What popular start-up advice is plain wrong? Successful founders demystify entrepreneurship
Have a business idea? Read this advice from entrepreneurs behind award-winning start-ups as they uncover common myths of starting a business
If you’re thinking of starting a business in the UK then you probably already know that there are a wealth of resources at your fingertips where you can gain free advice to get your business idea off the ground.
For instance, you can peruse Startups.co.uk for start-up guides, visit the Department for Business, Energy and Industry to learn about new business policies, and you can call the government’s Business Support Helpline for one-to-one advice.
And yet, while there are a number of reliable sources of business advice easily accessible to budding entrepreneurs, poor advice and myths around starting a business still circulate and perpetuate in the enterprise landscape.
At the Startups Awards winners’ dinner, founders behind hugely successful UK start-ups – those businesses with hundreds of thousands of customers and millions in revenue – demystified these myths.
Read on for their thoughts on the common start-up advice you should ignore or, at the very least, don’t follow prescriptively…
MYTH: You MUST raise funding from VCs or angel investors to achieve business success
Luke Barlow is the CEO of Netduma. Launched in December 2014, Netduma’s router software is now used by thousands of customers across 95 countries and took home accolades for Lean Start-Up of the Year and Export Business of the Year at the Startups Awards 2016. Barlow outlines how Netduma has succeeded without any external investment from VCs or angels…
“We’re probably quite rare in the business space as we’re still bootstrapped. The great thing about developing software is that you’re investing time, instead of money.
“We used a Start Up Loan to help us launch the business. We were convinced that anyone that would invest in us would massively undervalue us, and we considered a bank loan, but then we saw the Start Up Loan scheme and realised that you just needed a business plan and a good idea.
“The application process was quite thorough but we put the business plan together and we only needed £6,500 and we got it. We bought 100 routers and – I’m quite proud of this – within the hour of putting them on the website, we had sold 100 routers and made enough money to pay back the Start Up Loan! We just needed that leg up. Obviously, there are lots of different stories of small companies that stay small by not raising external finance but the Loan was the perfect start for us.
“Even if we had secured investment, I don’t think it would have changed anything. We are currently re-designing our software and it is so hard to do and requires a lot of skill. We could have taken money to throw a lot of heads at the problem but I’m not sure it would have made us any faster.
“Maybe I’m being naïve, but I don’t think investment would have helped, but it could hold us back once we’re on our way and when we need to start growing quickly. This new software will enable us to grow rapidly across many markets so investment could really help then. For now though I don’t think we’ll change from being self-funded because the profit margin that we’re making can carry us forward.”
David Cox, partner of of haysmacintyre; chartered accountants and tax advisers and sponsor of the Startups Awards 2017, adds:
“VC and angel funds can be a great way to fund growth, but are not at all necessary to guarantee the success of a business.
“Raising money from such sources can be incredibly time consuming, so entrepreneurs should ask themselves not only whether this funding is appropriate for their business, but when suits them to make an approach as there needs to be sufficient resource in the company so the business doesn’t suffer.”
MYTH: Investors are notoriously difficult to deal with
Steve Folwell is the co-founder and CEO of by-the-box storage company LOVESPACE. The business has raised over £2m through private equity and crowdfunding, earning it the title of Startups Awards Crowdfunded Business of the Year. While the media often portrays investors as difficult to deal with, Folwell says this isn’t the case and investors have been a positive influence for LOVESPACE…
“If you have top class management and you’re not signed up to a daft deal then investors will back you, not sack you!
“It does depend on whether you’ve got short-term or long-term investors though. We’re very lucky because our shareholders have no time period to exit particularly and we don’t have any short-term investors. Our largest single shareholder is Carl Ameln, who founded a bunch of storage companies in Scandinavia and he’s in it for the long haul. Smedvig Capital are also involved and their long term and then we’ve got the crowd who are incredibly benign and supportive; we’ve got a fantastic relationship with the crowd thus far.
“Things are going really well with our investors but if they thought we were a unicorn then maybe we’d have a different relationship. I think our investors know it’s quite a tough gig as we’re bringing a new concept to market. I can talk to any of you about it but LOVESPACE is storage by the box to your door, it’s got more life-time value than self-storage […] and you’ll all think ‘what a great business’ but only some of you will need to go home tonight and use that. A lot of people who are even in demo and in market don’t need our services yet so it’s a slow earn and slow return but very valuable – our shareholders understand that.
