Over 400,000 businesses were started in 2012, yet one in three start-ups fail within the first three years of trading and 50 per cent fail within the first five years. Ward Williams Creative, which specialises in business advice for brands and people in the creative industries, believes that while it is encouraging that many budding entrepreneurs are taking the plunge and following their commercial dream, with continuing economic turbulence, it’s more important than ever to start with firm business foundations and practical solutions.
A successful business is about more than a great idea, and you can learn a lot by looking at companies that haven’t succeeded. For example, as Erin Walls of Ward Williams Creative reveals, a technology company in the medical sector had a very good and viable idea for a product that could significantly reduce costs in the health service arena, whilst at the same time improving patient service.
Statistics backed up all their claims and they had several high ranking NHS individuals supporting them. The projected returns for the product rollout looked huge. It sounds great, so you would think raising finance to get the prototype built and tested would be easy. The company made a good start with a thorough business plan and a pitch honed to perfection, delivered to their network of some very wealthy and connected investors.
So did they get the funding and is the new service coming to a health service near you soon?
Well, this case proves that even if an idea or product is amazing, there is no guarantee of success.
Obstacle 1: The high-risk label
Any new technology and product connected to it are automatically classed as high-risk investments as there are a lot more unknowns. Just being labelled as high risk, regardless of what the offering is, can stop many investors looking any further, so immediately the pool of potential investors has been greatly reduced. With a new product using existing technology but in a very innovative way, this company was labelled as high risk.
Obstacle 2: Early commitment from your team
When you have a new business idea and approach people to help you build it, everyone is excited and enthusiastic. However, when you want people to sign up as a key team member, which no doubt includes hours of work and very little guarantees of an early return, suddenly people lose their enthusiasm.
For this particular company, some of the key players were high-earning developers and medical consultants who wanted to be involved, but wouldn’t commit unless funding was in place to pay their wages and fees. It’s very hard to get funding when some vital resources are not already locked in, so the company found itself in a frustrating loop; key players wouldn’t sign up without investors and investors wouldn’t sign up without key players.
Obstacle 3: Economic confidence
Timing is very important; the company knew the economy was on its knees and the stock markets were lacking confidence, but their new idea could be reproduced by others, so they needed to get it to market before someone else did. This means they were pitching to investors an untested product, labelled as high risk, in an economy with no spare cash to lose.
Obstacle 4: Industry politics
The company’s offering would be perfect for the NHS, private health services and pharmaceutical companies alike, however it required cross communication. At top level this seemed fine, but when trials started, they encountered a lot of politics and red tape, not only between different organisations, but within them too. This stalled trials, which unnerved potential investors as the likelihood of a quick return looked impossible.
The outcome
Sadly the company didn’t achieve the necessary funding and the company and its dreams are now dormant, waiting to resurface when the time is right and the world is ready.
Further reading
In starting a company, you can’t second guess every obstacle you’ll face along the way, but you can make sure you have a firm foundation for growth. Ward Williams Creative offers the following tips to start-ups:
- Don’t expect your business to take off overnight. Some very fortunate people have this experience, but most work at it for years before they gain success. A software company may take two years or more getting their product to a stage where it’s ready to go to market, so make sure your funding will last until you reach revenue stage.
- Check your business idea for sustainability. You may be great at what you do, or have a product that delivers excellent benefits, but if it’s not significantly different or cheaper than what’s already out there, it won’t have a future.
- Know the market and your position within in. Many entrepreneurs are so busy doing what they do, that they don’t look at figures, research or market findings which can help make vital decisions like when would be a good time to launch a new product.
- Identify the skills your business requires. Work out which ones you don’t have and go and get them; it’s vital that you build a team covering all basic business skill sets.
- Get to market as quickly as you can. If you have a new product or technology, the speed of getting to market is going to be very important as someone will have the same idea at some point, so make sure you get there first.
- Get everything in writing. Funding, shareholders agreements, employee contracts, supplier agreements, everything! When you start out it’s very exciting and a bit overwhelming and people may say they will do something to help. However, if the business struggles, people can change their mind very quickly and with nothing in writing you will have no protection.
- Network and maintain marketing activity It’s no use being busy now and having no work in two months time. Always find some time to keep in contact with people and do some basic networking; it may seem pointless but it will pay off over time.
- Anticipate any possible political situations with industry partners or clients and think how you could alleviate them.
- Don’t be afraid to fail. It happens, you can come back from it and if you don’t try you will never succeed. Many very successful entrepreneurs have failure in their past. If it happens to you, learn from it and move on.
Further reading on starting a business
