I find people are endlessly interested in what it’s like to run your own business, and particularly like the juicy stories, since schadenfreude and rubber necking are yet to go out of fashion it seems.
So I’m going to share a few thoughts on starting a business; in particular about bootstrapped businesses where you haven’t got a large pile of VC money behind you and the freedom to hire all the people you want and put PS3s in the kitchen.
This post is for the poor sod who left the easy nine-to-five job and who is now fighting tooth and nail to keep his/her business going. A bootstrapping top tips if you will…
The first people in are important so make sure your relationship can survive massive stress
I co-founded Arena with a friend of 10 years. Four years on, we’re better friends than ever but, in the first two years in particular, the stress levels were fairly epic; we got barred from one pub we’d been going to for ages after a particular heated disagreement.
The same can apply to employing family; I even had to make my mother redundant at one point, which wasn’t an easy decision, as you can imagine. Tempers will run high because decisions matter and you don’t have the luxury of getting too many of them wrong, so make sure your starting team can take the pressure. Bootstrapping is not for the faint of heart.
Don’t manage by committee (even though this may make you unpopular at times)
It’s tempting to try and keep everyone happy, as it’s the path of least resistance. Unfortunately, it’s also a path that can lead to poor and compromised decisions, to the detriment of your business and to your reputation more than anyone else’s.
This was one of the areas that I found hardest to adapt to in being an MD; I’d run a number of teams in my eight previous years of working life, but there was always someone else at the top responsible for the big calls.
It takes some getting used to the fact that the buck stops with you, but the upside is that you’re involved in all the most exciting discussions and decisions.
Make your decision making process and requirements clear
The easiest thing in a small business is to “wing it” or to make rushed decisions. It takes discipline to be structured and it can cause grief requiring the same from an already overstretched team.
One thing that I’ve found very helpful is to make sure people have a good idea of the way I will generally approach making a decision: eg have the numbers been run, can I review the spreadsheet, what are the key assumptions, have alternatives been looked at, where does this fit in with our priorities, how much resource and time will it take, what’s the return on investment etc.
That way everyone knows what’s expected in order for a decision to be made and they’re more likely to come to ask for an approval far better prepared and more likely to get a yes.
Don’t let minority investors hold you over a barrel
We’ve had a lot of angel investors investing small amounts, 99% of whom have been fantastic, adding value, support, ideas (and sometimes just money). We’ve also had some problems, primarily where experience and expectations of the angels have been revealed as broadly different to our own.
That alone would have been okay, but in the early days we had a Shareholders’ Agreement that had 100% shareholder approval requirements for certain key decisions; a big mistake as this allowed even the holder of one share to dig his heels in. This caused a lot of grief for us but was ultimately resolved by moving these changes to majority shareholder approval (defined as 75%).
As with all legal documents, draft them hoping never to use them, but assuming that you will have to.
It takes time, so be patient
The rule of thumb is raise twice as much as you think you need and expect it to take twice as long. Sage advice.
We’re four years in now and we’ve been through three distinct phases of focus: start up madness, sales focus and, currently, margins, control and systems focus. I would say it will still take us another year to get to the point of having built the robust all round business that we are aiming for.
If we’d had a big pile of money we could have done things a lot quicker, but we didn’t so we have put the business together slowly but surely and in a prioritised way; consequently, we have a very deep understanding of our sector now and it’s hugely rewarding to see the final shape of the business becoming clearer. The blood, sweat and tears of the last four years are paying off.
Know what your end game is
While most of the time we simply have our heads down working on the nuts and bolts of what we’re building, it’s important that we have the ultimate goal in the back of our minds.
This may be to build a sustainable lifestyle business and be your own boss, it may be to get to a point where you can raise further funding to take the business to the next level, or it may be to shape the business to make it attractive for a strategic acquisition; there are countless reasons people start businesses and keeping that goal in mind and articulating that mission to the team is important so that the ship keeps moving in the right direction, whether you’re there to give guidance or not.
There are lots of other standard top tips (hire as many good people as you can afford, always have a bookkeeper, don’t be afraid to fail etc) but the six points above I have found to be super important; they took me a long time to learn.
There is no magic formula to bootstrapping a business, especially in a competitive sector (such as flower delivery), but a focused, structured and clear approach makes a good start. Then you can look forward to (hopefully) becoming an overnight success, after half a decade’s toil.