Over 400,000 businesses were started in 2012*, yet 1 in 3
start ups fail within the first 3 years of trading and 50% fail within the
first 5 years. Ward Williams Creative –
the business advisers for brands and people in the creative industries, believes
that while it is encouraging that many budding entrepreneurs are taking the
plunge and following their commercial dream, with continuing economic
turbulence, it’s more important than ever to start with firm business foundations
and practical solutions.
Erin Walls of Ward Williams Creative comments, ‘A
successful business is about more than a great idea, and you can learn a lot by
looking at companies that haven’t succeeded.
For example, a technology company in the medical sector had a very good
and viable idea for a product that could significantly reduce costs in the
health service arena, whilst at the same time improving patient service.
Statistics backed up all their claims and they had several high ranking NHS individuals
supporting them. The projected returns for the product roll out looked huge. It sounds great, so you would think raising
finance to get the prototype built and tested would be easy. The company made a good start with a thorough
business plan and a pitch honed to perfection, delivered to their network of
some very wealthy and connected investors.
So did they get the funding and is the new service coming
to a health service near you soon?
Well, this case proves that even if an idea or product is
amazing, there is no guarantee of success:
Obstacle 1: the
high risk label
Any new technology and product connected to it are
automatically classed as high risk investments as there are a lot more
unknowns. Just being labelled as high risk, regardless of what the offering is,
can stop many investors looking any further, so immediately the pool of
potential investors has been greatly reduced. With a new product using existing
technology but in a very innovative way, this company was labelled as high
risk.
Obstacle 2: early
commitment from your team
When you have a new business idea and approach people to
help you build it, everyone is excited and enthusiastic, however when you want
people to sign up as a key team member, which no doubt includes hours of work
and very little guarantees of an early return, suddenly people lose their
enthusiasm. For this particular company, some of the key players were high
earning developers and medical consultants who wanted to be involved, but
wouldn’t commit unless funding was in place to pay their wages and fees. It's
very hard to get funding when some vital resources are not already locked in, so
the company found itself in a frustrating loop - key players wouldn’t sign up
without investors and investors wouldn’t sign up without key players.
Obstacle 3:
economic confidence
Timing is very important; the company knew the economy
was on its knees and the stock markets were lacking confidence, but their new
idea could be reproduced by others, so they needed to get it to market before
someone else did. This means they were pitching to investors an untested
product, labelled as high risk, in an economy with no spare cash to lose.
Obstacle 4: industry
politics
The company’s offering would be perfect for the NHS,
private health services and pharmaceutical companies alike, however it required
cross communication. At top level this seemed fine, but when trials started,
they encountered a lot of politics and red tape, not only between different
organisations, but within them too. This stalled trials, which unnerved
potential investors as the likelihood of a quick return looked impossible.
The Outcome
Sadly the company didn't achieve the necessary funding
and the company and its dreams are now dormant, waiting to resurface when the
time is right and the world is ready.’
In starting a company, you can’t second guess every
obstacle you’ll face along the way, but you can make sure you have a firm
foundation for growth. Ward Williams
Creative offers the following tips to start ups:
Don't expect your
business to take off over night. Some very fortunate people have this
experience, but most work at it for years before they gain success. A software company may take two years or more
getting their product to a stage where it’s ready to go to market, so make sure
your funding will last until you reach revenue stage.
Check your
business idea for sustainability. You may be great at what you do, or have
a product that delivers excellent benefits, but if it’s not significantly
different or cheaper than what's already out there, it won’t have a future.
Know the market
and your position within it. Many entrepreneurs are so busy doing what they
do, that they don't look at figures, research or market findings which can help
make vital decisions like when would be a good time to launch a new product.
Identify the
skills your business requires. Work
out which ones you don't have and go and get them; it's vital that you build a
team covering all basic business skill sets.
Get to market as
quickly as you can. If you have a
new product or technology, the speed of getting to market is going to be very
important as someone will have the same idea at some point, so make sure you
get there first.
Get everything in
writing -funding, shareholders agreements, employee contracts, supplier
agreements, everything! When you start
out it’s very exciting and a bit overwhelming and people may say they will do something
to help. However, if the business
struggles, people can change their mind very quickly and with nothing in
writing you will have no protection.
Network and
maintain marketing activity It’s no use being busy now and having no work
in two months time. Always find some time to keep in contact with people and do
some basic networking; it may seem pointless but it will pay off over time.
Use the many free
resources available for start ups. The
government site, www.gov.uk/browse/business, has
lots of links to advice and potentials grants or mentors. If you are in London why not come to one of
the Ward Williams Creative free drop in business clinics at 81 Rivington Street,
London, EC2A 3AY every Tuesday in September & October 2013 (meeting room
7). No appointment is required - just pop in or email a query in advance to
creative@wardwilliams.co.uk.
Anticipate any
possible political situations with industry partners or clients and think
how you could alleviate them.
Don't be afraid to
fail - it happens, you can come back from it and if you don't try you will
never succeed. Many very successful entrepreneurs have failure in their
past. If it happens to you, learn from
it and move on.
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