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Being the person that never gives up: an entrepreneur’s guide to the first few years
At The Business Finance Guide, we’ve had the pleasure of rubbing shoulders with more than our fair share of successful entrepreneurs and business owners.
Each has his or her own story to tell of their business journey, and the ups and downs they have experienced along the way.
But there is one thing that they all have in common. Like endurance athletes, they don’t give up lightly.
According to Lise Madsen, Founder and CEO of the Honeyrose Bakery,
“You need to be very thick skinned and plough on. Just continue!”.
Tip 1 | Never give up
An early milestone in the Honeyrose Bakery’s development came when Lise approached a buyer at an airline caterer, who clearly did not engage with Honeyrose’s proposition – that of high end, delicious, gluten-free bakery products. Rather than take the rejection, Lise approached the airline directly, buying an airline ticket to Stockholm and pitching to them personally. With Honeyrose quickly stocked on main routes between Stockholm, Oslo and Copenhagen, this was a major ‘business first’ for Honeyrose, supporting Lise’s European expansion plans.
For every business, the most significant ‘firsts’ stick out in founders’ minds. For some, the one that sticks out most is their first sale, for others it’s moving into their own premises, and yet for others, it may be about a round of investment, or proving their concept with a working prototype. The ‘business first’ that sticks out in any entrepreneur’s mind will usually be the one that has caused most angst along the way, required the biggest leap of faith, or has simply exhausted the largest amount of their time. ‘Never giving up’ is a recurrent theme.
This theme is echoed by Dan Kieran, the author-cum-entrepreneur who co-founded Unbound, a crowdfunding publishing house. Dan is very clear in his assertion, “you have to be that person that never, ever gives up”.
So if ‘never giving up’ is the first piece of advice for business owners facing the hurdles of the first few years, what are the others?
Tip 2 | Seek help
Whilst of course, there are always exceptions to the rule, the entrepreneurs we’ve spoken to all mention their support networks as fundamental to the success of their early years.
Here are a few different ways this can manifest itself:
1. Co-found your organisation. Splitting the responsibility may mean splitting the profits when these come in – but if you are successful, you’re likely to be offering equity to shareholders at some point anyway. The benefits of having a business partner are many. As well as sharing the burden of initial investment, two (or three, or four) heads are usually better than one. Yes, it’s true that some co-founders fall out, and the best of friends don’t always make the best of business partners, but going it alone can be extremely challenging – and a lonely place in the hardest days or nights.
2. Use your network. Whether you’re coming from a job in a corporate environment, starting up straight from college, or have had a varied career, you’ll have contacts and connections you have made.
And the clear advice from entrepreneurs is that you use this network – for advice, support, and for investment.
3. Choose investors with advice to offer. If your business requires early investment, then this should always be about more than money. Angel investors and VCs do invest in early stage businesses if the business plan is solid, and should bring far more than just money to the table.
According to Unbound’s Dan Kieran,
“I demand a lot from my investors. And I don’t mean just money. I like to think that you can get money from anyone – but good advice is harder to find, so it’s important to choose investors wisely”.
4. Use your bank. When you set up your business initially, you’ll (hopefully) have been given a named business account manager in your local branch. This is great for getting started, but when you are on a path to serious growth, it’s likely that you will outgrow that manager’s experience, network and expertise. But here’s the thing. Every bank has more experienced managers that can help you.
“Entrepreneurs are likely to experience inevitable ‘high growth’ woes with their bank. But remember, it’s in the bank’s interest to keep you as a customer. And the reality is that the relationship manager with most experience in your sector is probably not based at your local branch. It’s unfortunate that the onus is often on the business owner to push for a change – but those that do so can reap the benefits.”
Tip 3 | Domain expertise (understanding your core strengths)
It’s easy to lose your way in the first few years of running a business. Business owners are pulled in many directions, and the reality is often that managing day-to-day operations can consume almost all your time.
But if you’ve set up a business based on an area of expertise, or something that you are passionate about, it’s important to keep the focus on growth and the tools – and funding – needed to achieve the next step in your journey.
Unbound, the crowdsourced publishing business, was founded by three authors with limited business experience. So at their first funding stage, they brought on board an angel investor, whose knowledge and expertise was vital for building the first iteration of the site.
Many entrepreneurs agree. Patch.garden, a young business which has tapped into a growth market, is founded on a desire to create urban green spaces in central London. Day-to-day, the business is essentially a sourcing and distribution business, and the logistics of managing that take up a huge amount of time. It’s vital for any business owner to bring in the expertise needed to manage that, so they can continue to focus on their core passion – in this case plants, and the benefits of a plant-filled city – and use this to focus on growth.
Whatever your passion or expertise – whether it’s property development, car sharing or cheese making – if your business idea capitalises on this, then it’ll be much easier to create something unique, and to remain on your path to growth.
Tip 4 | Equity vs debt (funding growth in a way that’s right for your journey)
As you’ll already know if you are running a business, there’s a great variety of finance options currently available to fund growth.
But not every option is suitable for every business. Rejection aside, your attitude to risk, requirement for connections and advice, the assets of the business, and whether you’re prepared to sacrifice equity, are major considerations.
Lise Madsen from Honeyrose Bakery chose to raise the initial funding for her bakery using her existing support network. She quickly raised the £70,000 needed to establish the business, all in small chunks of £4-8,000, so that lots of people had a small stake – an amount they were prepared to take a risk on. As well as investing amounts that were small enough that the investors could afford to lose, Lise surrounded herself with many people that could offer advice and connections if needed, and help her to promote the business as it grew.
For Will Swannell, founder of Hire Space (a high growth business established to make booking event venues easy), it was important to use VC investment, and he was happy to give away a reasonable share of the business for the benefits of having investors that were able to give advice and contacts – but equally not “meddling where it’s not needed”.
Will’s business also took advantages of SEIS, a tool also used by Dan Kieran’s Unbound: “the risks per investor are really low. Unbelievable, almost. You are a tax efficient investment vehicle, and investors can really take advantage of this.”
There are benefits to business owners in applying for – and receiving – confirmation that they can offer government SEIS tax incentives to investors, significantly reducing the risks to investors.
We’ll be publishing more about SEIS, and its big brother EIS, in the coming months. In the meantime, the EISA is a great resource for business owners – and investors – looking for more information.
As businesses move from early stage towards Series A (typically looking for investment of £1 – £5m, although this varies), their attitudes both to risk, and to giving away equity, can change. For some, giving away 5% of a high growth business is worthwhile, to secure both investment and expertise, on the basis that the value of shares will increase, but for others it’s important to hold onto their equity.
Honeyrose Bakery is a good example of this. At the point when they wanted to purchase the freehold for their premises, they approached their bank for a £400,000 mortgage, and this has suited them well, as they retained full ownership of their remaining shares. Following this funding injection, the business was able to acquire Kenton Fraser, a bakery brand that had subcontracted manufacturing (which they were able to bring in-house), giving them the access to European markets that was vital for the next stage in their business growth journey.
Your journey, your way
Business finance is simply an enabler for any business owner’s plans. The Business Finance Guide is designed to help you at every stage of your journey, whether you are starting out, approaching Series A – or a well-established, proven business considering an IPO.