
Gareth Smyth, founder and CEO of Hilton Smythe business advisors, has witnessed first-hand the mistakes entrepreneurs make when launching their business. Here he gives his advice to avoid falling into that trap…
It takes a lot of courage to step out into your chosen industry and start a business from the ground up. Yes, there’s always an element of luck involved, but being prepared for all outcomes is crucial to your business surviving in an ever-more competitive landscape for startups.
At Hilton Smythe, the business brokers I co-founded with my best mate in 2011, we’ve witnessed many new entrepreneurs make mistakes over the last 12 years. Here are the key lessons I’ve learned that could help budding businesses stay afloat in those tricky first few years…
1. Understand what makes your business unique
Successful entrepreneurs usually have a clear idea what their company values are, and how they can distinguish themselves from competitors. This can help identify any problems that need being solved for your audience (scroll down for more).
2. Sort out the basics first
Any entrepreneur worth their salt should do the following:
Conduct comprehensive market research
Check out local competition
Investigate labour supply: how many people can you realistically afford to hire?
3. Money, money, money
Many new entrepreneurs also underestimate start-up costs, especially if they are considering using physical premises. There’s so much to think about here: property rents, commercial insurance, digital infrastructure, marketing costs, equipment and supplies, stock, and staffing and employment costs. For this reason, you should seek advice from a trusted financial adviser.
4. Never recruit a mini-me
It’s also important to hire any expertise that you lack. This will increase productivity and efficiency, prevent burnout, and ultimately improve the quality of your service.
5. Identify problems that need to be solved
Knowing your industry, as well as any problems your knowledge can solve can help provide your business with a direction to follow. Take the example of Airbnb. Having started in the San Francisco living room of founders Brian Chesky and Joe Gebbia in 2007, today it’s a globally-recognised hosting/accommodation business valued at $113bn. Chesky has long-maintained that Airbnb’s success came from the need to solve a problem they faced.
“If we tried to think of a good idea, we wouldn’t have been able to think of a good idea,” he once said. “You just have to find the solution for a problem in your own life."
This is reinforced by advice from Virta Health co-founder Sami Inkinen, who said, “Starting a company extracts so much energy and conviction that not having a clear-cut goal and meaningful mission can hamper your success. This is why, at Virta, our mission was clearly defined: reverse early type-2 diabetes in 100m people by 2025.”
6. Don’t be afraid to offer some of your product/ services for free
Showcasing your value to investors or customers isn’t easy. However, offering a trial period or free tier can help get your foot in the door and make them want to pay for more of your service. As Melanie Perkins, co-founder of Australian tech company Canva, says, “If you can offer a free tier that provides much value, it will naturally help your product to spread much more rapidly.”
7. Get ready for the next stage: upselling. But be ‘human’: selling isn’t “a macho act”
Once you have an established audience who’ll pay for your services, you can start looking at upselling and progressing to the next level. When building a plan for upselling to your customers, remember that everyone in the sale is human with human-like hesitancies.
Subroto Bagchi, co-founder of Indian consulting firm Mindtree, provided insightful commentary on this: “Selling is not a pushy, winner-takes-all, macho act. It is an empathy-led, process-driven, and knowledge-intensive discipline. Because, in the end, people buy from people.”
8. Finally, the most important advice to remember is…
… accepting that failure is a natural part of building a business. Make no mistake: setting up a new business is risky, with statistics showing that around 20% of startups are dissolved within the first year of operating as company.
You might have spent weeks examining forecasts and believe you have a creative solution for a market. But there’s every chance your venture won’t work out the way you hoped it would. In fact, there’s every chance that despite examining forecasts and having a unique and creative solution to offer a market, it doesn’t work out the way you hoped it would. This can be disheartening with real knock-on effects on your business.
It can help if you have a similar outlook to Jessica Herrin, founder/CEO of boutique jewellers Stella & Dot, who says, “You have to see failure as the beginning and the middle, but never entertain it as an end.”
Resilience can be a key factor in the survival of a business. While you may experience financial shortcomings or competitive market trends, by sticking with your knowledge and your team, you might just see your fortunes change.