Here, we talk to two entrepreneurs and reveal why you shouldn’t dismiss starting your own business.
Setting up a business is a powerful idea. Many of us have huge aspirations to set up the company of our dreams, but we go on to dismiss it at a mere fantasy. Indeed, the planning process and potential risks can be very intimidating, but you shouldn’t let this put you off as there is a real achievement to be made both professionally and personally.
Here, we interview Charlie Ross, director of haberdashery shop Offset Warehouse (CR), and Alex Nicholas, CEO and co-founder of real estate JRD (AN), who offer insight into the early stages of their companies.
What made you decide to start the business?
CR: I started my business when I struggled to find beautiful, ethical textiles and soon realised that there were many other designers, like me, facing the same issues. I saw a gap in the market. I decided to aggregate all of the resources and contacts I had made through trying to solve the problem for myself, to gauge the level of interest and decide if I had a viable business.
AN: In 2008, [my business partner] Siddharth and I left our jobs as consultants in London and landed in Dubai, intrigued by the potential for business opportunities in the city. Over the years, we’d frequently visited Dubai for short holidays with our group of friends and we were drawn to the energy and excitement in an emerging cosmopolitan city like Dubai that seemed set to overtake the global stage overnight.
The two of us had been working closely together as analysts, getting our feet wet with a variety of technology projects, working at different client sites with the aim of driving business transformation through technology. But eventually, we grew disenchanted with consultancy life and felt this gnawing desire to just start something of our own.
Soon after getting to Dubai, we gave ourselves a six-month window of time to just solidify and launch a business idea. Given the level of government investment into building infrastructure in Dubai and the increasing number of foreign investors attracted to the property sector, we thought that real estate would be a good industry to focus on. We saw that the property market had not yet leveraged technology, with lettings predominantly published in print. It was not common to list properties online and so our initial idea was to create a site for holiday home listings. That eventually pivoted to our first portal for property rentals called JustRentals.com.
How did you finance the business?
CR: I’m a risk-averse entrepreneur. I started the company with limited finances, a fraction of my own savings, and tested the market bit by bit. I spent money on a website, and negotiated with my contacts and suppliers to work as an agent, taking commission on any sales, so we didn’t have to put any funds into owning our own stock. The company grew organically for the following three years. Eventually, sales were large enough to warrant investing in our own stock. Investing in stock dramatically increased our margins, quality control and delivery times. So, with a small loan we invested in 20 or so lines. The sales from these were then invested in 50 more lines, and so on.
AN: We bootstrapped from the very beginning and only recently (in 2015) received an injection of growth capital from a regional venture capital firm. By the time we were in the thick of working on our site in mid 2008, we were not the only portals in the market. There were already existing portals that had launched before us and had the added benefit of funding. On top of that, the world was waking up to the initial throes of the financial crisis.
It seemed particularly acute in Dubai, seeing the huge amounts of expats making an exodus out of the city and colossal real estate projects screeching to a halt. It proved a real challenge to remain focused and undaunted and launch our business, given the flagging market sentiment at the time. Still, we were undeterred. In fact, the circumstances at that time and our decision to bootstrap provided us with a greater impetus to make our business work and to make ends meet.
Did you face any financial difficulties and how did you overcome them?
CR: Starting a business without funding is risk averse but it restricts fast growth. We squeeze the money out of every opportunity and leverage every single thing we do to make the most impact. Not having funds to spend on marketing agencies and SEO companies is a struggle, but it makes us much more resourceful. We are cleverer about how we can work without over-spending. Cash flow can also be a problem, but having funds in stock means that we are able to have sales and liquidate the stock for cash quickly, so alleviates the odd cash problem we might have.
AN: We set aside some savings to tide us through those six months and came up with a budget that we strictly adhered to. Gone were the expensive lunches, dinners and drinks. Because we bootstrapped until very recently, it helped us become a truly efficient and profitable business. We kept our business model lean and mean, focusing on what was really important – our product and value proposition – because that’s the hallmark of any successful business, regardless of the economic climate.
What financial advice do you have for entrepreneurs looking to start a new venture?
CR: Start with a minimum viable product and grow from there. Spend as little as you can. I find that start-up entrepreneurs often fall in love with the romance of owning a businesses; a big office in trendy Shoreditch, pinball machines, lots of staff running around. But savvy entrepreneurs will do everything possible to keep their overheads down. Start online, use freelancers, work from home. Reward yourself for a great year of sales with your first pinball machine!
AN: Have six months personal expenses saved up. Reduce any unnecessary spends like eating out and drinks. Spend every penny really carefully on your new business and only when it’s absolutely clear that you need to spend that money. When things get tight, have a level head and don’t let your emotions cloud your judgement or let stress about your financial situation overwhelm you. Believe in what you are doing and keep finding ways to do it better. Conviction and confidence can make all the difference.
Take the plunge
So, if you possess an entrepreneurial mindset and have the desire to start up your own business, then fear not! More than 4.6 million people in the UK had the same thoughts as you and have taken the plunge in being self-employed. Take risks, push yourself and make it happen! After all, we must speculate to accumulate.
Ensure you keep your spends to a minimum as this will increase your business’ success. Spend only when necessary in order to increase revenue. Above all, do not lose faith! Starting up a business is not for the faint hearted, they said. Indeed, it can be stressful and is rather time consuming, however is all the more worthwhile. Hard work really does pay off and so you will see. You have a great idea, so why not make this happen?
Stephen Verber specialises in corporate finance and heads up the forensic accounting department at Alexander & Co.
Further reading on business ideas