As one of a series of articles to mark the 25th anniversary of the founding of GWS Media (back on September 25th, 2000) I have put together a short article about the main things I've learnt over 25 years running a business. I hope that some of them will be useful to aspiring entrepreneurs, or people who have already taken the plunge and started their own business. Good luck whatever you are doing - and don't forget that small businesses (SMEs) employ the majority of people in the UK economy - you are making a real difference.
David Graves - Creative Director
Health and determination
Running a business can be exhausting, and potentially you will need to work long hours, particularly in the early stages. You may sometimes feel like you are fighting a losing battle and getting nowhere, or that every door you’re knocking on closes in your face. It is very important to have the determination and resilience to bounce back from the many disappointments you will experience, and good enough health to keep going, even when you may be feeling low, or exhausted from the long hours you’re working. You should be aware of (but undaunted by) the fact that relatively few businesses survive beyond their third year. If you feel strongly that you want to work for yourself, then that will help to make the tiring and not always remunerative phases of setting up and establishing a business seem worthwhile.
Make sure you have a financial buffer
It can take much longer than you expect for a new business to pay you adequately for the hours you are putting in – many businesses start out without having a budget to pay the owner, and you may be working on less than the minimum wage for some time. You will probably need savings to draw on over the initial start-up phase, and you may well find you also end up borrowing money on credit cards, or from your bank. If you own a house then your borrowing may be secured on that, with the risk that you may lose your home if you can’t pay back the loan. If you can get people to invest their money in your business, that is less of a personal risk for you – but always bear in mind that friendships and family relationships may be at risk, if you get investment from that quarter – and be careful to set out exactly what the investment entitles them to, and how and when it’s envisaged they will be paid back.
The more of a financial buffer you have built up before starting a business, the better. Sometimes, that may come in the form of a redundancy payment – but unless you are out of work, there is a strong argument for starting a business while keeping your day job, and not burning any bridges until you can see that the business is going to bring in a level of income you are happy with – bearing in mind that income from a business is less certain than what you receive from a regular job.
If possible, try not to jeopardize your financial future by jumping into an unproven business concept (or risking your house as collateral) unless you feel very confident about it succeeding. This is why some people starting a business look to the franchise model, where the concept is tried-and-tested, and the marketing collateral already exists.
Have a co-director / investor / adviser
Being able to talk to someone about your business is essential. You will often need to bat around ideas that may be good, bad or risky, and that may have a significant impact on the business. Having someone else’s input can help to clarify your thinking, and make you consider the downside as well as the upside of any new idea. Often what’s under discussion will be sensitive, or may involve problems or complaints, and won’t necessarily be appropriate to share with staff. Even the form of words and tone you use when writing to a client or prospect can have a major impact on your business, and sometimes having a second pair of eyes on important emails and proposals can make a big difference to how they are received – helping you to always come across as friendly and professional, even under pressure.
Having to listen to all your thoughts about your business can put a lot of pressure on a personal partner or spouse (especially when things are not going so well) and can strain even the strongest relationship. It’s normally better to have either someone who co-owns the business or someone who acts as your business adviser to use as a sounding-board, providing a safe space to talk about things, without bringing in too many emotions.
You can learn a lot from a business adviser, but you will still find you generally need to make your own mistakes in order to learn and move forwards – no matter how many books on business you may have read.
Befriend your bank manager / accountant if you can
Bank managers – and your relationship with them - used to be incredibly important, though now you will generally find you will only get a named person who you can speak to and who comes to visit if you are turning over 1m upwards, or have borrowings that the bank wants to keep an eye on. Nowadays, the relationship you have with your accountant may be more important in terms of actually getting to know your business and being able to help you with and advise on financial things as well as ensuring that your accounts present your business in a positive light. Accountants also know many other businesses, and well-connected people are always valuable in making introductions or passing on opportunities.
Don’t take on staff before you have to
Some people who start businesses vow never to take on staff, having heard too many horror stories about employment tribunals etc. Equally, some ambitious entrepreneurs try to take on staff before they really need to - or before they are ready. You can carry out a lot of the tasks that directly-employed staff were used for in the past with virtual assistants, freelance or temporary staff, AI tools, and online services. And these will normally only require a month’s notice if you no longer require their services for any reason (temporary staff may not have a notice period).
It is much harder to dismiss a directly-employed member of staff who is unnecessary or unsatisfactory – you will need an HR advisory service or support from an organisation like the Federation of Small Business to navigate the challenging area of employment law, which gets more complex by the year.
You will pay more per hour for most alternatives to directly-employed staff, but they will typically require less training and less time in orientation – and are also less likely to be absent due to illness or with holidays etc. Always ask yourself – do I really need to take on a direct member of staff – or can I get a freelance or even an AI system to help?
If you do need to directly employ staff, make sure your recruitment processes are right for the kind of team you want to build, and that you have the necessary support to draw up appropriate employment contracts, policies and handbooks. Beware of copying online models, which are rarely appropriate.
