When you come up with an inspired idea for a new business while toiling away making money for someone else, it’s tempting to think that there’s little downside to going it alone.
After all, the freedom of being your own boss can be coupled with more-than generous financial rewards, as the media persistently reminds us in its portrayals of the likes of Sir Richard Branson and Mark Zuckerberg.
But there are plenty of harsh realities awaiting budding entrepreneurs. Countless problems, dangers and frustrations are hurled at new businesses, many of which are completely unexpected.
To help give you an idea of what you’re getting yourself into, serial entrepreneur, consultant and author Tom McKaskill has put together 101 tips on how to succeed as a start-up.
Here are McKaskill’s top 10 lessons that you will learn once you take the plunge into entrepreneurship.
1. Raising funds takes a long time
The last time I raised venture capital it took over nine months and over 70 presentations in most of the major cities along the eastern seaboard of the US.
Every fund I went to said that I had an outstanding proposition but even then, it still seemed to take forever. While they were all interested, in the end their decisions were made on whether the investment suited their industry preferences, stage of investing, location of our firm and size of the investment.
We did raise the funds eventually but it was a long haul.
I have seen many really good ventures struggle to raise funds. They end up doing endless presentations, attending many meetings and even enter into due diligence only to be rejected.
The problem lies not with the firm or the investment proposition but with the preferences of the investor.
Basically, until you find someone who has experience in your sector or who is comfortable investing in your sector, you won’t see the money.
That being the case, you really need to plan your business as if you won’t be successful in fund raising.
2. Empathy beats excuses
Far too often the response to a mistake is, “Oops, sorry!” which is actually not what the customer wants to hear.
They don’t want excuses, which only makes the situation worse. What they want is for you to understand the position you put them in and to understand the issues they are dealing with because of your mistake or failure.
So the correct response should have been “I can understand why you feel the way you do”. Basically, we have to put ourselves in the shoes of the customer to experience the pain or problems which they are dealing with.
We need to fully comprehend the magnitude of the impact of our mistake. Once we understand their position, we are in a much better position to offer a solution, correct a deficiency or compensate them for the trouble or expense they have been put through.
Not all customers want compensation, sometimes they just want the opportunity to be heard, to voice their complaint and to offer a suggestion.
Providing the response they receive is one of sympathy and empathy, most problems will not require any other action on the part of the supplier.
How we handle problems says a lot about our values and the importance we place on good customer relations.
In the end, our reputation will be greatly impacted by the way in which we handle mistakes.
3. Watch out for the large customer
Salespeople love to chase the large deal. They want the big commission, the status and the reputation.
But they don’t see the risk for the business. Far too often you hear of a small firm losing a major contract and getting into trouble.
If you end up committing a significant part of your business to one customer, you are dependent on them for your profitability, if not your survival.
If suddenly you lose the contract, you are left with all the fixed costs which you now have to cover from somewhere else.
Big businesses are not known for being kind. They can be entirely ruthless when it comes to suppliers.
For them, you are a transaction and the cheaper they can get the business the better. If someone else comes along with a cheaper deal, they will jump ship.
At other times, their decision to switch may have nothing to do with the quality of your work. They may be required to do so by a corporate preferred supplier deal.
The purchasing manager may have a separate personal agenda to use another supplier or it might be that they simply want to have a change.
The bottom line is that you can never guarantee they will be your customer in the future. You need to plan accordingly.
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