Small business

A key reason why many start-up businesses fail

Here my short (impromptu) video on why I believe many business start-ups fail.

The old adage that “cash is king” remains as true as ever today, however, there is something else that I am increasingly seeing that can put the future survival of new businesses in jeopardy.

This issue is that: many startups fail to define upfront the market need or problem that their product or service will solve.

Seems obvious right?

You would think so but with so many new businesses looking to innovate into new areas and with technology providing an increasingly affordable platform on which to build new businesses, this consideration sometimes seems to get sidelined – typically until businesses seek funding and / or its too late.

So focus now on that particular market failure or wider need that your future business will plug in the world? What need are we anxiously waiting for you solve by creating your business? What frustrates you (and many others?) that your business will crack?

Be clear on the problem and your business solution and you will be one step ahead in defining future revenues and a potentially profitable business.

Collaboration of digital businesses challenges the future of the firm

Digital businesses are increasingly setting up shop in tech hubs or shared workspaces – the merits of the Sharp Project, Pie Factory and Media:City were all discussed at length at the recent BVCA Digital Age event held in Manchester.

Much of these initiatives are aimed at providing cost effective office premises for those fledging businesses which might not otherwise be able to afford a ‘normal’ office space plus they often have access to state-of-the-art technology and superspeed broadband access.

The merits of such initiatives have been well publicised but less so is the potential importance of housing these businesses under one roof and, more importantly, what the potential for collaboration might mean for future business structures?

What if small businesses seize the opportunity to network and co-create on projects? What if micro digital businesses pull together as deep specialists to provide best of breed combined solutions to beat off the competition provided by larger established agencies? If digital businesses really can collaborate seamlessly to beat the bigger boys then might this mean that the importance of separate firms or company structures becomes less important to the point that the concept of the firm starts to dissolve?

If so, would this be a step forward?  What do you think? Could digital businesses lead us into a new era for the way we do business in the 21st Century?

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Hate Accounting! Or Love Accounting?

The accountancy industry, like every other, is going through a rapid period of change. When I read posts like this, I feel a little despondent.

It gives me that awkward feeling that I get when people ask me what I do at dinner parties or networking events? I stumble between:

  • “I’m an accountant”
  • “I’m a tax advisor”
  • “I work in finance”
  • “I’m a tax partner”
  • “I’m a creative accountant”….mmmh , perhaps not!

It all feels a little apologetic and understates the value we can provide. I think that as an industry we’re a misunderstood bunch, yet we’ve only really got ourselves to blame.

I believe that there is a common misconception amongst business owners between accounting or bookkeeping on the one hand and business advice on the other. The former relates to data capture and entry (which is important yet mundane) and the latter is what can make entrepreneurs healthier and wealthier.

John O’Nolan makes some great suggestions on how we can embrace the ‘uninterestingness’of many aspects of accounting work and turn it to our advantage – some ideas which are already being embraced by new firms in similar ways – but I believe he misses the mark in relation to business advisory services. Dealing with the bookkeeping aspect first, I believe that we are getting closer to creating a solution with the emergence of cloud based accounting software e.g. Xero and Freeagent, which is intuitive and provides realtime data access.

Yet business advisory services covers the whole gambit of a business lifecycle from initial advice on structuring the business on startup, to raising finance, growing the business and making acquisitions and disposals. It involves treating the business and business owner(s) as one, providing all-round tax and strategic advice. Sometimes its just a shoulder to lean or being a sounding board when an entrepreneur has some tricky seas to navigate and is perhaps feeling a little isolated at the helm of the ship.

But there’s far more as an industry that we can do.

For me the real killer move for accountancy professional service firms will be the shift from a position of information or intellectual property protection to information flow management. We’ve spent decades building huge barricades around our knowledge in professional firms to ensure that we get maximum value on consultancy services yet the waste and cost to our economies of this information not getting into the right hands (in time) must be astronomical. Let’s turn it on its head and set the information free to get to the right people as and when they need it.

Tomorrow’s accountancy firm winners will be those that can get relevant information in the hands of business owners first – business advisory information that gives entrepreneurs that “Aha” moment right when they need it – perhaps John O’Nolan and those of a similar ilk would then change their perception from HA! to LA! (Love Accounting!)?