Credit check your business
Potential clients of any size (though most commonly larger ones) will almost certainly be running credit checks against you / your business before they sign up. They don’t want to be left high-and-dry if your business were to cease trading. To see your business the way that others see it, be sure to order your own credit checks, and if there is anything in the reports that will not appeal to you clients or suppliers (such as the recommendation ’Cash trading only’), talk to your accountant - there may well be easy and legitimate steps you can take to improve your company’s credit rating.
Sometimes a tax-efficient way of accounting for payments may create red flags, and you need to be careful with how directors’ loans affect the way that your business is perceived.
And if your bank manager or other business adviser seems to be concerned about your accounts, always ask them to spell out the nature of those concerns – they may assume you know and understand accounts, even when you don’t!
Create a Business Plan?
Business plans are necessary for a number of purposes, but they can be divorced from reality. The useful thing is that they set out the steps that need taking to get your business from A to B. The bad thing is that almost no business plan survives contact with the real world - an ambitious plan can lead to a cycle of disappointment if few or none of the goals are achieved, and targets keep having to be revised downwards whenever you revisit the plan. It can also be disempowering for your team if they are expected to work towards unachievable goals.
On the other side of the coin, if you are not ambitious in the goals you set, then you’re less likely to achieve high growth. Many people believe in the power of ‘manifesting’ – thinking about something positive and about success in business sometimes seems to encourage that success to happen. I am somewhat sceptical about this – however it is common sense that, if you are in a negative frame of mind and just thinking about failure, then that is probably not going to help take your business to the next level.
Spending time with successful and ambitious people and learning from them is also recommended by many people who have succeeded in business - as long as you find that inspiring rather than intimidating, why not try it?
Small things are big things
Most people start out as they mean to go on whether that is at work, in their relationships, or in other areas of life. I’ve remarked over the years that a small sign of a difficult temperament or bad attitude from someone in the early days will normally be the prelude to much bigger problems in future. If you can afford to, walk away from a potential business relationship or employer/employee relationship if you see any early warning signs, even if those seem small or insignificant. You will probably have to learn exactly what those signs are in your business from your own experience.
For me, some of the red flags are potential clients who say things like: ‘I’ve been unlucky with my previous suppliers’ or ‘I’m taking legal action against a supplier’. Someone who complains about their suppliers will probably soon be complaining about you – or worse! It’s also worth bearing in mind that, psychologically, it seems to be harder for some people to move on from a bad, abusive relationship than from a healthy one – I’ve often remarked that the more someone complains about a particular supplier, the less likely they seem to be to actually move on from them.
Generally, watch out for people saying things which may suggest patterns of problematic behaviour or habitual conflict in interactions with people, which they may have been at least partly responsible for. For example: ‘I didn’t see eye to eye with my last manager’ or ‘Customers aren’t loyal these days’ - someone who got on badly with their previous manager may soon be getting on badly with you, and a supplier who is regularly losing customers may not be delivering the best levels of service.
Employees
The area of recruitment and people management is something that most business owners can talk about at length. This can be one of the biggest challenges for a business, particularly when you have a relatively small team, so that every hiring decision becomes critical to the composition and effectiveness of that team. I have found that people who look good on their CVs can be much less impressive in person, and no matter how many psychometric tests you perform, you don’t really know until someone starts work exactly how they are going to perform in the role, or whether they will fit in well with other team members.
ChatGPT and other tools allow people who aren’t strong coders (or good at writing or speaking) to appear far better than they are in online interactions, so in-person interviews should be mandatory. A trial working day can be a much better way of finding out about a person than any number of interviews or references (and most employer references now are short, and confined to a statement of facts about the job title and dates of employment, so don’t really tell you anything useful).
Even employees who start well can in some cases end up becoming demotivated or doing a bad job later on – whether that is from how they are managed, from becoming bored with their work, or from the impact of things that change in their personal life. It can also happen because of the influence of someone outside work, or even when someone else in the company becomes a negative influence. Sometimes these matters can be resolved without anyone having to move on, but sadly not every staff problem has a solution that involves no one having to be ‘let go’.
A single toxic individual can lead to your good staff leaving, so do your best to spot at interview potential trouble-makers or people who will antagonise others - and where possible look beneath the surface with questions that aim to bring out all aspects of someone’s character, not just their ‘interview persona’.
Planning an Exit
Almost as important as starting a business, is considering how you will exit it when the right time comes. You may be in a business for life, but even then you will eventually want to hand it on – perhaps to a management buy-out, a staff trust, one of your children, or perhaps to sell it to another business with similar clients and ethics.
It’s always said that it takes some years to get a business ready for sale – building the right processes so the business can run without you, building the right team and the right culture, and trying to ensure that your key team members won’t walk out and set up as competitors – all of these are necessary steps to take if you want to achieve a satisfactory price for your business, and for it to have a life after you are no longer involved.
