Thinking about starting a business?
Make sure you’re cut out for it first. Check out the advice from Marcus Gibson, CEO of the Gibson Index.
Launching a successful, multi-generational, engineering-based company is the equivalent of winning the Olympic Gold Medal of business. In recent years only a tiny handful of talented individuals have created an engineering business worth £500m or more in their own lifetimes. Think of Sir David McCurtry, who created Renishaw plc, the UK’s largest supplier of metrology equipment, or Sir James Dyson, founder of the eponymous vacuum cleaner business. Both are great inventor-engineers, highly creative, passionate about their work.
Historically, they are successors to a proud British tradition of producing engineering entrepreneurs back in Victorian times: men with character and vision. Sir Joseph Whitworth was an engineer, inventor and philanthropist. Joseph Whitworth & Company made the first sharpshooter rifle, and thousands of machine tools, too. In 1841 he devised the British Standard Whitworth system, which created an accepted standard for screw threads.
Next in line might be Sir Charles Parsons, whose invention of a multi-stage steam turbine which revolutionized marine transport. In addition to his turbine, Parsons invented a mechanical reducing gear, which, when placed between the turbine and a screw propeller, greatly improved the efficiency of both. His business, C A Parsons & Company, employed 7,000 staff at its peak. His wife, Katharine, later co-founded the Women’s Engineering Society.
The UK has produced many eminent engineers – but not many have also built a large international business.
With the right formula and the right sort of help – you, too, can build an engineering business. Don’t Wait, Start Planning Now!
Eight Tips Before You Begin..
1) It all starts with a Single Piece of Paper.
Plot the details of your enterprise. Will it be a company or a partnership? What is the product? Who are your co-founders or partners? What location have you chosen? Who is going to print your business cards? When will you launch? Will there be a launch event?
Set out these details and start constructing the basics, the first outline of your project.
2) What are you Good at?
What are your true talents – and deficiencies? What are you best at? What do your parents, siblings and teachers say you’re best at? Compare the answers.
Work out what the best role for you might be. Should you be the leader of the business, or the chief scientist, or chief salesperson? A few of us can be all three and do all three jobs well. Many of us can’t – so think about who you need to recruit in the roles you can’t fulfil yourself.
Are you a ‘starter’ or a ‘finisher’? You need to build a balanced business, or a business with the right balance of talents and expertise. It is no good starting a business with only starters, as nothing will be finished. Some people are brilliant at starting a venture. They love the excitement, but after 12 months they might get bored with the relentless, unending chore of sales meetings, administration and follow-up work – just when you need the maximum of back-up support.
3) Are you ready for a really tough challenge?
Building a business, especially a successful one, is usually a 6.5 day a week job, often involving 12-14 hour days. This will be harder than anything you’ve done before. If you want an easy job – get an ordinary job. Be home by 6pm. But being an entrepreneur this will never satisfy. Anyway, you don’t want to be anyone’s employee, you want to be your own boss.
Don’t try and do this alone. Choose your co-founders with great care. Do they have the same passion and enthusiasm as you? Can they take the bad days as well as the good. Are they easily disillusioned? Who has the toughness and resilience needed to succeed?
4) Do you need some prior experience in the industry of your choice?
Go and work in an engineering business, even if it’s on a part-time or weekend basis. Learn the ropes; watch the skilled men and women at work. Watch and learn every aspect of the business: physical, operational, administrative, even the accounting.
Company directories list all of the engineering companies in or near your home, school or college postcode. You’ll be astonished by the quality and variety of companies in your region – throughout the UK. Look up those that look innovative and forward-thinking, and which might be keen on your invention in future. Ask to visit in person.
5) Consider starting a family business
Many hundreds of thousands of the longest-surviving business in Britain are family-run businesses. Guest Keen & Nettlefolds, or GKN plc as it is now known, started as a family firm in the early 19th century. Lady Charlotte Guest ran the firm after the death of her husband Sir John Guest, helping the firm to become the world’s largest manufacturing company. She also had 10 children.
Family firms were the cornerstone of the Industrial Revolution. Why not follow their lead and think about a business idea that several members of your family can launch collectively? Even with limited funds a family can start manufacturing, say, a building product such as novel plumbing device, a children’s toy, or a consumer product such a new cosmetic.
