New Business Launch – it’s not a piece of cake
Over the past decade one life transition that has certainly impacted many of my clients is the decision to open their own business. This event sees them fulfil a life-long dream, one potentially borne out of years of planning and sacrifice, and one that could see them secure the desired lifestyle they’d always hoped for themselves and their family.
Whether it be a fast-growth tech start-up, a craft beer business, or a natural foods café in the heart of your city, the idea of being your own boss leads you to question your current employed life, and question whether you are truly happy. There’s nothing wrong with this; we all need to dream, so embrace it, but with calm and caution.
All too often those that take the brave step to launch a business can lose sight of some key planning ingredients; the likes of which could mean the difference between success and failure.
They lose sight because they get caught up with the understandable and predictable euphoria that is starting something brand new. But it’s this emotion, and this moment in time, that could prove to be the most damaging if not first understood, and then controlled.
My article today focusses the mind on some of those key initial planning considerations, or ingredients, which when mixed together, form the perfect recipe for future entrepreneurial success.
Ingredient 1 – To understand the plan you must first look beyond it.
Clearly, writing a beautifully constructed business plan (complete with mission and vision statements, 3-5 year goals, opportunities for growth, expectations to grow your new tribe of employees, and a clear set of financial projections) is just the start of the planning process. But the plan is not, and can never be, just limited to this written document.
Instead what you could do is adopt a more research driven approach to your business plan, once that sees you dive a little deeper into the likely outcome of your decision to launch a Day-1 business.
The genuine value for your new business is not to have a finished product in hand, but rather, by implementing a structured and systematic process in the way you research and model your businesses processes as they business grows.
As an example, different research methods include:
- Go learn your trade method = by working within your chosen industry, from grass-roots up if required, this will give you deep and vital insight into the pros/cons of running your own firm, and the dos/do nots that you observe from your current management/employer.
- Buy in the expert’s method = if you don’t have the necessary experience you still could launch your company but hire in the experts to support you, an approach which carries with it higher operation costs and indeed risks if you were to hire the wrong person.
- Bumps and bruises method = learn as you go, make mistakes, evolve quickly, adapt and refine your proposition as cheaply as possible. High risk but a method most new start-ups follow.
If your decision is to not carry out research beyond your initial business plan you may learn some very valuable, and expensive, lessons along the way.
The question is do you have the financial ability, or the desire, to want to go through that learning curve? Or would you rather carry out a little more research first?
Ingredient 2 = Plan, plan, plan, and then plan some more.
There’s always been a myth that over 80% of new business fail within their first year, however I’ve never truly believed it.
In fact, from the research papers I’ve seen it appears that on average 80% of new businesses can expect to survive their first year, with 50% of those survivors still being in business at the end of year five.
As we know, far too often people will rush into opening a business without carefully confirming if their idea is going to work, then spend the initial months and years experiencing a number of painful bumps and bruises.
We know from Ingredient 1 above that looking beyond the initial business plan is crucial, and that research sits at the core of this movement.
It’s good to talk. Talking to your friends. Your family. Even your desired customers. Understand what they need from a business; what they expect as a value-added service or product.
What they would want from a Day-1 new start-up business. What would make them trust you enough to use your service.
Don’t be afraid to ask obvious questions either. Make sure you test and then validate your ideas and thinking.
Don’t be upset if you don’t receive the glowing feedback you had hoped for; all feedback is positive if you are able to see through the negative noise and accept that sometimes your ideas may be plain awful – don’t take it personally!
Committing time, perhaps years, to learning and planning, will provide you a unique opportunity to try out your ideas on the public ahead of you launching your own business concept.
Using my cooking analogy; you can use this planning time to practice different recipes ahead of producing the perfect first batch of exceptional cakes; a batch even Mary Berry would be proud of.
Ingredient 3 = You think you know your market? Think again.
Within your opening business plan you’ll have no doubt spent considerable time outlining operational details, financials, IT systems, and the use of tech.
