5 Questions You Should Ask Yourself Before Starting Your Business
Many of the most successful companies in the world today came from humble origins. How can you ensure that you are ready to make your start as a business leader?
Glenn O’Grady, co-founder of GuideSmiths, offers CEO Today his advice for entrepreneurs looking to build their idea into an organisation.
Entrepreneurialism is on the rise, with a staggering 2.5 million more businesses today than two decades ago. According to official figures, in 2020 there were 6 million private sector businesses in the UK, up by 112,700 compared to 2019.
Among these businesses could be future FTSE stars, major market disruptors and any number of side hustles that have seen people turning their passions into extra cash and – in some cases – lucrative businesses with longevity.
No matter what your ambition or industry of choice, there are some universal principles that can be applied to business journeys of all types and sizes. Here are the top five questions every prospective entrepreneur should ask themselves before they take the leap.
1. Are you ready?
This might seem basic, but while having a big idea is essential, it isn’t enough on its own. The best idea is the one you can commit to developing; one that combines your skillset with your interests. You might have the best idea for an app – but it’s no good in your head. If you don’t have the skills and experience (or money to pay someone who does) to develop the initial idea into something tangible, evolve it or move on.
This might seem basic, but while having a big idea is essential, it isn’t enough on its own.
2. What should you expect?
Even before COVID, the odds were stacked against new businesses succeeding – over 600,000 businesses a year (10.8% of the total) were predicted to fail in 2020 – before the pandemic. That is around 1,700 businesses every day.
It’s important that figures like these don’t discourage budding entrepreneurs, but they need to be alive to the pitfalls and learn from their own and others’ mistakes. Most successful entrepreneurs have made several wrong turns on their journeys, but resilience is everything and easier to display when you’re putting long hours into your passion. To get an idea of the rewards of unshakeable determination, it’s no secret that James Dyson produced 5,126 vacuum prototypes before he got it right. Likewise, Apple took five years to develop the first iPhone. The message is: stick at it and bounce back quickly!
3. How will you fund it?
If you’re not already well funded, you’ll have to figure out how you’re going to fund your business. Starting small and proving your track record will be necessary before being able to pique the interest of bigger investors, but it’s worth deciding early if this is your chosen path.
If it is, figure out what you’re willing to give away for the investment. Is it strategic control, voting or equity? When seeking investment it’s important to establish the limit of what your prepared to give away, otherwise you might find that the business drifts away from your original vision as more people become involved.
Starting small and proving your track record will be necessary before being able to pique the interest of bigger investors, but it’s worth deciding early if this is your chosen path.
4. Who will you work with?
No founder is an island. Behind every great entrepreneur is a great mentor, team or business partner – or all three. Do you choose a business partner with a similar style or one that is your inverse – filling in your weaknesses to make a stronger team? Much like when seeking funding, business partnerships need clear boundaries. I co-founded GuideSmiths with Felipe Polo and our relationship was firmly rooted in clear communication, trust and respect. How you choose your partners will have a significant impact on your success. It won’t always be easy, and remember that you’ll most likely be seeing this person more than your family. Speaking of which, whether you link up or go it alone make sure to have a support network behind you, you’ll need it.
5. What’s your long-term plan?
As you build and grow your business, decisions will come at you thick and fast, so it is vital to have a long-term vision and clear plan (even in your head) from the outset. This can shift with experience but having a strategy can help to avoid mission drift.
Building a business that can attain a steady revenue will require different decisions compared to a plan for exponential growth and expansion. If you do want growth, you will have to consider what strategic compromises you’re willing to make along the way – either as a condition of funding or to maximise revenues.
Lastly, and in a less-discussed aspect of entrepreneurialism, you might be starting a business with the strategy to increase its value and sell it a few years down the line. In this case, you will want to drive growth whilst making your business as attractive as possible to investors. And if you do have a business partner, no matter what your plan, make sure that you’re both on the same page.
Ultimately, it’s the journey that is most rewarding, keep your eyes and ears open, learn from your mistakes and reach out to the wider business community for advice and support.
Glenn O’Grady co-founded GuideSmiths in London in 2014. The company grew to become a truly international force with over 50 employees, a staff churn rate of <1% and revenue growth from £1 million to £7 million between 2016-19. Earlier this month, Glenn and his business partner Felipe Polo sold GuideSmiths to DCSL Software. They both remain involved in Non-Executive Director roles.