According to research by the Centre for Entrepreneurs (CFE), new business formations reached a record high in 2016. More than 650,000 businesses were launched in the UK last year alone; a staggering 74 start-ups an hour. Seemingly unperturbed by any uncertainty of Brexit, such high levels of start-ups entering the economy is an encouraging indicator of economic prosperity and a reflection of the appetite and potential of Britain’s thriving entrepreneurial community.
This upbeat assessment however, doesn’t quite paint the full picture. Research by RSA indicates that more than half of UK start-ups will fail within the first five years of operation, and up to 90% fail within the first 12 months. So, while the nation’s entrepreneurs may be brimming with innovative ideas, unfortunately they all-too-often fall victim to similar pitfalls—whether that be related to their business model, cashflow, talent or product.
The harsh truth is that the business environment can be a complex and daunting territory to discover. Whilst it would be virtually impossible to list out every conceivable threat, entrepreneurs and start-ups could, and should, take measures where possible to avoid those all-too-common pitfalls, such as ensuring sufficient cash flow processes are in place, staying on top of your competitor activity and perhaps the most basic, ask for advice.
Unlocking the value of an idea
We’ve all had that “lightbulb moment”, an idea that comes to you when you’re least expecting it. But before you share it with the world, it’s important to pause and reflect. We see first-hand that raw ideas alone don’t always convert into entrepreneurial success, and there are a number of ingredients that are needed before you can convert the idea into a winning formula.
Here are some points to consider before embarking on your entrepreneurial journey:
Is it truly unique?
Has your business idea been attempted before? If yes, and successfully, then it may be worth holding out for the next brilliant thought that comes to you. However, if a previous business has run with your idea and failed, explore why and whether your thinking might be just the bolt on it needs for success. Perhaps the market provides insurmountable challenges, or maybe you can learn from the mistakes of others.
Where will it have the greatest impact?
Make an honest assessment of which markets are in need of your solution, and alter your idea to cater to them. Often, founders get fixated on and wedded to a particular industry, when their ideas are simply not in demand there. The success of your start-up hinges on the appetite there is for your idea, and that could mean exploring sectors you have never considered.
Create your support network early
Assemble your own “board of advisors”, which could include anyone from friends and family, to professional mentors or senior industry contacts. Having a sounding board like this to run ideas past, or to ask when in need of advice and support, can be a crucial asset when making the first steps of your entrepreneurial journey.
Satisfying investor appetite
It’s important to remember that entrepreneurs and investors are essentially looking for the same thing: the right fit. Just as start-ups need to identify and secure investment that offers the most advantages to their business, investors are looking for companies that will work for their portfolio, and as such entrepreneurs need to communicate what they can offer an investor with clarity and, most importantly, honesty.
The UK Innovation Hub recently carried out research with Tech City to find out exactly what start-ups want and need from potential investors. The research revealed that following funding, the main criterion for founders is that investors trust them and understand their vision, but this is by no means a one-way street. It is key for a healthy working relationship that investors can place their trust in the companies within their portfolio.
Just some of the considerations when identifying a delivery partner include:
Ensure you can accurately and concisely explain the market your business intends to serve, and how your company is unique from others already within the market. Importantly, make sure to communicate the key drivers of growth within the market. Remember that investors aren’t simply looking for interesting companies, but to buy into growing industries that offer promising returns.
Competence and experience
It goes without saying that one of the greatest assets a fledgling start-up has is its founder. Being able to demonstrate the passion you have for your business will go far, however investors also need to see that you are well-versed in your industry, with the nous to back up your ideas. A start-up is a far more enticing prospect for investment if it has a solid foundation of competency underpinning it.
Customisable business model
Different investors look for different outputs, so make sure your business model is sufficiently adaptable that it can demonstrate what each wants to see. For instance, venture capitalist investors will most likely want to see detailed market analysis included in your business model before considering investment.
Keep it simple
Simplicity is a key ingredient to success that often gets overlooked. It is far too easy to overcomplicate your idea, excitedly adding more and more features until your business proposition gets warped out of recognition. Keeping a simple mission statement in mind, that you can tie your venture back to at every stage of your journey, will help keep your business as streamlined as possible and allow you to focus as you push to meet your entrepreneurial goals.
Kate Jack, UK country lead for Innovation Hub by Innogy
Kizzi Nkwocha is the editor of My Entrepreneur Magazine and publisher of The UK Newspaper, The Property Investor and Gold, Oil and Diamonds, the net’s fastest growing wealth creation publication. Kizzi Nkwocha made his mark in the UK as a publicist, journalist and social media pioneer. As a widely respected and successful media consultant he has represented a diverse range of clients including the King of Uganda, and Amnesty International. Nkwocha has also become a well-known personality on both radio and television. He has been the focus of a Channel 4 documentary on publicity and has hosted his own talk show, London Line, on Sky TV. He has also produced and presented both radio and TV shows in Cyprus and Spain.