Tag Archives: Startups

How 4 professional engineers used an MBA to change their careers

The MBA is a highly desired qualification by both young professionals and employers.  Not only does an MBA equip the student with a wealth of business and leadership skills, it  shows clear signs of an individual’s focus and ambition as well as an adventurous spirit – leaving a secure job to study for an MBA requires not only funds but courage.

MBAs benefit individuals, employers, and the economy. Although it is essential to hone skills in specialist areas, businesses are keen on hiring MBA graduates because they have a deeper understanding of a range of business practices that enable them to be more strategic and agile in their thinking and problem solving.

The MBA opens new career opportunities, helps students to gain better insight into their motivations and goals, and connects them with inspiring professionals who can support their career ambitions long term.  Taking an MBA is a major financial commitment and because of their prestige, the cost of attending the top international schools is high.  Consequently many students seek scholarships to support their studies.  For over 30 years, the Sainsbury Management Fellows (SMF) scholarships have been awarded to professional engineers who have clear leadership potential.   Today, there are 365 SMFs who, collectively, have been awarded £11 million in scholarships to enable them to acquire skills that help UK businesses succeed and the economy growth.

In this blog we introduce four Sainsbury Management Fellows who have used their MBA skills and experiences to steer their careers in new and exciting directions.

Engineering a Finance Career in Green Energy:  SMF Chris Gifford, Senior Risk Consultant, Chief Credit Officer, Vancity Community Investment Bank, Canada

After gaining his engineering degree at Oxford University, SMF Chris Gifford started his fulltime career in the power generation sector. He worked throughout the UK and internationally helping to operate and maintain the control and instrumentation systems of fossil-fuelled power stations.  He progressed into a commercial role, analysing the financial performance of the power stations, which gave him a deeper understanding of business and a desire to pursue his career in a business direction.

Chris decided that he wanted to work in the cutting-edge transition from fossil-fuel to green technology in a business and finance capacity, but he realised that he needed additional business skills to secure a top-level position in a leading company.  Because of his engineering background, prospective employers tended to pigeon-hole him as a techie. Chris knew that gaining an MBA would enhance his skills and make him more marketable.  The MBA, which he undertook at INSEAD, provided not only the vital business skills needed for a career shift, but accelerated an improvement in his interpersonal and leadership skills.

Today, Chris is the Senior Risk Consultant, Chief Credit Officer at Vancity Community Investment Bank in  Ontario, Canada where he uses his combined engineering and business skills to assess the viability and robustness of complex renewable energy proposals from businesses seeking finance, eliminating the need for the bank to use external professionals to carry out additional assessments.  In addition to identifying potential problems, Chris recommends improvements and efficiencies that allow important renewable energy projects to be funded.

Chris’ engineering background is a major asset in his role.  He explained: “My engineering skills are typically applied to evaluate whether businesses trying to access financing have fully understood the complexities for themselves.  There is a bias for optimism and sometimes blind spots when it comes to risk assessment; I provide an objective and pragmatic view on how likely a project is to succeed.”

Switching from a Technical to Management Role:  SMF Dere Ogbe, Shell Corporate Strategy and Portfolio Consultant, UK

SMF Dere Ogbe was appointed Senior Strategy and Portfolio Consultant at Shell after graduating from London Business School with an SMF-sponsored MBA.   He credits his MBA for galvanising his career in this new direction and says he now has the ability to lead both technical and commercial strategy projects.

Before taking his MBA, Dere was a Senior Operations Excellence Engineer at BP Exploration. This was a technical role which involved implementing best practices to drive continuous improvement across joint ventures in Europe, Middle East, and North Africa. This involved cascading business decisions into technical requirements and this gave Dere an insight into how commercial choices drive project design and operational requirements.  This awareness, coupled with the knowledge from courses such as Managing Engineering Projects, sparked his interest in business management.

Dere sites a number of ways that the MBA has helped to transform his career: “It has given me the necessary financial, strategic, and commercial skills to quickly analyse problems and propose possible solutions. The programme also enhanced my data analytical and leadership skills. Also, I feel very comfortable leading a wider range of people with different technical and commercial expertise.  With these additional skills, I can jump into projects and get up to speed quickly.  The part of my job I especially love is the challenge of thinking on my feet, rapidly uncovering the critical factors and, with the team, creating a roadmap to solve the problem.  The MBA has had a transformative effect on my career and leadership skills.” 