“What it means for us, and this is partly to do with next year, is that we have a huge amount of control as management. We’re in a different place and we don’t have a VC investor who’s saying ‘we need to get to here so then we can get to here’.”
MYTH: You should have a multi-channel marketing strategy from the get-go
Guy Buckley-Sharp is chief financial officer of ClearScore. Launched two years ago, ClearScore recently announced it had secured a customer base of more than 4.6 million for its credit scoring service. Named Venture Funded Business of the Year at the Startups Awards, Buckley-Sharp explains why ClearScore immediately decided to run with TV advertising, before trialling other marketing channels…
“We’re a B2C brand and we are born and bred TV advertisers. As soon as we got accreditation, we did TV advertising. We are a mass consumer product and there’s absolutely no reason why every person in the country couldn’t sign-up as it costs nothing and is free to use.
“If you’re a Sky viewer you’ll have seen our ads and we’ve ran them through Direct Response TV which is a cheaper form of television advertising; significantly cheaper than peak.
“We didn’t know if it would work but we did TV advertising for a couple of months and we saw that business was flying, and we weren’t advertising anywhere else! I’m doing a disservice to our marketing team as a lot of work and time goes behind the TV placements but we see a direct correlation with traffic when we run TV ads.
“We’ve continued to invest a lot of money in TV advertising but, in the context of advertising on social media, and through PPC and SEO, we’re getting tens of thousands of people through, while we’re getting hundreds of thousands through TV so that’s where the weighting is.
“We’ll continue to try lots of different things, but actually TV has worked supremely well for us.”
haysmacintyre’s David Cox continues:
“It’s critical to be able to measure return for all marketing activity and that includes advertising spend. A lot of cash can be burnt in this area, so a focused and measurable advertising strategy is key to promoting your business and ensuring good relationships with investors.
“When building your advertising strategy, apply what you know about your customers; speak with them and listen. Don’t blindly continue to push your advertising, or even your product if it’s not engaging with customers – and be willing to adapt.”
MYTH: SEO doesn’t need to be top of your priority list when starting up
Liam Dickerson heads up marketing at Housekeep, the on-demand cleaning service awarded Service Business of the Year 2016. Launched in 2014 with just a handful of customers and two cleaners, the company has grown to more than 20,000 customer accounts with 5,000 recurring subscription contracts. Dickerson says Search Engine Optimisation (SEO) has played a pivotal role in Housekeep’s early success…
“Around 80% of all our customer acquisition is via search engines as that’s often the first-place people go to search for a house cleaner.
“A lot of the work I’ve done over the last year has been making sure we’re the best at search in our vertical; when I joined the company, SEO was nowhere. We weren’t ranking on the first page of search engines for anything and I don’t think we’d attributed anything to SEO when I joined the company and it’s been building that out with a lot of local based search.
“I joined Housekeep two years into their journey and they’re about three and a half years old now, we had an incumbent SEO agency but, actually when I cast my eye over it, we weren’t performing particularly well. To an untrained eye, it looked like we were doing great but over the last year we’ve cut customer acquisitions costs more than half and grown acquisition through SEO. There was a lot of low hanging fruit that we could go after.
“If you’re thinking about hiring an SEO agency, it’s worth saying that not all SEO agencies are created equally so get somebody to have a look at your set-up. Everyone’s willing to do a quick assessment of your SEO set-up so if you have suspicions that the agency you’re using isn’t great, it doesn’t hurt.”
MYTH: You can convince customers to buy into your brand by doing x
David English is chief marketing officer at The Start Up Loans Company. Headline sponsor of the Startups Awards, The Start Ups Loans Company has worked with thousands of businesses since its launch in 2012, providing loans of up to £25,0000 to help would-be small business owners get started. English is keen to assert that there is no magic formula to win customers over but does believe there is a marketing philosophy that all start-ups should adopt…
“When The Start Up Loans Company launched we didn’t have the metrics in place to track when customers registered or came to our website – now we can leverage all of the latest technologies to help us understand our customers better! We’ve got a lot of channels where we engage with customers and we track every possible interaction.
“As we’ve grown, we’ve developed a philosophy now to inform, educate and inspire. We’re asking people to make a big commitment so we have a three-pronged approach:
- First, we inform people we exist.
- Next, we educate them – making them aware of what the Start Up Loan scheme is about, what it offers and how we can improve someone’s life.
- The last bit is about providing inspiration. Our research shows that people often talk themselves out of starting a business – 60% decide not to because they don’t want to take the risk so we try to inspire them to take action by showing them examples of other people, like them, who have taken the leap and been successful.”