Starting a company can be a lonely, stressful, exhilarating, scary and wonderful adventure. To help guide you through the process, we’ve assembled your very own personal support group: marketing expert Colin Benjamin, accountant Sue Prestney, venture capitalist Doron Ben-Meir, search expect Chris Thomas and lawyer Peter Vitale.
With their help, we’ve put together 10 vows that will assist every entrepreneur who is starting a business.
But these vows aren’t just for start-ups. Just as romantic couples like to renew their marriage vows, it’s a good idea to return to these principals from time to time and renew your start-up vows.
I will have a clear value proposition
There are all sorts of things you need when you start a business – a business plan, financial projections, a marketing plan. But nothing is more important than your value proposition.
“A value proposition is so important because it is what’s going to fuel your business,” says Doron Ben-Meir, chief executive of venture capital firm Prescient Capital.
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It’s not enough to have a great idea, or a great piece of technology or a new invention – you’ve got to have a clear idea of who will actually buy your product or service.
“A simple definition of value proposition is: ‘Why will customers buy your offering?’ It’s not about why you think they need your product,” Ben-Meir says. “The difference between those two is fundamental and unless you can answer that question succinctly, you are not even ready to start.”
He says it’s crucial to test your business proposition by talking with potential customers before you start your business. “Continue to test your product idea until you are satisfied. If you continue to get knock-backs, you’ve got to go back to the drawing board.”
And remember, a value proposition is something that you should return to over and over again as your business grows, to refine, adjust and even entirely recreate.
I will understand my market
How well do you know your customers, your competitors and the size of your market? Good market research is a crucial part of business planning, and it’s never more important than when you are starting out.
Colin Benjamin, a marketing expert from independent think-tank Marshall Place, says Google is a great place to be. Start by looking at the broad industry category into which your business fits, then try and figure out the keywords your customers might use to search for your product.
“This will give you a great idea of which companies are in your space,” Benjamin says.
After that, find out the name of the industry association in your space. Check out their member list and try and have a chat to some of the key people out there about the big players in the sector and the prevailing conditions.
Finally, Benjamin says it’s a good idea to check out the media for stories on your sector and potential competitors. “Particularly look at what’s available in terms of the same services under different names.”
Once you’ve got all this info, you can start thinking about drawing up a competitive analysis, a SWOT analysis (strengths, weaknesses, opportunities, threats) and a marketing plan.
I will continue to panic
Starting a business is scary. There’ll be sleepless nights, panicked phone calls to mentors and investors, and moments where you think that the whole thing just won’t work.
Colin Benjamin’s advice is simple: “Continue to panic. The disasters are already happening and you need to take action to get things sorted out.”
If you’ve got business partners or shareholders or staff, get them panicking too – explain your problem and ask them for advice and solutions. “Encourage them to start helping to reduce your panic,” Benjamin suggests.
To keep panic from becoming a regular occurrence, planning is the key. For example, if it’s money you are worried about, spend time planning your outgoings over a certain period versus your revenue over the same period – if the sums don’t work, you’re going to be eating into your capital or your savings. Not great, but at least if you’ve planned and prepared you can do something about the problem.
I will understand how my numbers fit in with my business plan
Sue Prestney, principal of accounting firm MGI Melbourne, says so many businesses start with a great idea but lack understanding of how the financial engine of their business actually functions.
“You need your financial roadmap that sits next to your business plan,” she says.
Start by working with a bookkeeper or accountant to prepare financial projections for the next 12 months. Prestney says you’ll need a three-way budget containing a projected profit and loss statement, a projected cashflow statement and a projected balance sheet which will show your position at the end of 12 months.
Having put the three-way budget together, you can see where you are going – and how much trouble you are in.
“In the course of doing that you’ll find out what you don’t know about the business and where your cashflow holes are,” Prestney says.
I will have enough capital
The old start-up adage is that getting a business up and running takes twice as much time as you anticipate and three times as much money.
And the capital requirements don’t finish after the initial start-up phase is over – often the end of the first year, when it comes time to renew those first contracts, can be the time when you need capital the most.