Family firms can last for centuries. Family-owned engineering manufacturers that buy British products and maintain their place in a sophisticated supply chain across the generations contribute hugely to the British economy.
6) Protect your IP with simple means
Write up a summary of your invention or design, then date and sign the summary, and get it signed by a witness. Keep your idea confidential at this stage. Is your invention unique? There are 7 million patents in the US alone. Do a prior-art search, giving you an indication of whether you even qualify for a patent. If you’re not, you’ve saved yourself a lot of money.
If you go ahead, the costs can be steep. However, a patent agent or attorney can advise you on your options. Many advisers offer a 1-hour free consultation. A decision from a national Patent Office can take anywhere between 1-5 years. You can use the term ‘patent pending’ in the interim.
Some years ago it was often difficult to protect your intellectual property from outright theft by copyists and duplicators worldwide. It is still not easy but a few worthy initiatives have enabled smaller British firms to guard their IP more comprehensively than ever before..
Protecting the innovative, or indeed revolutionary design of your product has also become easier. ‘Creative Barcode’, based in Brighton, helps companies and designers to share ideas prior to receiving a formal trademark, design registration or patent application. You register your design using digital tags that are embedded into images, documents and content on websites. When you send your design to a prospective client the sending, receipt and downloading of files is recorded, constructing a binding trust between the parties.
7) Market test your ideas and products – before you mass produce
Can you list the top 10 trial customers of your product? I bet you can’t. You haven’t even thought about it. This is vital: think hard and come up with a list of the 10 clients most likely to consider buying or testing your product.
If you can’t complete your list – go to a trade show, search through directories, read the trade journals of your sector – find out who the top 10 opinion markers are – and then ask them for their opinion.
‘Amateurs are product focused; professionals are market focused’.. Don’t become obsessed with your product – difficult though that is. Your product may be the best, quietest, least expensive, most efficient and most competitive of its kind – but if no one wants it you’re wasting your time.
Undertake some basic market testing. Who wants your product, and what will they possibly pay for it? Study existing rivals. Work out what time of year would be best to launch your product, and at what showcase event?
8) Learn basic accounting – it’s crucial
In about two hours a qualified accountant or accounting clerk can easily teach you the fundamentals about keeping business accounts – double entry bookkeeping. It’s not difficult. Double-entry bookkeeping was invented by an Italian monk in the 15th century. Accounts are certainly not frightening – thought you’d be surprised by the number of people who are genuinely fearful of it.
Why is this important? It is your role as a leader – and legal duty as a director – to ensure that the company does not run out of money. It is called ‘cash flow’, or the ability not to go bust. A large number of companies that go bust were actually making a profit. They just ran out of working capital to keep paying the current set of bills, and couldn’t raise the short-term funds to keep them in business.
In future you can seek to reward those customers who pay you in 30 days, or 15 days, by offering, say, a 5% or 10% discount respectively on your prices. Customers like a discount.
In the long run this skill will help you ensure the survival of your company in the difficult months and years ahead, when clients pay you late, or when they go bust without paying you, leaving a monstrous hole in your accounts. A strong grasp of your firm’s finances will impress a bank manager, business angel or generous relative at this critical point that your business is worth saving, and that them you are serious about saving it. Trust and reputation are everything at this point. Basic accounting in Microsoft Excel is a good place to start:
Some Tips After You Start..
1) Your First Employee Must Be a Sales Person
As soon as your product is ready – you must push the sales process into overdrive. The best way to do this quickly is to employ a reputable salesperson, preferably someone who knows the sector well already. Do they have a fistful of contemporary contacts who will take their call? Try them on a three or six month contract first and see how they perform. Make sure their performance bonus is generous. Do anything and everything to boost sales.
Growing sales gives you a financial breathing space, a lifeline, which enables you to plan the expansion of the company when the right moment arrives. If you make some sales, the first testimonials about your product will soon arrive. Make sure they are on your website. Promote them far and wide.
2) 99% of firms start without external finance
Yes, you’re tired of reading about those young companies that have just received £500,000 in venture funding from some smart investor – and wished it was you.
Don’t be fooled: the vast majority of companies are started without any outside funding – from banks, business angels, venture capitalists. Most companies are started on family savings, a few credit cards, loans and gifts from family and friends.