What you may have missed however is a description and true understanding of what your potential customer looks like, and once known, what their purchasing and decision-making processes are.
Spending an increased amount of time analysing your ideal market, or customer base, is beyond critical to your new company.
Far too often people leap into opening a business with a vague idea of what perfect looks like, and before you know it you’re either not securing the types of business you want, or worse, you’re letting people onto the Ark that is your business/service that you know aren’t the type you really want to be helping/supplying.
Learn who your ideal customer is. Understand what drives their purchasing decisions. Deep dive into a place where you develop methods that will truly differentiate you from your peers and competitors.
Truly understanding your market can be the difference between changing a failed aircraft engine on the ground versus doing it mid-transatlantic flight. Implementing the right plan from the start therefore, is far more likely to yield success than figuring out a plan on the fly.
Ingredient 4 = Cash flow is King; long live the King.
Without adequate cash flow your business is dead. It’s that simple.
Ahead of launching your new business you need to take measured steps to adequately capitalise the venture and secure ready sources of capital for growth. This could be from personal savings, family money, external investment, or a combination of all.
Utilising an interactive cash-forecasting tool would be a sensible idea too, something that will enable you to determine how much cash you’ll need. The production of a cash flow statement will enable you to estimate your expenses and income, from which sources, and what that means to you on a rolling cash basis. There are a number of online tools available, such as www.liveplan.com or www.enloop.com.
Another sensible approach would be to avoid long-term commitments, like long-term commercial property leases, until absolutely necessary. There’s a reason so many start-ups begin at home; it’s to save money.
Don’t let pride or external perception trick you into signing up to a paid office or commercial unit from Day-1; if your cash flow is not adequate, that decision could help lead your business down the path of failure.
The reality is that there is a considerable amount of uncertainty during the first few years of your new business.
Be conservative in making commitments for resources that might not be yet needed, and make sure you keep a tight rein on your cash flow.
Ingredient 5 = Choose the right business structure and business partners.
The truth is this. Before your business goes live it is beyond crucial to select the appropriate corporate structure, and crucial to select the right people to join your tribe – whether it be new legal business partners or otherwise.
The structure you choose will ensure the success of future decisions, such as raising capital or exiting the business.
The vast majority of start-ups will probably operate as either a sole trader or a limited company, with the conversion from sole to limited being easy and inexpensive.
There are also other legal structures, such as limited liability partnership, all of which I will cover in a future article.
The decision you take regarding structure should be made in conjunction with a trusted business advisor or accountant, whom will be able to explain the pros and cons of each, and their benefit to you.
The people that you let onto your Ark in the form of business partners can also ensure its long term future, or be a reason for its downfall.
They can either bring genuine fresh ideas to the table, with a sincere approach to everyone’s success; or they won’t or indeed can’t.
If you’re able to launch your new company and develop it without external investment or/and business partners, it might be the logical path to follow.
If, however, you need to bring in new partners, only do so after carrying out comprehensive and extensive due diligence on them and their previous business dealings; seeing the cost of this DD as an investment into the company’s long-term well-being.
From personal experience the launch of a brand-new company is both the most exciting and terrifying experience you may encounter in your working life.
Your hard work and courage has been rewarded in the form of your new venture, but the daunting reality that you’re now the boss and the buck stops with you is now ever present.
Embrace those emotions, but keep them under control.
Make sure you plan and research your new company well ahead of its launch, even years’ ahead of its launch.
The best poker players in the world possess one common differentiator to that of the average player. It’s not their ability to ‘read’ other players. It’s not their ability to ‘bluff’ other players. And it’s not their ability to ‘predict’ probable outcomes.
Their common differentiator is patience. Their ability to wait. To learn. To understand. To plan. To not rush into making a decision or/and caving in to an emotional feeling.
The result of this approach will most likely see you win the game, to bake the best cake, or to build and grow your best possible Ark – the ultimate business.