If at first you don’t succeed, try and try again. Well, sort of. Most startups – and by most I mean 55% – fail in their first few years. And not many more live long enough to actually turn a profit; it’s a teeny tiny portion of the half-million enterprises that are founded each year.
Unfortunately, the numbers speak for themselves. There will be casualties. But the majority of them will find that they’re a whole lot better at business the second time around, with previous business owners having a 30% greater chance of success with their next venture.
Americans view failure as very much a part of the journey to success. They’d rather entrepreneurs dived into the business pool off the high board than gingerly stepped off the side. Sometimes it’ll go wrong, but it’s worth the risk for that spectacular entry. We Brits, however, are different. Frustratingly different.
The truth is there’s no shame in failure, only in not trying hard enough. The first couple of ventures I ran, whilst not failures, were not the game-changers I’d hoped they would be. They were lessons though and these lessons shaped the next businesses.
By the time Moneypenny came along the battle scars were already there. So maybe my experience will help first-time entrepreneurs succeed and help second-timers not make the same mistakes twice.
Lesson one: Make money
It’s really simple when you say it, but you have to make money for a business to grow. Growth money is very different from operating profit. The difference is it allows a business to scale. To turn £1 into £2, and then into £4, creating a credible return on investment. Whether you use that increase to grow or not is your call. But creating the opportunity is paramount.
A lot of new and small businesses that are currently trading (and some undoubtedly very well) actually grasp that in order to succeed, and I mean really succeed, they’ve got to have a decent profit margin.
I didn’t make any money out of the first business I owned. It was a small water sports shop which I adored, but it was impossible to grow. Business was good, growing sales, happy customers and satisfied suppliers. But there was no profit – my 30% margin was eroded by loyal customer discounts, marketing and operating costs.
Turnover is about ego. Business is about profit.
£15 off a £100 wetsuit seemed fair to a good customer. But in reality, it cost more than my resultant margin to simply get the suit delivered to my shop. I was too focused on turnover. Turnover is about ego. Business is about profit. I wasn’t generating cash and even at full margin, this was destined to be a lifestyle business.
Nowadays at Moneypenny, our clients don’t use us because they want a cheap service – after all, we’re representing their business. They want quality and value. And, whilst we all like the occasional market trader-style haggle our clients understand that our pricing is transparent and the same for everyone.
Lesson two: Scalability
A friend of mine runs a recruitment company and has mastered the art of scaling his business. When he finds someone capable in the business he’ll simply say: “Right, where in the world do you want to work?” He’ll then invest a limited amount of cash and send them on their way to set up a new office. They earn little at the outset but reap the rewards as the regional office grows.
His business is now all over the world – Brazil, Hong Kong, America – and growing at a mighty rate. He finds good, hungry people, gives them the tools and sends them running. It’s simple but effective. His barrier to growth, like most businesses, was procuring the people needed to grow. He’s kicked down that barrier and created an exponentially scalable business.
Cash is too often viewed as the limiting factor to scaling a business. If it was a cash issue, the entrepreneurs with the deepest pockets would always prevail. This is seldom actually the case.
There’s nearly always funding available to the right company. The successful entrepreneur spots the real barriers and plans how to cross them. Time invested in this area is critical. And nine times out of 10, the barrier is finding the right people.
Lesson three: Experience pays
There are still times when I look back and think: ‘If I knew then what I know now.’ Of course, hindsight is a wonderful thing. But it really needn’t be the case. Many new and small businesses struggle because they don’t seek advice or even recognise when they are lacking in basic information. I know, I’m as guilty as anyone else.
Ones of the greatest traits of entrepreneurs is their love of sharing their stories and influencing the success of someone’s venture. Their pride is your opportunity. Pick up the phone and ask someone for a few minutes of advice. You’ll be astonished how many will open their doors. Their advice is your gold dust and it’s free.
Above all else, make the most of your experiences – as a previous business owner or a customer. Even if it wound up badly, you’ve already cut your teeth when you come to start up another venture.
In business, what didn’t work the first time around probably won’t work again. But having lived through it, you’ll be aware of what succeeds and what doesn’t. You’ve learnt what good and bad smells like. And, if you’ve had your fingers burnt, you’ve had the hardest lesson of them all.