We all know that we live in the age of startups, technology has made it quick and easy to execute ideas anywhere in the world with any starting budgets. We all also know that with the high rise in number of startups every year, the possibility of failure becomes high as more competitors enter the market quickly.
For example, in London the five-year survival rate for start-ups in 2022 is a meagre 39.35% according to the moneytransfes.com website. This means the other poor souls owning and operating the remaining 60% of the startups have failed, and will have to face the consequences of enduring financial loss and time loss in addition to the devastation and trauma of feeling as a failure and possibly firing employees.
However, this high rate of failure is not typical to London or the UK, as it doesn’t defer from the global average according to data from Startup Genome. In fact, London has been ranked the second best tech startup hub in the world behind Silicon Valley and the top hub globally for fintech according to new research, according to an article published by the evening standard. This means our special city is a top hot spot for creativity, networking, taking risk, mature markets, stable political and social dynamic, in short, some of the key elements to succeed in startups.
In this article however, we provide you with top 7 tips that we believe are key for a founder to know in order to navigate the high seas of the startup world, whether you are in London or anywhere else in the world:
Knowledge of accounting
If you want to run a business successfully, regardless of if it is startup or not, you need to have basic understanding of accounting principles. Even if you hate numbers, you will still need to know what is your company making, owing, your assets and liability, cost of operation, your liquidity and cash flow status, when and where is the money coming in and out, as well as when, what and who will be filing your accounts. It is also tremendously important to understand the tax rates and regulations that impact your company so you can plan wisely. A company that is always suffering financial instability will most likely fail.
This knowledge is also key when having conversations with potential investors as they definitely expect you to know how your company is doing and what will your financial look like for the upcoming years. Try to always have some cash ready for emergencies and to cover the cost of your operation including employees’ salary, rent, bills for at least 6 months ahead, and avoid the stress of losing sleep thinking how to pay owed bills tomorrow morning!
Also, decide early how much you want to pay yourself and others and why, as this might be the bar for your recruitment model and HR compensation policies. According to glassdoor.co.uk, the average salary for CEO-Founder in London is £93,254 per year. The average additional cash compensation for a CEO-Founder in the London is £43,379, with a wide range from £7,679 – £245,051.
Knowledge of the market
Again, regardless of being a startup or more established, you need to know where you stand in the market, and where you want to be in the upcoming few years. Though it is good to have a long-term vision of where to be in the marker, realistically market move quicker than ever now with the world being very closely connected, and technology advancing as such speed. Markets also often take unexpected turns or get disrupted. With this said, for a startup, focus on the now and few upcoming years.
Market knowledge include market research, which include awareness of competitors, pricing, size of the market and the key players, who are the new entrant to the market, how they enter and how easy it is to enter, and what regulations does it need to adhere to. What other startups are there? And is your product or service unique enough to standout and have a market share (which is a slice of the market pie). There are many theories, and material out there on the internet that you can leverage to understand how to do your market research, some of the material might seem dry and more for an MBA candidate to read, so focus on what is easy for you to understand to apply in real life. Practical knowledge is key, and consistency of research is critical, as you cannot do the research to kick off your startup then forget about it. You need to be on top of it to be successful and know changes in your market or industry segment as they happen. Subscribe to news, groups, attend summits, and further your network if need to in order to always collect intelligence. Some people also prefer buying market research, but we understand you might not have much of a budget to afford it, though it might be a worthwhile investment.
Knowledge of product
You need to understand your product more than any other living soul. Understand its purpose, customers and their demographics, its value, its production, its strengths, and weakness, its pricing strategy, its sales strategy, its marketing and social media campaigns. In addition to this, ensure you are clear where and when you will sell your product, when do you do sales, and which platforms can you sell in and what are their policies, and commissions models.
Be ready to defend and standup for your product, as you will be the main representation of it.
Knowledge of people
As a business founder or owner, you need to be mentally ready for any downside that might come with dealing with people. People skills or emotional intelligence is at the heart of every successful business, so invest in enriching yours. You need to understand the importance of networking and building business relations as well as how to navigate them. You also need to be ready for any rejections, conflicts, and learn to never burn bridges. In short be professional, you never know, a closed door today might be open in few months’ time!
People knowledge also include research of who’s who in the zoo. This means who are the key people you need to know for your business to be visible and successful. Don’t be shy to reach out, as more often than not, you will never see some of these people again. Leverage social media such as linkedin, and identify the hubs. The hubs are the people who are usually connected to everyone, they are at the center of the network, they have many followers making them influential, and possibly helpful to you. Identify possible partnerships, sponsorships, key investors in your industry or company size, and get to know about them. Identify any stakeholders than can impact your business such as policy makers, or major players who can be suppliers or influencers of your market.
Knowledge of culture
Given how the close is the world now, understanding culture might go a long way. This includes cultures and etiquette of the countries where your customers are based, and your investors and other stakeholders are based. Remember, some countries where youth are the highest percentage of the population, startup means having a job which is key to stability and is welcomed by governments initiatives and often supported financially as well. However, in some other cultures, it is viewed that starting up a company is a risk, and it is better and safer to work for people / other companies, so you might not get emotional or financial support. Some cultures also reward ambition more than others, which would sit at the heart of the entrepreneurship nature.
You also need to set your company’s culture early on. What kind of company and employees you want to have in your dream startup, as you are the founder, feel free to be creative and do it differently to maybe the last company you worked for. This includes setting up and identifying your work ethics and code of conduct, values and practices within the company, your human resources policies, benefits to your employees, attitude towards social responsibility and charitable initiatives.
Knowledge of business analytics and data
you also need to have an understanding of what kind of data you can collect about your business, and what can you learn and get from it. Depending on what you are selling, the scale of the data you have might be small or big, but you can always spot patterns if it is clean data and presented in a meaningful way for you to analyze.
On another topic. If you are collecting data from customers, understand the regulations and your responsibility for this data. This may defer based on the country your startup is registered in and where it operates, and where your customers are. But even if you are in a country that doesn’t have mature policies on data protection, always do your best to maintain integrity, transparency, and code of ethics with your customer, and your investors.
Knowledge of letting go
No one sets up a company to fail, yet the rate of failure is 60% as mentioned in the article’s introduction. This tip is possibly the least talked about when discussing startups as no one usually want to hear about the unhappy path. But it is wise to know your exit strategy, as this is part of risk mitigation and disaster recovery. After all this is a business, regardless of your KPIs of success, and the emotions, sweat and tears you invested in your company. This is why it is important to have 2 strategies:
- Recovery Strategy: will be more of a resuscitation strategy, it should clearly have a plan B, basically what to do to get back up there. It can be a different strategy to get back market share, rebranding, seeding money or recruiting investors, moving operations to another place, outsourcing, or bringing some services in house, changing the target customer base, and so on. Whatever it would take you to be shock-proof and recover your business. This strategy should be flexible and agile enough for you to adapt it to whatever the disaster you are recovering from, but it is worth thinking out in advance and revising every few months.
- Exit Strategy: this is the more painful one to think about. The purpose of this strategy is to get you out of business with as minimum losses as possible. It is up to you to identify what a loss is, it can be monetary, time or resources, reputation and so on. This strategy should outline your stop losses and when to give it up and should be revised every few months to keep it practical. This stagey might include liquidating, filing for insolvency, returning people’s money, advertising, and the messaging of closure to your customers, policies to exit contracts with 3rd party providers, and regulations of any of there in your country of operation including taxation.
We hope you find all the above compiled list of advice useful for your startup to not just survive but also grow and thrive. For more articles about success in business, check our articles repository in the Business Category.
