The following is a guest post by Innovate UK, the British government’s innovation agency. They are focused on finding British businesses and entrepreneurs who can use new science and technology to drive economic growth.
Follow Innovate UK on Twitter: @innovateuk.
An entrepreneur needs a number of specific qualities to succeed, this is the same for any business plan too. There are numerous relatively simple points that need to be followed by a startup to ensure they have the best chance for success. Follow this four step guide and your company will be less likely to become one of the 50% of all startups that fails in the first five years of operation.
Step 1 – Scrutinize Your Idea
You have a business idea which is looking really promising, it was deemed a breakthrough by your parents and a really exciting prospect by your friends. Think this is enough? Think again. You cannot rely on your friends or family being objective about your business plan. You need to scrutinize it thoroughly and ask yourself the following questions:
- Does it satisfy a need or solve a problem?
- Is it disruptive?
- Can you make money from it?
- Can you identify at least one USP?
Only once you’ve answered these questions thoroughly and confidently can you begin to consider your business plan as having some genuine potential.
Step 2 – Have You Done Your Research?
What do you actually know about the industry that your company will enter? You can’t simply answer this question effectively with only the knowledge of a consumer. You need to know exactly who your demographic and niche market is and then you need to know whether they will actually give you money for what you offer. Is the sector in growth or decline? What are your realistic price points? What is your understanding of your direct competition? Is there any indirect competition that could affect you? If you do not know the answers to these questions, then you do not know how to approach your potential consumers effectively.
Step 3 – Build Your Team
A company that is just starting up will be massively affected by the team that is working for them. You need to surround yourself with people that will plan and deliver your strategy. Do you need co-founders to shoulder the work or can you rely on a team of employees? Don’t forget that your team needs to be paid, even if your company isn’t making profit!
Step 4 – Get Your Finances in Check
A lack of money is the most common cause of failure for startups. Make sure you have a realistic plan for longevity that gets the numbers right. It’s worth factoring in a cushion of money to take care of any hidden surprises further down the line. You need to consider how much money you have initially and where this will get you, then think about when you would require investment or to start earning revenue. Never forget to factor in production and staffing costs as well as a realistic outlook on how much money you’ll be earning. Ultimately, you shouldn’t get carried away and think of turnover and profit being the same thing.
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