Frank Hannigan was rejected by Dragons’ Den with his idea for online lost and found service Yougetitback.com. He sought alternative sources of funding, eventually winning twice the amount asked for on the show.
The company issues security tags that can be used on anything from mobile phones, mp3 players, laptops to PDAs, with a unique ID code, an international free phone number and web address to arrange returns.
Yougetitback.com is now worth over £7 million and boasts such blue chip clients as Lexus, Vodafone and Deloitte. SmallBusiness.co.uk caught up with Hannigan and asked for some pearls of wisdom on the major hurdles for start-ups:
What are the main problems for companies in the early days?
One issue that hold a start-up back is the inability to attract good quality, talented personnel. At the start, because you probably need the help, you meet anyone who can string a sentence together or stand upright and you’re tempted to hire them. People don’t realise that this is a huge issue and a big mistake; it can really slow your progress down. I’ve done it and lived to regret it.
So what can you do as a small business owner?
Set a standard early on; know what you want and what you need in terms of staff. If you are struggling to find the right people, you really need to set out a detailed job description and, dare I say it, engage with recruitment consultants. If they’re good, they add a lot of value to your business. They can filter out the people who aren’t right, saving you time and money.
So what can you do if you end up with the wrong people?
If you are a mature business, retrain them and reassess their position, but I’m afraid if you’re a start-up, you have to move that person out. If you don’t take a hard line at the start, you’re out of business. You simply don’t have the cash or the time for the wrong people.
Running a tight ship is the key in the beginning, then?
The only things you can manage in business are cash and time. In terms of cash, if you can bootstrap for the first two years – employing fewer people than you need while money is tight – then all the better.
Out in the States they throw money and bodies at an idea and if it fails, it fails, but in Europe there’s a different approach. I say, if you can fund your business yourself to a sustainable level before you turn to outside investment, you’ll get a much better deal in the end.
That’s easier said than done isn’t it?
It’s desperately hard to do, but if you can approach an investor at the point just before your first customer, you’ll do better than someone who has brought 10,000 words of prose and a couple of spread sheets.
We raised £500,000 in lumps of £5,000 and £10,000, from a local investor community made up of farmers, managers and dentists and so on. If you can approach local business people then I would advise that you do so. They tend to have more sympathy than a VC who may view you and your company solely as an investment.
One thing to remember about pitching your business is that saying ‘I don’t know’ does no harm. If someone asks you a question, and they see someone trying to make up an answer, it’s not going to work. Ideally you’ll be an expert in your area and if you are, it will come through in what you say, but don’t try to pull the wool over people’s eyes.
So what can SMEs do about lack of time?
Outsourcing can free up time, reduce your fixed costs and give you scalability. For instance, we have 11 full-time staff, but there are more than 60 people working for Yougetitback.com. Because of this, people see that it’s not a ten person operation and we’ve got more capacity if we need it. Outsource like mad I say, but hold on to whatever intellectual property you can.