Starting a new business is not for the faint-hearted and no matter how much planning you do and how much advice you seek, you’re sure to come across challenges you did not foresee; if starting a new business, expect the unexpected.
However, there’s a lot to be said for learning from other people’s mistakes and here are 10 things I’ve learned through starting my supply chain consultancy Crimson & Co 10 years ago:
1. Have a Plan B so you can focus on Plan A!
Plan A is the one you want. You will work all hours to make it succeed. But what happens if it goes wrong? If you are frightened of failure because of the ripples through your life, how will that make you act?
Plan A for me was the company that is 10 years old this year. It was a big leap of faith; I had a successful career and was well paid in a good job. I also had a family with three kids and a mortgage, and I’d never started a business before. I was 37 and decided to take a risk.
I knew that if it didn’t work out then I could probably get a half-decent job again. It may not be the ideal job but I could still pay the mortgage and wouldn’t be out on the street.
So, that was Plan B. Definitely not attractive but it limited the risk of Plan A. Did that lessen my drive to succeed at Plan A? Not at all; probably the opposite. Freed from worry about losing my house if everything failed, I re-mortgaged to start the new business and away we went; fun, excitement and the drive to be a success, with no sleepless nights.
2. Punch above your weight
A recent survey of our clients showed that some of them thought we are four times our actual size. We focused right from the start on the quality of our people, good training, good branding and exceeding expectations on delivery.
Our people and the insight and change we can provide is at the top end of the consulting spectrum, and yet in the early years we were competing with freelancers and interims because we struggled to convince some clients of our true value. This was not a viable business model for us.
The final straw came when two different clients expressed concerns about how good we must be based purely on our pricing structure – we were too cheap! We raised our rates by 30% and within three weeks had a full order book. The big lesson – have confidence in yourselves, or no-one else will.
3. Start-up businesses have size and scale drawbacks, so play to the strengths
A lot of people like the spirit and energy of start-ups; in fact, many of them wish they were doing it themselves. We capitalised on this, and still do… we aren’t a start-up any more but we aren’t a big corporate either and people can relate to us.
We had no grand plan to manipulate everyone’s thoughts; we have just been ourselves with our network of contacts, new and old, and have included them from time to time as the business has developed. We invite them to our celebrations and ask their advice, and they are (thankfully!) delighted to help out.
This creates a feeling that is both humbling and satisfying. Some seriously talented and successful people out there are helping out our business ‘because they want to’. It also makes you a better company as you have an influx of good ideas to choose from, as well as a strong network of advocates.
4. Keep costs low – every penny counts
It’s tempting to start with a flashy office, assistants and executive car, but what is really necessary as you get started?
We met in hotel lobbies and Regus offices, and we joined the Institute of Directors to get access to their offices around the country and research department. The office costs were free to minimal, and they still are; we have 30-plus people and still do it the same way.
You need to ask yourself whether you really need the overhead of larger competitors as a start-up. Starting small can be an opportunity to do things differently, and that usually goes down well with staff and customers.
5. Recruit ahead of the work
We started the business with three founding members and no clients. After we won our first piece of work, we immediately began recruiting even though we didn’t need that person for the project.
The first piece of work finished and we had a new employee, so we then had no work again but this time we had four mouths to feed. We won some more work and recruited more people, and this cycle continued until we had 30 staff!
This was incredibly stressful at times when there wasn’t much work around, but it’s amazing how innovative we became to find work that paid the bills.
We partnered with a software start-up at one point and got paid for referring them to some of our network.
We stopped doing it after a few months because it felt out of kilter with the independence of our business, but over those few months it made the difference between paying wages and not.
6. Someone needs to be in charge, even of a friendly start-up
We started the business as equal founding members, but soon found that clients and staff expected to see a hierarchy; in some circumstances, people need to know that they are talking to ‘the boss’.
In fact, some clients even said they were suspicious of any business that didn’t have a boss, because surely it is rudderless?
In typical Crimson style, we had a good open chat about the issue and made some decisions on roles that fitted in best with prior experience, ambition and perceived capability; a hierarchy was born.
Importantly, the founders stilled earned the same as each other and had the same amount of equity; what we did was allocate roles to provide clarity to everyone, inside and out.
7. Pay equality binds people together… where mutual respect reigns
The founders of our business have always been paid the same as each other through thick and thin. We have suffered together and profited together. This sounds like an idyllic relationship, but how well has it worked in practice?
When small, and as a start-up, it is easy to see what everyone else is doing and to identify everyone’s impact on the business. The founders (and later additional directors) all brought something different to the table.
There was, and still is, huge mutual respect and we all work just as hard as each other. There is no internal squabbling because there is nothing to be gained from such behaviour; nothing positive, at least. If we all do the right things, the business will do well, and if the business does well then we will all do well… together.
There is no doubt that the ‘same pay’ rule for the owner/managers has been fundamental to our growth and our unique culture. Will it still work when we are twice the size? That’s something for me to come back to at a later date…
8. Treat yourself, especially if ex-corporate
We try to do little things to remind us that WE are in charge and don’t need to follow the herd. We allowed ourselves to buy whatever wacky laptop we wanted, and we got everyone iPhones pretty early on – not a BlackBerry like the corporates.
We hate wearing suits, so we don’t do that unless the client environment demands it. We don’t insist that staff go to an office when they are not on a client site; we trust them to deliver great results rather than micro-managing their time input.
Starting your own business should be a chance to set your own rules and you shouldn’t be afraid of standing out from your competition, for whatever reason, be it small or big.
9. Say goodbye to a work/life balance
Work/life balance doesn’t exist. Get used to it. Get your partner to get used to it.
If you are successful, your work/life balance will become more one sided; the business and home will merge into one. This is a concept you will need to accept and, if you’re starting your own business, you need to ask yourself whether or not you will resent this shift. It is not necessarily a good thing for you or those around you!
10. Treat your staff differently
We aimed to recruit the best staff, but we wanted them to join a business they’d never heard of that didn’t have a plaque on an office door anywhere. Not easy!
We came up with an innovative remuneration mechanism, a mix of flat salary and potentially unlimited company bonus, that allowed us to recruit the best staff whilst minimising our fixed costs, with the member of staff benefiting hugely when business was good.
Your business is only as good as the people within it and this must never be forgotten, no matter how much the company grows. We treat people differently when they are with us; the culture is unique to our known consulting world and the positive and supportive relationship between Crimsonites is often remarked upon by clients; they say it differentiates us from our competitors.
Richard Powell, co-founder and managing director of supply chain consultancy Crimson & Co, which started life 10 years ago. www.crimsonandco.com