The A to Z of being a successful entrepreneur
The following blog post summarises a talk given by Gavin Eddy in Cornwall a few weeks ago. Gavin owns and runs Forward Space Ltd in Somerset, an innovation centre for small and emerging businesses, and also invests in young private companies. Previously, Gavin spent ten years as a trader at Merrill Lynch and UBS in London.
In the following A to Z guide, Gavin highlights what he believes are the most important things for any entrepreneur to focus on:
Angel investors are individuals who look to invest their own money in young and small private companies in return for acquiring a proportion of the investee company’s share capital. Angel investors are commonly experienced entrepreneurs themselves and look to add value to their investment through mentoring, guiding and introducing opportunities through their existing network. Angel investment is a rapidly emerging trend as wealthy individuals look to invest their own money directly to secure higher future returns.
It’s important to choose an original and strong brand name and logo that will give your business an instantly recognisable identity.
Never underestimate the importance of cash flow to the success of a business. Business owners should keep an eagle eye on the cash flow position and know what it is at any point of the day.
Young companies should look to appoint non-executive directors. These should be well connected people who have your best interests at heart. Importantly, non-executive directors do not make decisions, but have a purely advisory role. They are usually older and wiser with relevant sector experience and are important to have on board when looking for outside investment.
Whether you are starting your own business or investing in one you should always have a plan and target at the outset for when and how you can leave the company and sell your interest.
Franchising is a cheap, easy and fast way to grow a business whereby your business licences its brand and rights in any given territory in return for a licence fee. The franchise contract represents a proprietary interest that can be sold on.
Through adversity comes opportunity. History shows that the number of start ups increases in a recession when tight economic conditions make people reassess conventional business practices, adopt more efficient technologies and take risks due to job losses. As a result of the difficult trading environment new businesses are likely to be better run and less likely to make mistakes. Both Microsoft and Apple started in recessions.
Always ask for help and learn from your mistakes. Don’t ever panic or despair. Make sure you find really good business mentors and listen to accountants and lawyers. Don’t immediately think you need to close your company when circumstances are difficult as this can be very expensive and is almost always unnecessary.
Shared working spaces with onsite support services, such as Cornwall’s Pool Innovation Centre, provide the best environment for start-ups. Resident companies can easily share ideas, collaborate and access mentors and advisors.
Just do it
There is never a right time! Take the plunge as soon as possible and learn and develop your skills as you go. Continuously tweak and reassess the business.
The businesses that produce the most innovative products and services which drive demand and revenue generation are fuelled by their superior knowledge base and access to information. In the present day internet age people are exposed to more new information every day than someone in their whole lifetime in the 18th century, so it’s never been more important to ensure that you have a top knowledge acquisition and management set up.
Entrepreneurs need to be self-reliant, work on gut instinct and want to control their own destiny, but they also need to learn how to empower people, delegate and communicate. Leaders need to have a team in place that allows them to focus on the strategic direction of the business rather than get bogged down in detail.
Organisational efficiency commonly drops as companies grow larger. Once their business has got to a certain size, entrepreneurs need to appoint good managers to take control of the day-to-day running of the business, enabling them to focus on the strategic leadership role.
Always do your homework in advance of negotiations and make sure you know your position, whether weak or strong, so that you can use whatever leverage to get yourself a better outcome. Don’t bother flattering people as it doesn’t work and they will lose respect for you.
With a 16% annual growth rate in respect of online sales, any new business has to have a good online strategy. Furthermore, there are low cost barriers to entry on the web. However, getting the customer experience right online is not always easy and entrepreneurs should look to outsource certain functions and development aspects to experts.
Know your own limitations and listen to people who can do things you can’t. Employ and engage the best people you can afford and make sure you deal with people who are prepared to challenge you. Understand how to make your people happy and ensure that they are motivated and keen to stay with the business.
All successful businesses are great at customer care. Make sure you are always delivering a product (or service) in accordance with your client’s expectations and that you fully understand their needs.
A very important element of being an entrepreneur is having a great attitude to risk, which is essential for growth. Entrepreneurs are successful because they understand risk and emerging trends and know how to manage these better than others. However, investors in a company will penalise risk, so a good risk management strategy needs to be in place to give them comfort.
Sell, sell, sell
This is commonly the hardest aspect of business and should be compulsory training for all entrepreneurs. You’ll need to become a master salesman and then employ great sales people.
What you learn in the past quickly becomes redundant. This has never been more apt than in the present day where technology changes so rapidly. You need to constantly update your skills and knowledge.
Up to it?
You need to ask yourself serious questions about your capabilities and make a firm commitment to pursue your venture. There’s no turning back!
A buyer of a business will look at the historical accounts in order to arrive at a valuation and offer price, but a seller needs to sell the future potential of the business, as well as the quality of its client base. In good times, 7x a company’s annual net profit figure is a common multiple for a sale price.
Don’t extend credit to anyone if you can help it. Don’t over stock, get rid of obsolete stock and make use of credit terms. Always ensure that there is sufficient working capital available.
You need to know what your X factor is and articulate well your unique selling points.
At the end of the day it’s all about you and your ideas. Always talk about what you do. Talk to everybody, especially
wealthy people. Make connections everywhere.
You can sleep when you’re dead. You’ll be busier than you’ve ever been building a business, but you’ll find this enormously rewarding and won’t want to slow down!