Billy Comes to Life Through Engineering and Business Talent: SMF Rob Deering, CEO, Billy, Australia

Before business school, SMF Rob Deeming gained a degree in mechanical engineering at the University of Nottingham. After graduation, he spent five years as a consultant at Bain & Company where he developed practical skills such as problem-solving and collaborative working.  This role gave him the time and freedom to decide what he wanted to do longer term.  He said: “It was an incredible place to start a career. The level of learning, skills development and personal support available in consulting is second-to-none.”

Rob took his MBA at Harvard and says that it gave him both personal and professional perspective: “It opened my eyes to new career pathways, in particular, those which combined his engineering and business skills.”  Since graduating, Rob has lived in both New York and Sydney where he has built several tech-driven businesses, including three start-ups.

The most recent entrepreneurial venture is a technology company, Billy, which addresses the fundamental challenges of caring for seniors, while allowing them to remain in their own homes as independently as possible, on their own terms. Billy uses a series of Internet of Things sensors to identify patterns of behavioural routine for seniors, and shares this information through an app, in real time, with family members and professional carers. Billy can read all the activities of daily living using smart analytics to determine patterns in routine and identify changes before they result in medical emergency.

The future is exciting for both Rob and the company; Billy is growing in size and reputation and is now in 1,000 homes across Australia and the USA. Initial feedback shows that customer confidence is high and there has been a reduction in hospitalisations in the households where Billy is installed.

Winning an SMF scholarship enabled Rob to undertake his prestigious MBA, which gave him the skills to follow his entrepreneurial dreams.

Engineers with Business Skills Transform UK Industry: SMF Ian Peerless, Operations Director, ExRobotics, UK

SMF Ian Peerless and ExRobotics Colleagues

Ian Peerless’ route to an engineering career began at the University of Southampton, where he graduated with a First in Civil Engineering, after which he spent a year with British Leyland in a mechanical engineering role.  The hydrocarbon industry in the North Sea was booming and he was keen to move into that sector, so gained a Petroleum Engineering Masters at Heriot-Watt University and shortly after graduating joined Shell as a Petroleum Engineer and enjoyed an international career for five years.

However, he reached a ‘crunch point’ in his career, as is often the case with young engineers.  At this point there is a choice; to work up through the ranks of a company as a pure engineer or to diversify and move upwards in a different direction.  Ian chose the latter. His interest in business management led him to the MBA, with a scholarship from SMF to attend IMD in Switzerland.

The MBA gave Ian the credibility required to step into a management role; a role that would otherwise been out of his reach. He was one of the first engineers to benefit from the SMF scholarship programme, and proved that having engineers in management roles throughout industrial companies is extremely valuable.

After the MBA he joined British Steel, where he gained a wealth of management experience. He worked in Business Development, Sales, Operations, and finished as the number two in the Business Strategy department reporting to the main board.   After 15 years with British Steel, Ian was enticed back to Shell, where he was a key member of an internal consultancy group.  He travelled the world advising, coaching and facilitating leadership teams on project management and contract strategy.   When that project was completed, he set up an independent consultancy, IPKA where he continued to perform a similar role to the Shell position, but with different oil and gas companies.

In 2010, Ian took on a Shell contract to develop an oilfield robot. He gained extensive knowledge of this specialist robotic niche which led him to form ExRobotics, a company that is tackling the problem of oil and gas operators being sent into hazardous, harsh, and remote locations. The robots can be permanently stationed at those locations, removing people from harm’s way as well as cutting costs and reducing lost production.

Summing up the benefits of the MBA, Ian said: “The MBA gave me skills that I still use in my work. In particular, the ability to understand a business, its markets, its competitive position, and to turn that into an action plan for success.  Furthermore, the MBA made me understand that if you combine the strengths of individuals and create a motivated team, wonderful things happen. The MBA not only changed the direction of my career it also changed my industry.  The combination of my life before the MBA (technical) has been combined with my life after the MBA (management) to create ExRobotics.”

How to Apply for the Sainsbury Management Fellows MBA Scholarship

If you are a professional engineer considering an MBA as one of the stepping-stones towards a business leadership career, visit our MBA scholarship application page, you could become one of our successful awardees –the individual scholarship is £50,000 and we award ten of these every year.

