1. Engage with potential customers early
Early-stage companies sometimes spend a great deal of time and effort on business plans that are fairly abstract and theoretical, founded largely on guesswork and speculation. It’s worth devoting as much time and effort as possible at the pre-trading stage to talking – and, more importantly, listening – to real practitioners in real organisations that might possibly later buy from you. This will provide a more valid and relevant gauge of the viability of your business ideas than desk-based research ever could. It may also help to build a network of contacts and relationships that will be useful at a later stage.
2. Try to build a strong and rounded team as early as possible
The position of the sole founder of a business is a lonely one. The probability of success is greater if more than one person is involved (although not too many), and where they bring to bear a range of different and complementary capabilities and experience. Be ready for the fact that the mix is often not right first time around. It may take a while for differing approaches and priorities to become apparent, and views may diverge as the realities of developing the business are experienced. Such situations can be difficult and disruptive, but the success of the business may depend on finding the right outcome.
3. Think through your funding strategy carefully
Companies which need or want to seek equity investment should ideally think beyond the immediate priority of simply raising money. It’s worth considering carefully the ways in which this may influence the entire future direction of the business. For example, investment decisions taken at an early stage can sometimes significantly constrain the funding options available at a later date.
4. Take the quickest and most direct route to making sales
Over some years now we have seen the growth of a business startup culture (particularly in technology-related areas) that tends to focus on and celebrate the winning of grant awards, equity investment and other sources of development capital. This can lead to a mindset that sees these achievements as ends in themselves rather than means to the real end – which is generating revenues from customers. For some types of businesses, funding from external sources is absolutely necessary before they have any chance of making sales. For others, a bootstrapping approach is viable. A focus on generating revenues from sales as early as possible will encourage a disciplined approach, and help to provide objective evidence of the viability of the business.
5. Be obsessive about cashflow management
I once heard a company founder, when questioned about cashflow, say “I watch it carefully – I check the bank statement every month.” By the time that will tell you there’s a problem, it’s far, far too late. If cash is tight, it’s vital to run detailed forward projections covering a period of some months ahead, and to review these frequently. They can be highly dynamic – significant changes may occur very quickly.
6. Be clear about your relationship(s) with your business
In the case of a sole trader, there is little legal or financial differentiation between a business and the individual who owns and operates it. A limited company, however, stands as a legal entity separate from any of the individuals (shareholders, directors or others) involved. The senior members of an early-stage company team often simultaneously have several different relationships with that company (eg. director, shareholder, employee). They should differentiate clearly in their own minds between these relationships and understand the duties and responsibilities attached to each.
7. Be as objective as you can about your own business
No-one is as close to a business or cares as much about it as its founders and leaders. That’s great, but a degree of myopia can easily set in. It’s not always easy to appreciate the whole picture from up close, and other people (both inside and outside the business) will have different perspectives. It’s worth taking a step back from time to time, and trying to take as objective a look as possible at the way the whole operation is functioning. It’s important to take (or even try to make) opportunities to understand better what customers, employees and others really think of your business and how they find the experience of dealing with it.
8. Identify specific target markets and focus on them
Some early stage technology-based companies (particularly in the business-to-business area) have products or concepts that may potentially have application in a wide range of market sectors. While this is a good challenge to have, it does require choices to be made. Young companies don’t usually have the resources to address adequately a large number of market segments with varying characteristics and requirements, so don’t try. Be informed by the best information and feedback available to you from early market engagement, and focus initially on the sectors that seem most responsive to your message.
9. Work at communicating your vision and values
As businesses grow, they develop individual cultures and internal characteristics which influence the way their employees interact with the organisation, with each other and with customers. This organisational culture may develop almost by default, or it may be the product of sustained thought, effort and internal communication on the part of the founders and managers, driven by a vision of how they want the organisation to feel and to behave. How would you rather see your business culture develop?
10. Don’t confuse revenue growth with profitability
There’s a natural tendency, In seeking to grow a business, to focus primarily on increasing revenues. This is a necessary but not sufficient condition for sustainable growth. There’s a risk of losing sight of the fundamental need to maintain profitability. It’s exciting to win larger and larger orders – but remember that if profit margins are not there, larger orders will just lead to larger losses.
Remember also that rapid growth may place significant demands on cashflow, and be prepared for this.