“Growth takes cash, just as much as getting started. In fact, growth takes even more cash and if you don’t plan for it you can find yourself insolvent in a very short space of time,” Prestney says.
Her advice is to budget well beyond the first 12 months and start to figure out what capital you might need for each stage of your growth.
She also suggests asking investors for staged commitments – that is, a bit of money on day one, a bit more capital at the end of year one and a bit more to fund your expansion at the end of year two.
I will have a water-tight shareholders agreement
The start of a business is also an exciting time for your shareholders – they think they are about to make a mint by backing your company. But as the business grows (and particularly as speed bumps emerge) the disagreements and disputes will also emerge.
At these times, it’s critical to be able to fall back on a shareholders agreement. “A shareholders agreement is essentially another form of partnership agreement,” says Peter Vitale, principal of CCI Lawyers.
“It regulates the behaviour of shareholders, particularly in terms of what they can do with their shares.”
Critical items you’ll need in your agreement include clauses regulating how the initial capital will come into the business; the management structure; the structure of the board; rules about how shareholder decisions will be made; how and when profits will be returned to shareholders; and rules about how shareholders can exit the business (for example, will other shareholders get first right of refusal over other investors shares?).
As Vitale says, shareholder agreements are often left in a bottom drawer and only referred to in times of trouble – but that’s exactly when they are so important.
I will protect my corporate identity
When you’ve come up with your brilliant, memorable business name and dazzling corporate logo, it’s time to protect your corporate identity.
You’ll need to register your business name and take out trademark registration over your name to ensure it is protected across Australia, even in places you’re not doing business. You should also register corporate logos and slogans where possible.
Chris Thomas from search engine optomisation consultancy RESEO says it’s also crucial to secure your domain name, which will ideally be based on your company’s name.
Then make sure you secure your identity on social media sites such as Facebook and Twitter, ensuring your “channel” name on these sites also marries up with your business name.
I will look after myself
Every entrepreneur, no matter how long they have been in business, knows that running a company is a stressful thing. Sleepless nights, unhealthy eating patterns and a few too many relaxing drinks are all things to watch out for. So how do you tackle these issues?
“The first thing is to recognise that you have been drinking too much for too long anyway – otherwise you wouldn’t have got into this business,” Colin Benjamin jokes.
On a more serious note, the key for any entrepreneur who feels like its all getting to be too much is to lean on their support network of family, friends and business mentor. “The worst feeling for an entrepreneur is a feeling of isolation.”
Another strategy is to go back to your business plan, figure out your key priorities and focus on these while you get things back on track.
And stay healthy. Keep going to the gym, make time to see family and friends, ensure that you spend at least some time not thinking about work.
“Be aware that the start-up stress can have real effects on your body. Those stress factors can kill you and your business,” says Benjamin.
I will protect my assets
Businesses can and do fail for a number of reasons. It’s nothing to be ashamed of – plenty of entrepreneurs have bounced back from a company collapse or even steered the business out of administration.
But the collapse of your business shouldn’t necessarily mean that you are personally left destitute.
“It’s possible to lose everything if you haven’t structured your business and your personal assets,” Prestney says.
Her key piece of advice is to make sure the structure of your business provides limited liability – that is, make sure your business is actually operating as a company structure, as opposed to a partnership.
Another thing to be careful of is personal guarantees. “If you want an overdraft or a finance facility, you are probably going to have to sign a personal guarantee,” Prestney says. “But don’t sign a personal guarantee unless you absolutely have to.”
I will celebrate every milestone
Starting a business is a rollercoaster – difficult, stressful and, occasionally, exhilarating. Given that so much can go wrong, it’s important to acknowledge your successes. When you land a big contract, close a big sale or win an award, take time out with your team to celebrate.
It doesn’t have to be a big party – save these for the truly huge milestones – but make sure you do something. Colin Benjamin says a personal note of thanks from you to your staff can be just as powerful as a big soirée.
“[Advertising industry legend] David Ogilvy used to do this all around the world – a two or three line note to everybody who contributed to the award being won or the milestone being reached.