Keep Your Early-Stage Company on Track

New ideas are thrilling. So many of us are great at starting things; the genesis of an idea, the moment the lightning strikes, that flash of inspiration is pure joy. Taking your first steps into a start-up business are some of the most exciting steps. You are moving at break-neck speed to set up your platform for success.

But, as with all the greatest success stories, eventually, a wall is hit. Nothing worth having ever comes easy, and when it comes to start-up businesses, that struggle often comes in the form of early stagnation. The vision is in your head, the picture of the palace you are going to build is set firmly in your mind’s eye; now you have to go through the potential mundanity of building it brick by brick.

The unfortunate fact is, the majority of new businesses fail within their first year of trading. These failed start-ups are usually victims of common mistakes and misconceptions. Here we have some tips on how to ensure that your early-stage company becomes the success it deserves to be.

Track Your Metrics
On the face of it, this seems like an obvious thing to mention. However, new businesses, especially when low on cashflow, tend to focus mainly on profits and revenue. These are hugely important of course, but there are other data that you should be paying close attention to in order to get a rounded view of performance. Keeping an eye on the following will also ensure that you catch potential pitfalls before they happen…

Customer Acquisition Cost: How much does each new customer cost you? This can be easily assessed by dividing your total marketing and sales costs by the number of customers you have had within a specified time period. How do those figures look against your projections and business plan?

Customer Retention: Retained customers are vital for reputation and cashflow. How good are you at retaining business? Is there anything you could be doing to improve customer experience?

Return on Advertising Spending: Is the revenue you gain as a direct result of advertising sufficient for your investment? Advertising is not cheap and is always a gamble. Divide total sales by advertising spend in order to see what kind of return this investment generates.

Profit Margin: Profit is everything in the end. You must keep a very close eye on the bottom line.

Traction and Momentum
Getting things moving is widely regarded as one of the hardest things to do; getting noticed, getting talked about and getting a great reputation out there. It is a grind, but you have to keep the faith; keep pushing forward. You might have to take it one customer at a time, but, as Mother Teresa once said, “the ocean is made up of drops.” Keep pedalling and the breakthrough will come.

Momentum and passion are tough things to keep hold of on your own. Make sure you have other people around you who are happy for you to bounce ideas off them, and who will inspire fresh ideas and enthusiasm. When you are grafting away on your own, it is vital to have input from people who understand the difficulties of the process.

As your business develops, so will your workload. You need to recognise when this workload is too much for you on your own. There is no use in running yourself into the ground before your venture has even left it! To avoid this, take a look at the workings of your business and break them down into separate roles. This could be delegated to interns, or even employees if you are in a position to afford them.

Invest Effort in Talent
When a fresh venture is your baby it is really hard to take parts of it out of your hands and into the hands of others. But this transition must be made in good time. It is essential to invest real time and planning into hiring the right people. Do not wait until it is too late and get into a situation where you have to hire fast; this way you will most likely end up with employees that are the wrong fit for your company.  Make hiring the right talent a priority well ahead of when they are required so that you can put the focus, but not stress, into the task.

Under Promise and Over Deliver
This is a good rule of business in general. This rule not only helps you to gain a great reputation but also takes a little pressure off. An example of this is always promising a later completion date on some work than you intend to deliver so that when you do deliver, earlier than quoted, the customer is happy. This also buys you time if the demands of a start-up slow down a project or task for some reason.

Don’t work in secret. Many new companies fail because they are too timid, self-deprecating or fear apparent over-confidence in their product or service. With social media being in its heyday, self-promotion is easier than ever, go for it! Also, if you are planning a publicity event or advertising campaign, don’t be afraid to ask for things. Perhaps you can get a free venue for your launch if you promise to promote the venue. The worst thing they can say is ‘no’!

The bottom line is ‘make some noise’. You might have invented the greatest thing known to man, but all you will hear is crickets if the only living thing that knows about it is your cat!

Don’t Overwork Yourself
This is so easy to do. You have to relax a little; tension has never benefitted anyone or anything. We are told from a young age that the harder you work, the bigger and better the results. This just isn’t the case. It is an attitude that will grind away at you over time, extinguishing the flame that once was your initial idea. Many studies over the past decade have proven that sleep, rest and a healthy work/life balance are essential to wellbeing and success. Take breaks, delegate, keep to sensible working hours, eat properly and keep fit.