The art of starting a business with no money is called ‘Bootstrapping’. It is by far the best way to build a business. Why? It forces you to build it on sales. It forces you to listen to your customer base. It helps to prevent you from making mistakes.
What would you do if you were given £1 million? You would go and spend it – yet you may spend it without getting a single sale. You’d be getting some prestigious offices, top-end PCs and fancy phone system, and print pretty-looking brochures. In that case – you don’t have a business. Your company has zero value.
Remember: that company which ‘won’ the £500,000 in venture funding had to give a substantial chunk of its shares to the investor. Worst of all, if the company fails to meet certain targets in the investor agreement – deep in the small print – the investor gets legal ownership of your company. And there’s nothing you can do about it. You’ll arrive at work one morning and find the locks have been changed.
‘Bootstrapping Your Business’, a manual for starting a company will few funds.
3) Ideas are nothing – quality of execution is all that counts
As TV gangster Tony Soprano once snarled when one of his henchman wanted to strangle his best-performing salesman who had insulted him: “No one’s killing anyone. Do you read me? This is a business..” Sir Winston Churchill, it is said, had 100 ideas every day – of which only one had the slightest practical value.
Being an entrepreneur you will probably have lots of ‘bright ideas’, far too many in fact. What matters, what only matters, is the quality of the commercialisation process of that one idea. It is the skill you apply in business planning, careful marketing, assiduous attention to detail, and employment of adaptable, likeable people that will bring you success. Too many ideas can also lead to a loss of focus, which can kill a business in no time.
4) Get your product out quickly – don’t wait for the Perfect Product
A classic mistake by the most diligent entrepreneurs is to delay the launch of their product until they think it is ‘ready’, ie. ‘perfect’. Striving for perfection, as any psychologist will tell you, is a psychosis. It is to be strictly avoided in the fast-moving world of commerce. The British often invent first; Americans get it to market first.
The British are said to be brilliant at design. We are. Sometimes too much. We tinker and twiddle and mess about with a design for far too long. Eventually a rival company, often in a rival country, brings out a similar product and scoops up the available market share.
For you the lesson is this.. Get the core product out into the market quickly, and then see what happens. Your customers and triallists will quickly tell you what they like and, much more importantly, don’t like. It may be missing a few features: so promise to add them. Delete or withdraw the features nobody likes or nobody seems to be using. You may think it was your product’s greatest feature. It doesn’t matter what you think: get rid of it. Your opinion counts for nothing: only those of your customers matter now.
5) Always Be Likeable
Some entrepreneurs can be arrogant, opinionated and stubborn. Some, such as Steve Jobs at Apple Inc, were near-impossible to work with on occasions. For the budding entrepreneur, however, it is invariably true that your business will survive on the quality of your business relationships. Being arrogant and dismissive, especially of clients’ opinions, will be fatal.
Start by employing ‘Jacks and Jills’. Why? In a small company everyone has to know how to do almost every task? So employ the Jacks of All Trades, and the Jills, not someone who thinks basic tasks are beneath them or complex tasks beyond them. Specialisation comes later, after the company passes around the 18 mark in the headcount.
Make sure everyone is cheery with customers on the phone, and make sure they all know how to divert an internal call – immediately and without hesitation. Customers hate having to wait, they hate being transferred to the wrong person, and most of all they hate being cut off by a poorly trained employee in a supplier’s office.
One of the current directors at Philips Lighting knows a lot about lighting – but he also knows a thousand excellent jokes. He can keep a group of customers howling with laughter for hours. When a customer of Philips receives a lunch invite from him the customer knows he will be hugely entertained. He knows the Man from Philips won’t even mention the latest gizmo to come out of the Eindhoven development labs. Such is the fund of goodwill towards the Man from Philips, the customer would never think of placing a contract with anyone else. Why? Because the Man from Philips is intensely likeable.
Do likewise. Be intensely likeable yourself. When you need friends and allies – which you will – they won’t be there if they don’t like you. Remember their birthdays, remember their wives’ names.. and a few clever jokes of your own.
6) ‘How Much?’.. Getting a grip on pricing
Your product will be your brainchild, your darling, your precious creation. You will inevitably think it is worthy of a premium price. Wrong. So many times I’ve seen a new product hopelessly over-priced. When the truth dawns I’ve seen the blood drain from the faces of the founders as they see their dream slip into obscurity.
