Thursday, January 7, 2016
According to statistics released earlier this year 66 per cent of all business start-ups fail in their first five years of trading. During the recession this figure was said to be closer to 80 per cent. It’s a sobering thought, so what are the steps you need to take to make your new venture a success?
If there is an absence of planning, direction and accountability for all members of the team, the start-up will fail. A properly constructed business plan will ensure that goals are planned and mapped out in conjunction with the targeted market research of the specific industry to which the start-up is entering into. Detailed, fully thought-out elements including tax, legal and financials will give the start-up the accountability it needs especially when goals and milestones have not been met. In other words – fail fast, it’s a lot cheaper. Websites such as autopsy.io are an invaluable resource in helping you to appreciate where some start-ups can go wrong.
This is essential. Hire only the best people for the business. Often start-ups are constrained financially and hire those non-essential to the business or those who want to “have experience in a start-up world”. Invariably this is a waste of time. One of the essential mechanics is that the technical people are excellent. Ensure that all the intellectual property developed for the company is owned outright by the company. This goes to the value of the company.
Ask yourself: what is the financial plan for the next five years. And what are the sources of funding? For example, angle, accelerator, Enterprise Ireland or venture capital. This can be broken down into six month blocks and one person in the management team must take ownership of this role while the other founders concentrate on the operations of the business. Once there are funding milestones to be met, the business of getting customers can be developed in conjunction with the business plan. For example, the main question is how much it will cost the company to get one customer verses the lifetime value of the customer. Make sure that the financial projections match the funding obtained or the funding in the pipeline.
The ultimate deciding factor for your business is your customer and the experience that customer has with the business. As a start-up, innovative service and the experience that each customer has with the business will give the business the edge and eventually, the ability to scale.
Ensuring that a clear strategic map with set goals, is one of the cornerstones of the success for the 4 per cent that actually do make it out of the statistics. The other is getting good advice and knowing what the exit strategy is. Working backwards (from a successful exit point of view) usually produces a clear path to success.
You would be surprised at the level of goodwill that the business community extends to new start-up. Use this to seek out mentors for your business. They don’t necessarily have to work in the same industry. Look to your immediate network to make contact with business men and women who have inspired you. Then, if there are other people whom you admire, be bold and ask to meet. So far as appropriate, tell them your plans. Accept any potential introductions to people who can advance your new enterprise. Also, check in with industry bodies, semi-states and learning institutions about any formal mentoring programmes available to you.
By Majella Crennan, Associate
Email: Mcrennan@philiplee.ie Twitter: @majellacrennan