In conclusion, perhaps the most important thing to do to keep your business on track is to look after yourself first. Keep that positive vision in your head by keeping yourself healthy, happy and inspired.

Can unicorn startups thrive whilst ignoring regulation?

a worker asks for a transition to a patch on a piggy bank, but receives only a tease

The world of tech startups is peppered with stories of overconfident, brilliant entrepreneurs who disrupt the way business is done in traditional sectors, transforming consumer behaviour and challenging current legislative frameworks, often with detrimental outcomes to their business as in the landmark Uber employment rights case.

High profile tech innovators are sometimes branded arrogant “jerks” who try to by-pass national regulations in order to achieve success. But is the fair? Is arrogance a prerequisite to achieving a major shift in consumer economic behaviour? The new Sainsbury Management Fellows Business Survey asked business leaders/entrepreneurs for their views on the behaviour of Unicorns (billion dollar valued start-ups), with some divergent views.

Arrogant or just determined? Divided opinion
Sixty-seven of the 150 opted-in panellists took part in the survey and 37.5% agreed that Unicorns in the sharing economy are arrogant in their compliance with regulation and interestingly, over 51% of all respondents said that a degree of arrogance is actually required for new technology startups in traditional markets to beat incumbents and grow.

Arrogance of Start ups Survey Question `1

Echoing similar views among the 51% of respondents, David Bell, an engineering graduate on Rolls-Royce’s development programme said, “In order to gain advantage in the sharing economy Unicorn startups had to exploit loopholes and gaps in existing rules to rapidly develop market share before regulators can act to prevent these unforeseen practices. While no specific company was put in the spotlight, Bell said that some of the tactics include ignoring regulator warnings, claiming new technology’s exemption from old rules, asking customers to lobby on their behalf, and asking for forgiveness and paying penalties after their market position has already been established.”

Arrogance of Start ups Survey Question 2

On the flip side, just over 42% of all panellists stated that arrogance is not a prerequisite for success and startups are misunderstood and the public should not “confuse arrogance with self-confidence.” In this group’s view, such startups are simply pushing boundaries, testing new models and finding new ways of competing with incumbents.”

No place for arrogance in business
Successful serial entrepreneur Chris Martin, CEO of ADC Therapeutics SA said, “There is no room for arrogance in business – startup or not. Some Unicorns I have worked with were best in class and so may have been perceived as arrogant when they were just very, very good.”

Sinead O’Sullivan, an MBA candidate at Harvard, an aerospace engineer and entrepreneur stated that it is vital that not all startups are painted “with the ‘arrogance’ brush.” Some tech startups are being led by millennials who can appear overconfident.”

While some startups can be arrogant, most aren’t. Some simply operate with supreme “self-confidence and dogged single-mindedness,” said Phil Strong, CEO at Zymbit.

The role of arrogance in business
Asked to name a company that behaves arrogantly, unprompted 18% of respondents named seven companies, with Uber taking pole position. The others were Prowler, Theranos, Avery Dennison, Airbnb, Tesla, and Dyson.

Led by CEO Travis Kalanick, Uber develops markets and operates the mobile app which provides on-demand taxi service, connecting passengers to cab drivers at much lower costs than other services. While many deem Kalanick to be a brilliant entrepreneur and legendary CEO, he is also generally perceived to operate in an arrogant way. While this arrogance is seen by some as negative, the trait is said to be rampant in Silicon Valley, with investors rewarding supposedly callous tactics with tons of capital. The view of the Uber leadership is that it consistently acts as if the company is above the law and the ethical norm.

Sinead O’Sullivan reinforced this point saying, “While misplaced confidence can be damaging to the reputation of a company, this behaviour is encouraged by “the way the whole venture capital game works.”

Demonstrating polarity of views, one entrepreneur, Nimesh Thakrar, CEO of Banneya gave Uber kudos for changing “the status quo of how we are currently operating in that [taxi] space”, and that policies and regulations “need to change and be reflective of the modern world we live in.” However, another young entrepreneur Farid Singh argued that the way Uber has gone about doing things has become “similar to dumping free inventory” and that while “regular taxi services run out of cash and have to shut down, they [Uber] start squeezing the drivers and raising their prices”. He believes that these practices have created an “unchecked monopoly”.

