Statistics from HMRC show that around 80% of companies registering for VAT cease trading within three years, and this statistic has held true for many years now.
With the chances of survival so slim, it’s a wonder that so many people decide to take the plunge and start their own business. Anybody that manages to steer a start-up safely through these crucial early years, has done so against the odds and should be heartily congratulated on this achievement.
So what are the secrets to surviving the start-up years, and thriving beyond? John Sollars, the serial entrepreneur behind StinkyInk.com, shares his tips on how to safely navigate your start up through the early years;
I started my latest business over 10 years ago, so fortunately, my company was one of the lucky ones that made it through the tough early years. So what has enabled us to thrive during a vicious recession, in a very competitive and price sensitive marketplace?
6 Top tips for surviving the early years
Having run businesses that failed in past recessions, the lessons I learned there have stood me in good stead. Here are my top tips for surviving the early years of a business:
- Cash is King
- Understand your financials
- Customer service is paramount
- Keep focused
- Employ good people
- Automate to survive
1. Cash is King
This has always been so and really is the deciding factor of getting over that ‘three year hump’ – being able to pay all your bills on demand. As a start-up you are probably spending money without generating much, if any, income.
Living within your means in these early days is critical. Don’t spend what you haven’t got; try not to get into debt and learn good fiscal discipline for the better times around the corner.
2. Understand your financials
This point is linked to the last one. It is the boring bit, but for your business to prosper, for you to be able to plan your tenth birthday party, then you have got to ‘get’ your financials. You must understand the difference between turnover, gross profit and net profit – how often do those pitching on Dragons’ Den fail here?
Meet your accountant regularly to get updated management accounts; make sure that you go through and UNDERSTAND the information that they are giving you. Listen to what the money expert is saying because “the numbers never lie”.
Having a good online accounting system can really help you here. They can automatically pull the figures from your bank accounts and tell you exactly where you stand. Read ByteStart’s Guide to choosing the best online accounting software for your business for more.
3. Customer service is paramount
I recently had the pleasure of dining at a Michelin starred restaurant, and the day after still with the afterglow of good food, good wine and great service decided to put a positive review on TripAdvisor.
I was absolutely gobsmacked to see negative comments on there, but that’s life. We live in a joined-up internet world and you can’t please everyone all of the time. However, you must do your best to please 99.9% of the people all of the time, and when that negative review happens track it down and respond to the customer.
Our ethos is that we will treat every customer the same way that we want to be treated when we shop online. Most negative comments are actually the result of a miscommunication and believe me it’s worth the effort of investigating that misunderstanding and rectifying it.
4. Keep focused
Whenever I take on a new member of staff I tell them, “We sell ink – simple”. However, occasionally I get distracted, the business suffers and it takes me months to get back to where I was.
Let me explain. A few years ago I decided that as we were good at selling ink, we were capable of selling anything online and competing with the existing sellers.
Our business is based on organic search, and we think that we are pretty good at website optimisation, so I found a fresh niche. We spent lots of money buying relevant domain names, lots of time designing a lovely website, even more time sorting out databases, stock and price feeds from some new suppliers, and finally launched the e-shop to a great fanfare.
The result: after 18 months we had not sold a single item because we weren’t able to give it the resource and focus that any new business needs from the start. And of course in that period of getting it started my focus shifted away from selling ink and our core business suffered.
So keep focused on being the best at whatever you do.
5. Employ good people
As your business grows you will have to employ people. A wise man told me, “You will never make much money unless you employ people” and he is exactly right. Bill Gates once said, “Always employ the best people that you can get”, which is really good advice.
However, that doesn’t mean that everybody you employ has to have a first class honours degree from a ‘good university’.
The people who are picking and packing in my stores need to be able to work on their feet all day, have good attention to detail and be able to cope well with different stresses compared to the creative genius who now designs our website. Round pegs for round holes!
Define the role before you start to recruit; writing that job description will formulate the sort of person you need. Then interview against that description.
We have a multitude of skills, experience and capability here now, but the first guy I recruited nine years ago is still with me. He joined as a telesales operator, started picking and packing and ordering stock and is now my purchasing manager.
6. Automate or die
One of the stats I am really proud of is the fact that when we had a turnover of £1 million we had three people in stores; when revenue reached £3 million, we had three full-time, and one part-time person in the same department.
The number of packets shipped increased from around 2,500 per month to nearly 10,000 per month and we are still thriving with just a bit of extra help.
That is a measurable improvement due to automation. Without pushing automation throughout the business I would probably need another three or four in admin and three or four in the stores area. We are committed to ‘continuous improvement’ and look to improve every aspect of our business all of the time.
So this is my checklist to get any business start-up through the early years. If you want to share your tips, then please feel free to post a comment below, and if you are running a business then the very best of luck (so long as you don’t sell ink!).
This guide has been written for ByteStart by entrepreneur, John Sollars. Stinkyink.com is his third start-up and the first to get beyond the early years.