Unless you’ve been off-planet for the last 18 months, you’ll be aware the pandemic has hit the world’s economies large and small. You’ll also be aware economic downturn has threatened the survival of businesses and reduced job security. There will never be a perfect time to start a business, only times when the risks are lower than before. The optimist sees the glass as half full, the pessimist as half empty, the engineer sees the glass bigger than it needs to be. If you are able to see the potential whilst acknowledging the risks and are willing to adapt, starting a new venture may not be as farfetched as it first seems.
Parmenides was right saying ‘Ex nihilo nihil fit’ (Nothing comes from Nothing)
On the back of recession and economic downturn in the early 1900s, William C. Durant of the newly incorporated General Motors took the opportunity to buy struggling smaller automobile manufacturers. GM could then sell multiple brands and product lines and varying price points to a much wider market. They are now the world’s fourth-biggest car producer.
Yale University student Frederick W. Smith took advantage of the 1969-71 depression seeing a need for quick delivery of goods in urban areas. Smith first presented a paper on this to his professor and received a less than enthusiastic reception. FedEx is now a billion-dollar international behemoth.
During a period of inflation and high unemployment in the mid-1970s, a certain William H. Gates III and Paul G. Allen set up a personal computer company that is Microsoft.
In the 1950s the US economy was grappling with the impact of the Korean War. The need for affordable fast food was identified and paired with a franchise model that has become Burger King.
The Non-Negotiables for a Start-Up
Founders Agreement: unless you plan to go it alone, having a Founders Agreement is a must. It sets out the corporate vision, roles, responsibilities, salaries, hours and the commitment expected from all founders of the business. Whether you are going into business with family, a spouse, friend, colleague or someone of like mind, a Founders Agreement will reduce the fallout from the conflict.
Shareholders Agreement: when the business needs more than one investor or an angel investor to get it started, a shareholder agreement is a must. Future rounds of investment could dilute existing shareholder interests causing conflict, or give away too much of the company at the expense of your control.
Articles of Association: this is a written constitution for the company setting out the rules, processes and regulations directors are bound by.
Schemes to Encourage Investors: the Enterprise Investment Scheme (EIS) and subsequent Seed Enterprise Investment Scheme (SEIS) are government incentives to help small higher risk businesses raise money. They allow investors to claim reductions in capital gains and income tax. Start-Up Loans have been available since 2012 and can be used in conjunction with or in place of investors.
Terms & Conditions: managing expectations of buyer and seller is paramount to obtaining new and keeping existing customers. With clear and fair terms in place, the backlash when things do go wrong will be easier to remedy. The T&Cs should also reflect your Credit Policy in emphasising payment terms.
Get a License: there are regulations, associations and licensing authorities for just about every product and industry you can think of. In some case, a license is a legal obligation. Being a member of a trade association will give potential customers confidence in what you do. Don’t forget to see what kind of business insurance you need such as public liability and professional indemnity.
Protect your IPR: the business should own its Intellectual Property Rights i.e. the technology it or people within the company have created. Non-disclosure agreements can stop the IP from being used outside the company.
Pointers for Starting Up
History teaches us the world does not simply pick up where it left off following a major global event such as war, natural disaster, recession or a pandemic. There is no pause button in industry, only a litter of companies fallen by the wayside. The defunct corporate institutions of yesterday will soon be in the shadow of today’s start-ups and their enthusiastic entrepreneurs. Starting up a business is not without risk, and every entrepreneur will need pointers along the way…
Look for Transferable Skills. Someone working as a cabin crew will have customer service skills. Someone working on a shop floor may know about stock control and pricing. A parent stitching on school badges could make facemasks and even clothing. A heavy goods driver could teach at their own HGV driver training school.
Know Your Motivation. Starting up a business can be an exciting, rewarding, and challenging time. The products/services need to interest you and be something you are passionate about. Something you can relate to or have an affinity to. Making clothes for families with limited means will be an easier sell if you have personal experience. It also needs to be something you have some basic skills in. If you don’t know a needle from a thread then sowing should probably be a hobby instead of a business!
Look for Help. No one is an island. Even the greatest entrepreneurs in history sought out financial advice, business guidance, legal insight, and emotional support.
Employees are Your Ambassadors. It doesn’t matter whether they are entry-level apprentices or managing directors. Small things like flexible working, free coffee and active engagement with management can turn an employee into a brand ambassador.
Acknowledge Social & Environmental Responsibility. Customers, suppliers, staff and investors are increasingly aware of how business impacts society and the environment. The Better Business Act is a voluntary code and for most small businesses the cost of compliance is minimal.
Customer Service cannot be Overrated. Online reviews and customer neglect can destroy a start-up company. The art of good customer service is to get repeat business even when things go wrong.
Eco-friendly Products are Hot. There has never been a better era to launch an eco-friendly product. The right research, price point, production and distribution methods are all ingredients for success.
Longevity. If you have a seasonal product or one that will seldom need replacement, be sure to have other offerings to ensure repeat business. Greetings card companies have styles for all the seasons. Companies on a mission to end single-use waste have a range of different products.
Outreach the Right Way. Let’s be honest, contacting the Procurement Manager through Tinder probably won’t end well. Using email/phone/mail or dropping off a sample to the office will get you the right attention. Joining procurement networks and industry-specific advertising will get your business out there. A website will promote your business 24/7. If you are selling to consumers, be sure to harness the power of social media to spread the word and build that brand.
Research and then Research some more. The product/service needs to fill a gap in the market. Some industries such as pet care and DIY have thrived in the pandemic so your business needs to stand out. Some industries have declined in the pandemic so your business needs to offer something that shines in the midnight storm. Look into focus groups, competitors, changes to legislation and regulation. Learn from the mistakes of other businesses, and of course your own!
Be Realistic on the Company Valuation. Those oops moments on the BBC’s Dragons’ Den programme are prime examples. Valuing a company at £1M based on sales of £10 and a great idea will make all investors go ‘out’.
Make a Business Plan. It’s tempting to overlook a business plan when you are eager to start up. Investing time in one will give you a clear roadmap of where you want the business to go and how it will get there. Investors should look to a business plan before parting with their money.
In short, the key to unlocking a start up’s potential is having a team of people capable of launching the right product with the right skills and a scalable business model.