Airbnb, the world’s fourth largest startup is criticised for its supposed arrogance by the American Hotel and Lodging Association (AHLA). The AHLA launched several campaigns to counter Airbnb’s so-called hypocrisy and to fight for “the need to curb illegal hotels and ensure a level playing field”. As one panellist stated, startups are not always good just because they’re new, claiming that “Airbnb has damaged B&B markets.”

In the final analysis…
While some of the SMF panellists deemed Unicorn startups as arrogant, others see this arrogance as merely a change in the way business and business owners are pacing themselves. Startup owners and operators are seen as bold movers and shakers who “challenge incumbents” and are in the business of “exploring new ways of solving old problems” said one panellist. The leaders of Unicorn startups are seen as new types of entrepreneurs who emphasise the need “to strive for survival and reproduction.”

Some respondents felt that the term “arrogance” is “emotionally charged” and has “strong negative overtones” and that society should be acknowledging their achievements; focusing on how these companies are pushing boundaries, testing new models, creating change and improving services for consumers.

Sainsbury Management Fellow and venture capitalist, James Raby argued that subverting regulation can be catastrophic for long term success. “Some startups regard regulation as the enemy. Because entrepreneurs are bringing new technology to the market, they think it is a protective shield from regulation. The standard response is to disavow regulation, yet everything that’s old is not necessarily bad. Startups should embrace regulation if they are serious about long-term success. They need to recognise that to work in real markets they must cooperate in a regulated market, as I’m sure the manufacturers of driverless cars will realise.

This means startups need to employ people who understand regulatory frameworks and the detail of how they apply in different markets and cultures. Without this depth of understanding, companies side-stepping regulation will be challenged and regulation will catch up with them.”

As SMF implores startups to re-think their approach to regulation, perhaps there is also a need for the regulators to improve their understanding of technology and be quicker at managing technology shifts.

photo (c) nuvolanevicata

Intrapreneurship: corporations and startups can learn from each other

An entrepreneur is brainstorming new ideas for their start up company. The chalkboard has the words "start up" written in chalk.

Despite all the commentary and hype surrounding startups, there’s a reason that many fail to develop into bigger companies. The lean and hungry startup is not only able but supposed to take risks that more established firms cannot do owing perhaps to both organisational inertia and inflexibility. While this often results in more ‘failures’ than it does long-standing successes, the risks startups take can be of enormous teaching value in terms of providing case studies to larger, more well-established companies about what went right or wrong.

Likewise, start-ups looking to transition to the next stage could learn an awful lot from larger companies — once startups themselves — about long-term development and consolidation of both the brand and internal culture.  Startups lack the kinds of structure and procedures which characterise established firms, but these will need to be implemented if a startup wants to take it to the next level. There are a lot of opportunities for both sides to share good practice and learn from each other.

The exchange of ideas and good practice between big, established companies and startups is often derided as superficial ‘innovation theatre’.  Adopting the ‘perks’ of startup culture, such as open-plan office layouts or staff canteens, corporations posture and make it appear as if they are ‘innovating’ while sales continue to stagnate and the firm fails to break into new markets. They’re still just as rigid as before, having failed to learn the real lessons from startups about problem-solving, risk-taking, and experimentation. Investors remain conservative and management less entrepreneurial.

While startups do often successfully seek efficiencies by shaking up work patterns or by cutting through red tape and bureaucracy normally faced by bigger companies, it’s “how startups attack problems and mobilise talent that makes them unique,” argues Zachary Johnson for Forbes. “It’s being able to focus single-mindedly on one problem that allowed Salesforce.com to become the king of CRM. It was a reputation for hiring brilliant people that made Google such a desirable place to work.” For him, startups bring discipline to ‘mistakes’ (ideas, trial, error, iteration) building a safe space to incubate new ideas.

Building a space for corporate experimentation must have a clear end goal or objective in place to maximise resources. Both startups and corporations must strike a balance when learning from one another – taking too many cues from startups is untenable and risky for a company with a stable portfolio while inheriting a rigid organisational approach from larger companies can strip startups of their edge that makes them successful.

