Starting out as an SME: what you need to know

Here, Russ Madley, head of B2B, Kaspersky Lab, gives his advice on how to go about starting out as an SME

Starting a new business is exciting. It’s also very hard and many young businesses fail; in Europe around one in three very small businesses die before their second birthday. However, this also means that at least two thirds make it through the tough early years and beyond – so what does it take to succeed?

Kaspersky Lab encountered the same challenges faced by all businesses during its international expansion, the results of which shape the path to success or failure.

Early business growth

Funding options and how to seek investment

You’ll need to show potential financial backers that you’ve found a problem users are ready to pay for. Next, you’ll need to explain why it will be hard for others to replicate your idea.

Finally, you’ll need to explain why your business idea is sustainable and stable – you’re not addressing a small, localised issue that can be solved quickly. And after you’ve convinced backers that your idea is great, the next thing they’ll look at is the team. Even if it’s just one or two people setting up the business: what did they do before, do they have any chance of making this project happen?

People invest for different reasons. There are those who believe in a team but not in an idea, and those who believe in an idea but don’t care about the team. Most investors fall into the first category.

Early business growth: whether to go public or stay private

McKinsey highlighted a trend for start ups to remain in private hands. This is a critical choice for a business.

Going public provides a source of funding, business transparency, external validation and a positive force for efficiency and streamlining. However, with this comes an excessive focus on financial returns, the need to set short-term goals ahead of long term planning.

Staying private provides business independence, the opportunity for long term vision and investment, the freedom to do good without worrying about financial returns, not compromising on principles and rapid decision-making.

Business management

What is worth investing in…and what’s not

Firstly, people. If you treat them well and invest in them, everything else including sales and innovation will follow automatically. Secondly, invest in your brand with R&D and marketing. Thirdly, build go-to-market channels and partners. The more responsive and audience-focused this channel is, the faster your product will evolve. Efficiency tools, security in design and data storage are also essential.

All too often, businesses lose sight of their brand, instead diverting attention into areas that give no real value. Areas not worth investing in, at least at the start include fancy offices (just be easy to reach), consultants (they’ll never understand your business like you do), conferences, IT (it is available as a service) and shareholders – invest the money in R&D instead.

How to manage business risk

Entering a new market, launching a new product or service and growth – they are all risks, and could fail. What’s important to realise is that you could fail even if you don’t try anything – failure is an option, because a failure can lead to the success you seek. Learn every lesson you can from every single mistake.

It’s important to continue taking risks as there is a point in the business lifecycle when a company is at risk of becoming over-dependent on its customers. This can cause the business to stagnate and stop innovating. Start-ups don’t have this – they create disruptive products and services that they know their customers will need in the future even if they don’t realise it now. Never lose that start-up spirit, no matter how big your business becomes.

Don’t overthink every eventuality – just act – and redefine ‘failure’. If you don’t get the answer you need, maybe you’ve just asked the wrong question.

Finding and retaining talent

Focus on defining the type of people you want working with you – hiring mindset over skillset – then find a way of integrating them into the business. When interviewing candidates, ask about failures as it’s in failures that real abilities present themselves.

Retain talent by providing a common goal that unites people. This goal is what makes people stay and sustains them through mistakes, failures and other tough times. Have employees contribute as much as they can so they become part of something bigger. It’s beyond just having a job – it’s life, it’s passion and it’s fun.

Competitors – friend or foe

When you think you’ve got everything worked out and you’re ready for global domination, your eyes are suddenly opened to three more businesses offering the same as you. So how should you view your competitors?

Yes, competitors are after your customers and market share, but they are also your teachers, and sometimes your allies. After all there is no innovation without competitors. Either way, you’re all in it together, so focus less on competitors and more on your customers.

There is sometimes value in working together, however, there are some things that you should never share. These include; your people, your secret sauce, information about your customer’s problems or your company strategy.

To conclude:

The life of an SME can sometimes feel chaotic but one thing to remember, is to trust in yourself personally and the reason your business exists. Everyone has all the potential, skills and characteristics to succeed – they just need to learn how to turn them on.

Russ Madley is head of B2B for Kaspersky Lab

Further reading on starting out in business

Majority of SMEs satisfied

The decision to start a business is a daunting one, but new research shows that the majority of SME managers feel properly rewarded for the risks they have taken.

The decision to start a business is a daunting one, but new research shows that the majority of SME managers feel properly rewarded for the risks they have taken.

According to a study by insurer NIG, 60 per cent of sole traders and SME senior managers believe they have been sufficiently rewarded for risks they took in founding and running a small business.

The survey of 600 SMEs also found that entrepreneurs feel their efforts are recognised by their peers and communities. Nearly three-quarters (72 per cent) of those questioned feel valued for the role that they and their business plays in society.

Carol Undy, national chairman of the Federation of Small Businesses, says: ‘Setting up and running a small business is one of the most rewarding and satisfying things you can do. There are frustrations along the way, but many small business owners value the sense of responsibility they get and the ability to take control of their own working lives.’

Looking at individual business sectors, the belief in having received sufficient reward is strongest in the finance sector at 71 per cent compared with the cross-sector average of 60 per cent. And regionally, the South East of England contains the highest percentage of satisfied entrepreneurs (66 per cent) while Scotland contains the lowest (48 per cent).

Owen Gough, SmallBusiness UK

Owen Gough

Owen was a reporter for Bonhill Group plc writing across the Smallbusiness.co.uk and Growthbusiness.co.uk titles before moving on to be a Digital Technology reporter for the Express.co.uk.

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Starting a business

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