Moving from a mindset of information or idea protection to idea release will be difficult (perhaps more difficult than identifying the tools available to achieve it) but it is the critical next step in my mind if business advisors are to be able to demonstrate their expertise and relevance in an increasingly noisy market.

Back to my dinner party “what do you do?” question: how about this response?

“I help entrepreneurs turn great ideas into great businesses”

Any takers?

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7 tips for start-ups seeking VC funding

I’ve been reflecting on the key business learning points emerging from the BVCA’s excellent recent event Financing & funding the digital age held in Manchester on 16 September 2010.

It was a full day of fast moving panel discussions and keynote speeches that kept coming at a relentless pace until almost 6pm – plenty to chew over hence the delay in penning this summary.

There were so many ideas and tips to unpack that I’ve decided to run a series of posts covering different topics. First up is the comments made on VC funding.

BVCA Digital Age 1: 7 tips for start-ups seeking VC funding

  1. Start building relationships with VCs who specialise and invest in your chosen sector NOW – don’t leave it until you need a cash investment.
  2. Better communication is needed between both the VC and entrepreneurial community. There was much talk from tech entrepreneurs of the incredibly frustrating “long….slow…..No” from VCs (which was tacitly admitted by the VC panelists), however, there was sound advice in ensuring that you invest some time upfront to pick the right VC – this means studying each VC’s objectives for investment (does this fit with your business?), timeline for investment or where they are in the fund cycle (have they made any investments yet, and if so, any in businesses like yours?). This should save much time and frustration on both sides.
  3. Business plans are largely a work of fiction (as things rarely pan out the way you planned them) so don’t go crazy building huge singing-all-dancing plans, however, you still need one to set out the investable opportunity for VCs to get an initial idea. The point was made (and reinforced by an excellent post and VC panellist Nic Brisbourne) that the act of sitting down and preparing a business plan helps entrepreneurs hunker down and concentrate on the business model – how is this great idea actually going to make me and my investors money? Sometimes reality strikes home when it comes to calculating the sales v costs etc. See points 6 & 7.
  4. Concentrate on clearly defining the market need that your product or service will solve rather than how sexy your technology is.
  5. Dawning of microfunding? Lower costs of entry for building new tech businesses brings into question how much cash investment entrepreneurs might need and when? Put another way, entrepreneurs might now be able to reach a much more advanced milestone in proving the business concept using just “family, friends and fools’ money” than would have been possible a few years ago – the point of inflexion has shifted along the timescale – so does this represent the dawning of microfunding and a move away from traditional VC seed funding and the timing of subsequent rounds of investment?
  6. Merits of writing a business plan for startups seeking funding is best summed up by the comment: “Execution focuses the mind”.
  7. Best of all, when you do approach VCs, present your business as “strategic opportunity” rather than a request for cash.
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Why Business Leaders need Vision

“Start with the end in mind”

says Stephen Covey, in his landmark 7 Habits of Highly Successful People.

Meanwhile, Fast Company co-founder Alan Webber advocates that entrepreneurs should:

“Answer the final question first”

Two highly successful visionary guys with a consistent key message – but what does this mean for you as an entrepreneur aiming to build your business or startup?

Think back to those other entrepreneurs, bosses, managers or speakers who inspired you – what did they have in common? It is normally the uncanny ability to paint a consistently clear picture of a better future. A better place that, if everyone worked and pulled together as a team, you would reach. In a nutshell, they had vision.

All of these visionary entrepreneurs and business leaders have invested the time to think long-term about their business strategy. To be clear on the intended end game. To achieve this, they will have wrestled with BIG questions like:

  • why are we here as a business – is it to maximise profits, solve a world / local problem, have a good time (or a combination)?
  • do we want to grow the business into a global organisation or do we want to stay small?
  • why would customers buy from us? Are we the best in class, different from the rest or defining a whole new market?
  • are we building a business to sell (if so, over what preferred time duration?) or are we building a life-style business?

BIG questions demanding BIG answers.

The sooner you are clear on exactly why you are in business the easier it will be for you to make the right strategic decisions for the future and inspire others to help you build your business. If all of this is still a little fuzzy in your own mind, I recommend you get yourself out of the office for a strategy blitz to consider the BIG Qs or just go lie on a beach and think, dream and paint a vivid picture in your mind of what success in your business will look and feel like – see the end game. Have a vision.