Before any knowledge exchanges can take place or be put into action, there need to be clear boundaries and goals in place. What issues are you aiming to solve by adopting similar practices to companies of a comparatively different size and perhaps even industry to yours? “Startups by nature have to validate their ideas, so they value experimentation and exploration.” Any experimentation or knowledge exchange should likewise be clearly justified.

The rise of ‘intrapreneurship’ could hold the answer to a clear path for knowledge exchange between firms of vastly different sizes and experience levels. Intrapreneurship involves giving employees the means to dedicate their time to pursuing innovative ideas unrelated to their everyday tasks. This gives stakeholders throughout the organisation the opportunity to rise above the ranks, take risks, and pursue new ideas without fundamentally upsetting the regular, productive order of things. The intrapreneur takes risks “within the context of their job in the company” to implement “policies, technologies, and applications that resolve a barrier to productivity increases”. Working in conversation with a wide range of trends outside of the company, and, supported by shareholders and management, these autonomous ‘intrapreneurs’ are able to become key entrepreneurial forces and push the organisation in a new direction and can even result in spin-off brands that have a totally different brand, culture and product line to that of the ‘parent’ company.

Intrapreneurship makes perfect sense in any market that is facing disruption or long-term stagnation, or for any firm that is failing to keep up with the pace of innovation in its industry.  Most entrepreneurs of startups want to grow and expand into an empire.  As they achieve this ambition, they too will need to implement more structures and controls to ensure the business grows in a particular direction.  Intrapreneurship and the acquisition of new business disruptors will ensure that they remain the dynamic and flexible players they were at the start of their journey.  Their future could depend on it.

Photo copyright: Christopher Futcher

Guide to Entrepreneurship – Getting Started

Chirag Shah (1)
SMF Chirag Shah, a successful serial entrepreneur, contributes his second blog in a series of six.

My co-blogger George Fowkes’ Guide to Entrepreneurship – Getting Started posted last October about the key steps of how to get started and a priority list of the key things to think about in the early stages.  So I thought I would complement his post with some practical tips that you won’t find in the textbooks.

At this stage you have a great idea that you are pretty sure can withstand the blows of competitors and make you some money. If you are going to take your idea forward into a business, the next thing you must do is set up a company. At this stage, it doesn’t matter too much what the company is called; you can always change it or set up a subsidiary with a more suitable company name later.  The UK is, in my experience, the easiest country in the world to setup a company. You can actually do it online in about 5 minutes and it only costs a few pounds! (Get the details from Companies House website.)

So why the urgency? Because it’s a quirky fact of life – especially in this day and age of heightened transparency – that most of your stakeholders (future employees, banks and clients) will assess your credibility first and foremost by the period of time that you have been in business – i.e. since your company was born! For example, most banks won’t extend credit to companies that have been in business for less than 6 months old – regardless of how much sales revenue they generate, so you might as well start the clock ticking. Completely meaningless and outdated, but that’s how it is. Now here’s the clever bit: get your newco set up now and hey presto in less than 365 days time your “Founded in 2013” cachet will make you one year old in the eyes of most stakeholders!

Tip 2: Know your numbers
By this I do not mean do a business plan. I’ll get to that in my next post entitled “Getting Funding”. I mean figure out what is the minimum you need to achieve to ensure you don’t go bust. The former Cabinet Minister and über successful publishing mogul, Michael Heseltine, is famously attributed with doing the numbers for his publishing business on the back of an envelope.

In my view you should be doing precisely that too. In any business only a few key numbers drive the whole profit equation and its imperative that you know what they are and understand them simply enough to do the calculation “on the back of an envelope”. Now, I appreciate that as a business grows it can get more complicated, but at the very least, you should be able to do the calculation to the point where you understand the “break-even” – in other words, working backwards to understand how much you need to sell to cover your operating costs.

Here’s an example that I use with prospective franchisees of my écurie25 Supercar Club concept:

KEY COSTS per month:

Staff – £10,000
Cars – £15,000 (5 cars @ average £3,000 per car per month)
Rent – £4,000
Marketing – £2,000
Other -£5,000 (round number factoring in insurance, service costs, professional fees, admin, etc)
TOTAL £36,000

On the REVENUE side
Average Membership (customer) Income per member per month (net of vat) – £1,200

Hence, the number of members required to hit break-even = 36000/1200 = 30

[Sanity check: Number of members that a club with 5 cars can support 40]

So, that’s it. If you wanted to start a Supercar Club, you’d need to ask yourself whether you could recruit 30 customers, at least.