You think customers will pay £10 for your product? In reality they will pay £3 at most, so get a grip on pricing. Customers never pay the price you think they should – so get used to it.
There are various ways of getting a better price for a superior product. You don’t have to go below production cost. Added services and guarantees are ways of enhancing value in the mind of a customer beyond the mere base price of the product. You can include annual maintenance fees, or a free replacement service, a monthly inspection visit, in the final price.
You can charge by the quarter in place of the larger annual payment that frightens their accounts department. Your customer may have budget restraints until the start of the new financial year. Find this out. If so, wait until the fresh budget is in place -and the answer might now be ‘Yes’..
7) Go Mad for the Media, any type of Media
You know all about your product – but the world knows nothing about you. Now is the time to change all that. Aim to send out each quarter a news release to a select set of ‘laser-targeted’ media outlets, and maintain that rate of output thereafter. Put them all on your website under the ‘Press’ section.
Be heard; be noticed. Be seen as an expert, be admired as a newcomer – that’s one of the key functions of the leader of a new business. Start with trade journals, local newspapers, local radio stations, and travel on up the media pipeline to national and international outlets. Journalists are always looking for the ‘next best thing’. Have some top-quality photos ready.. of you, of your collective staff, of the product in action. Give the journalist the phone number of the customer who will sing the praises of your product. Your customers will enjoy the publicity, too.
At the next major conference of your industry ask for a speaker slot. Become one of the minor sponsors. Offer to sponsor, say, the printing of the conference dinner menu – which everyone will read. For around £500, it’s a cheap and highly effective way of getting known.
Blog and Tweet when you have something important to say. Eventually you will be seen as a ‘personality’ with opinions, the young businessman or woman who is a leader among their generation. Later, the press will ring and ask where you went on holiday, what car you own, what is your favoured restaurant. These profile pieces on you, the leader, can be excellent publicity for the company.
For the company itself, make sure you put up a profile on LinkedIn, Facebook and, where appropriate, Amazon.
8) Be British – Fly the Flag
Soon you will be starting to meet prospective clients from overseas. Don’t be shy to promote the product’s perceived ‘Britishness’. With traditional food & drink, for example, this is easy – British biscuits, cheeses, beers and whiskies are as much loved abroad as they are here.
Try to inculcate a heritage aspect to your product. Give it a history, a lineage, wherever possible. If you are starting a lace factory in Nottingham – mention the long-standing history of lace manufacturing. There is almost no product that doesn’t have a British manufacturing heritage of some description.
Do deep: if your craftsmen or manufacturing engineers have worked in venerable British companies before they worked for you, describe this in some detail. It adds depth and strength to your corporate brand.
In 2014 the Sheffield-based Ernest Wright & Son was the last maker of scissors and shears in the city. Sales were low and its prospects looked bleak. Then an article about the firm appeared in an American newspaper. It portrayed a craftsman manufacturing an individual blade with exquisite speed and skill. The article went ‘viral’, and export sales leapt up. It will almost certainly save the company. All because people abroad savour and admire British-made heritage products.
For some people, entrepreneurship is the best option around, a way to build wealth and do something you love without answering to somebody else. But it’s also a huge financial gamble — and some people, unfortunately, will discover too late that it’s not the right fit for them.
Support for Entrepreneurs from the Royal Academy of Engineering
Start-up Loans In 2015 it was announced that a new pot of £2m start up cash will be available to fund up to 300 new West Midlands-based entrepreneurs this year
The seed finance is available through Startup Direct, a partner of the Government’s Start Up Loans scheme which launched in Birmingham last year.
Based at Innovation Birmingham Campus, Startup Direct has seen strong interest from technology start -ps in particular and anticipates that this sector will account for around 30% of new businesses funded this year.
James Pattison, CEO of Startup Direct “Regional cities such as Birmingham have a major role to play in helping the UK compete in the global tech revolution.
“They offer cheaper office space, a good supply of local graduates and already enjoy a thriving start up scene with strong networks and support systems.
“This £2m to be lent over the coming year is going to have a significant impact on the West Midlands start up scene, particularly in Birmingham’s tech hub, which is brimming with talent and ideas.”
In anticipation of funding more than 300 new West Midlands businesses this year, Startup Direct is also growing its family of mentors, who provide support to every entrepreneur during their first year.