There’s a big myth that can damage your success in the business world: You need pots of money to run a successful business. Courage yes. Vision yes. Strategy yes. Research yes. But more money that the UAE oil empire?
“The phone box billionaire” that is what I think of when I think of Sir Richard Branson. Many people may not know this but the well known man actually used a public phone box as his first office. And this is a prime example of why cash comes low on the list of making a bang in the business world. I’d say having lots of it can actually be counter-productive to launching the next big thing. I know that from some valuable lessons I’ve learnt in setting up three core-businesses.
My first enterprise came out of necessity rather than a desire for world domination. Net121.com, was a design agency. It grew organically out of consultancy work, which developed so much demand I had to set-up a company to accommodate it into a full-time operation. The cost was little more than £50 in set-up fees.
The second was conferencevenues.com, in which an angel investor invested £30,000 for a 30% stake. This is relatively small compared to the mega-bucks people believe businesses thrive on.
Third-up was my latest venture P6.com, which took a major investment of £150,000 to kickstart. Even so, it’s still probably less than the millions some might think you’d need, and less than many companies part with every year to make their business dream come true.
So here’s the rub. You might think in a time of financial global meltdown, it would be suicide to set-up a business. The truth is, there has never been a better time to launch one on little cash. If you think about it, what are the two biggest costs of maintaining a business? The first is office space, the second is staff. For both of these you can cut the expenses right away.
We’re in a time when you can hire an office for as little as £10-a-week, in any major city in the world at places like Regus. You can even hire someone to handle mail, answer phones and manage your business calls, for little more. That eliminates the cost of a receptionist upfront.
Think of staffing and you hit another major expense. Most companies think the bigger they want to be the more staff they have to employ. The reality is, you’re better off with one brilliant employee, than three average ones. If you have little money, employ people who want to grow with the company, and reward them as you grow. But don’t employ people just for the sake of it.
Having too much cash can kill a business. How many times do you see a company, once they get a loan try to justify it? They splash out on luxuries because they think they have to. The money goes on pointless marketing, it goes on needless staff, it goes on looking flashy rather than working properly, it goes on lavish launches. In my experience, when a company starts off with too much money, it gets squandered by people trying to get you to part with it.
Yet how many businesses out there, even successful ones, will think strategically with that money? How many will think six months ahead and plan for it? How many news businesses will carry out feasibility studies of what will work and what won’t in their new enterprise?
Even if you dream of running your business, there’s no need to give up the day job. It would be foolish to. Keep the job and research the business in your spare time. Even taking a year in the planning will pay.
The truth is great businesses really are like gardens. You build up slowly, you nurture it, you keep it trim. You don’t overfeed. You don’t overwater, otherwise you have a jungle on your hands. Grow it organically, grow it lovingly and grow it with patience, and you have a foundation for something strong.
William Berry is a serial entrepreneur and in 2006 was named a Young Gun by Growing Business. He is the founder-director of accommodationforstudents.com, conferencevenues.com, and Vincentbond.com. William is also CEO of the new video start up p6.com, based in California.