Of course, you can go on from there to calculate how much money you would make with 40 customers, 60, etc and certainly you might have to add in more costs (supercars, in this case) to support the expansion; and of course there may well be start-up costs such as license fees, and fit-out costs and also other sources of income such as delivery charges and venue hire and so on.  Of course, there are many other revenue and cost items you can (and will) include in your business plan, but you now have your key metric that will shape your entire business thinking…I need 30 customers to break-even, let’s call it 35 to be on the safe side!  So now your focus can start to address key questions such as: can the market support that number? Where would I get them from? How many customers can I count on from my current network?

Tip 3: Ignore your customers
Well, at least for the time being. I know I’m flying in the face of convention on this one but here goes… I don’t advocate customer market research for start-ups! Henry Ford reputedly once said, “If I asked my customers what kind of car they wanted, they would say a faster horse”. When working in established markets, customers are very good at knowing what they want. But in the land of entrepreneurs, where hopefully you are bringing something to market that is a bit ground-breaking/innovative/disruptive, your potential customers are not the best source of feedback. By all means do canvas their opinions, but be prepared to take what they say with a pinch of salt. In reality most people are not that innovative; they are reluctant to accept change and slow to absorb great ideas even when they see them.

I find a much more beneficial route for entrepreneurial ventures is to undertake market research through talking with competitors (or “close-competitors” if there’s nobody doing exactly what you do), potential partners and key suppliers in the sector. Certainly, if what you are doing has been tried before, they will know, and more importantly they will have a good idea why your idea won’t work or didn’t work (in the past) which will help you refine your proposition to maximise the chances of success.

Of course you’re probably now wondering how you do that without giving away your top secret plans. Well, you need to be smart – talk to them in roundabout ways or share only a part of your secret sauce to ascertain whether it’s an area that they have considered before, or are considering right now. In my experience, most people like to meet and discuss – in this era people understand that today’s competitor is tomorrow’s partner and an open information exchange with a current or potential player has value to them too. Just be careful and understand your boundaries about what you are willing to share well. Prepare beforehand and don’t allow yourself to overstep the mark.

If you don’t feel you can talk to competitors, vendors and partners then mystery shop them – either yourself or through an agent as the case may be.

Tip 4: Defend your IP
If there is an element of internet or web identity in your proposition (and there should be), then do spend a bit of money now making sure you have conducted some legal searches to ensure you are not treading on anyone’s toes, and simultaneously taking the necessary step to protect your IP (intellectual property). It may be a painful expenditure at this stage in the start-up cycle, but the harsh truth is that the later you leave it the less “protectable” it becomes. A few well-spent pounds now could save you a fortune in legal fees or lost business later.

Tip 5: Focus on “frustomers”
In early stage business, sales can be divided into two groups: personal sales and “others”.

Personal sales relate to customers that know you from before (friendly customers or frustomers).  Either they bought from you in a past life, or know (of) you from your previous achievements.  The key is that these people are buying you and your reputation, not the product/service that you are going to create.  Therefore, you can sell to these people before you have even made the product – perhaps a concept or prototype is sufficient for them.  Of course, I don’t mean literally that you can get a cheque from them, but you can explain what you are planning to do and should be able to gain a significant degree of commitment – emotional, letter of intent, handshake, heartfelt promise – from at least some of them that helps you increase your confidence about your early-stage sales trajectory.

Note: If you are struggling to get sales commitments from this group, or don’t know anybody in this group, think very carefully about whether and how you wish to proceed. You’re probably doing something seriously wrong.

The “others” group don’t know you and it’s not worth trying to pitch to them too soon; if anything, you will lose credibility and make selling to them even harder later on.

In summary, most of this post has been dedicated to eliminating downside risk before you go off and start spending major chunks of money creating your product and bringing it to market. If you address these steps effectively, you should have moved from having a great idea to a new business and you should also be feeling pretty good about your future prospects for this business – without actually having spent more than a few thousand pounds in getting there.