You’ll then know and recognise it when you get there…

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Business Tips for Start-Ups from David Hansson – 37 Signals

Some key learning points for fast growth and start-up companies:

  • Common misconception that start-ups need external finance.
  • Taking other people’s money leads to bad choices – too much staff, computers and too much time.
  • Don’t waste your time raising money. Prove the business on its own revenues.
  • Make sure you are working on your best idea right now. If not, move on.
  • Market share is not important. Profits are important. Look at Apple’s (l0w relative) market share on computer hardware and smart phones yet huge profits.
  • Don’t chase the vanity of high revenues. Profits are all that matter.
  • Number of employees is irrelevant – you can run a successful business with 1 employee.
  • Build a business that is scalable – if you land a further £100,000 of orders, you don’t want to have to ramp up your employees and capital assets to match.

Hard to fault these words of wisdom – I would only substitute ‘cash’ for David’s repeated reference ‘profits’ as being key plus keeping the ‘WHY’ you are in business at the forefront at all times i.e. how will your business change the world?

Well worth watching.

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What Matters Now – Soul Business

Riffing off Seth Godin (and his collaborators’) contributions to the fantastic and recently published What Matters Now ebook, I thought I would add my one-pager (should Seth have asked me to contribute – maybe next time huh?)

What Matters Now?

Soul Business

Making meaning through business.  Solving global problems.  Engaging people in work that fulfills them. Making cool stuff. Existing for more than making a profit.  Businesses that make meaning.  Business can have soul.

Big business (used) to make the rules.  They made stuff that generates the biggest profits.  Enroll staff to work and make the stuff.  Pump millions of £s into advertising to make people want to buy the stuff that the big companies are making.  It has no enduring meaning.  Everyone knew it, there just wasn’t the ready means to challenge or change it (you needed money, and lots of it).  Business lost soul.

The internet has changed everything.  It allows mom and pop businesses to flourish from the kitchen table. It allows people who might otherwise never meet to collaborate to make cool stuff.  To put passion into business. To build businesses that make a difference to society.  To the world.  To challenge (slow, lumbering) big businesses through the delivery of new services or products, unparalled customer service and an overarching authenticity and meaning that resonates with customers. Business can use soul for competitive advantage.

The internet has also added one other killer advantage for small business: low cost.  There is now nothing stopping small ‘kitchen table’ businesses from competing side by side with major established big businesses.  Cool stuff can be made and then marketed online before being shipped to a global customer base whilst consulting services can be delivered globally via the cloud. The costs and overheads of establishing and running small businesses today are low (and are getting lower). Meanwhile big businesses have large, costly, unwieldly infrastructures built over many years to meet the demands of the old 20th century economy. Business soul is indiscriminate – it favours business of all shapes and sizes.

We are standing at the threshold of a huge opportunity.  We can now focus on building and supporting throngs of small businesses that matter.  Businesses that solve global problems and needs.  Businesses that can stay small because being big is no longer a necessary constituent of being globally successful.  Businesses that engage and enthuse their people. Businesses that make meaning ahead of profit. In a nutshell, business with soul.

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Great Business = Great People (and vice versa)

You often hear successful CEOs say: “I couldn’t have done it without my team” or “We’re a People Business and our people are our greatest asset”.  These hugely successful businesses all appear to have great people.

But is it the luck or skill of the CEO in finding these “great people” or is it that great businesses draw out the great in people?

I believe it is the latter – let me explain:

A great business has a clear and compelling vision.  It has a mission.  A mantra.  A reason for existing.  It is (or aims to be) the best in the world at whatever it does. It makes a difference.  A contribution to society.  The World.

A great business infuses a passion in those that work for it.  They can clearly see the vision in front of them.  They want to see the vision fulfilled.  To see the difference being made or the problem solved.  This is not ‘work’ in the ‘clock-in, clock-out sense’, this feels more like a ‘calling’.  Going to work brings a sense of fulfilment.  A strong team dynamic is established as people work together in line with the shared vision.

A great business draws out the great qualities of the people that work there.  People feel great.  People become great.  In turn, businesses become great.

So are you a “people business” and if so, what are you doing to build a great business that allows your great people to flourish?

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