Guide to Entrepreneurship – Getting Started

George Fowkes Cropped
SMF George Fowkes runs The Clear Alternative, which provides interim director expertise to clean technology companies to catalyse their start-up and growth phases. George’s early career was in new product development for Cambridge technical consultancy Sagentia, and management consultancy at A.T. Kearney. Conversations with investors while raising finance for The CarbonNeutral Company in 2001 gave him the idea for a company that would bring commercial and project skills to clean tech ventures, to accelerate their development. This became The Clear Alternative in 2006.

Before I start I wanted to add to Chirag’s post by nominating David Hansson, the founder of software company 37Signals, as the international grandmaster of ‘CARD’. And in fact most things about getting a business started. I think he has written a book but his speech at Stanford boils his whole philosophy down into one irreverent hour that you can laugh along to on your way to work.

If I had to summarise the very best of what I’ve seen in the past 12 years of getting ventures started for people, it would be the following:

Find a complementary partner

Most people think that the expression ‘better to own a share of something than 100% of nothing’ came about from raising money. That may be true, but it’s even more relevant right at the beginning. To get any new organisation started is such a huge amount of work, requiring so many judgement calls and such a very wide range of skills, that even an engineer with an MBA cannot do it on their own. You can’t be world class at everything, and it’s lonely flying completely solo.

If I think of the half dozen really successful serial entrepreneurs that I’ve met – the people who have built and successfully sold more than one business – almost without exception they work with a business partner. That partner doesn’t just fill a skills gap with their co-entrepreneur, they also fill what I’ll call a ‘character gap’, as follows.
Everyone has a number of aspects of the business that they can’t help preferring. It could be sales. Or the numbers. Or building the team. It’s very difficult indeed for an individual not to give these preference – it’s part of their character – so stuff gets missed. The partner has an innate preference for different aspects of the organisation. Their first thought on Monday morning is quite different to their co-partner. And so most of the bases get covered. That’s why you see sales people paired up in business with accountants, marketeers with ops people, Myers-Briggs introverts with extroverts, and so on.

So my point would be to find someone who’s quite different to you that you can trust implicitly and make them a significant partner in the business. And even (especially) if you’re married to them, sign an agreement that at least covers what happens if things don’t work out.

Touch the market early and often
With the very rare exception that essentially comes down to luck, it is not possible to bring a successful new product or service to market without first exposing it to the target market. To compete against better-resourced incumbents your product or service has to not just work, but fit the way its users look for, assess, buy and use the thing.

For the product itself we need to bring the alpha and beta-test principle common in software development to our own business idea. How to do this depends largely on the nature of the product, but everybody should be able to find their own versions of customer and competitor interviews, pitching the concept to friendly contacts in the target market prior to development, lending prototypes to prospective customers, offering ‘no-regrets’ deals for early buyers and so on, as the feedback from this user experience is essential. The next proof point is the one where customers actually part with their cash for the product. Hansson is right that this cannot come too soon and, in general, almost any way to bring early revenue into the business (that does not distract from the main development effort) is a good idea.

Closely linked to this, especially in B2B markets, is that your product can only be successful in the context of the buying patterns in the target market. Every market has its idiosyncratic way in which solutions are sought and evaluated, buying decisions made, price and delivery negotiated. And if you’re not compatible with the time of year, use of OJEU, ‘Plan A’, Environment Agency regs, contract management or other trivial necessity you won’t sell any product to that sector. The least costly way to master an industry’s buying patterns that I have seen is to get an industry veteran on the board.

Have a plan

It is true that no plan survives first contact with the enemy, but keeping a plan (i.e. a list of milestones/targets and dates, with associated responsibilities and costs) updated on a regular basis confers many benefits. First, putting the plan together forces you to think about priorities and risk. What’s got to go right, and cheap ways to stop things going wrong. Second, it’s a fantastic communication tool. With a plan everyone can see where the effort has to go. Scope creep – possible the worst enemy of the pre-revenue business – is easier to keep at bay. And finally, it enforces realism. Not all milestones will be met. The insights from ‘why not’ and ‘by how much’ make achieving future targets more likely. And achieving targets is an essential skill to keep investors putting money into a business. So put together a plan and keep it with you. If you have to keep changing it, at least you’re learning!

None of this covers seed funding, getting an office, or marketing, recruiting and financing on the cheap, which will have to wait for another day. Or be picked up by another blogger.