smallbusiness.co.uk: Helping your business think big

There are three common elements to a start-up successfully negotiating those tricky first few years: an honest appraisal of ability, market research, and finance.

Sure the person or people running the company need expertise in their particular field, but in a successful venture the owner-manager is realistic about what they can and can’t do. So a person may be fantastic at running a restaurant, but knows they will need help with the bookkeeping.

Then comes the research. Numerous companies fall by the wayside because there is no market demand for the product or service. Eric Archambeau, general partner at venture capital firm Wellington Partners, says he learnt this lesson the hard way when running his own company in the US.

‘We had several products and we made the decision that we had to focus on just one to make it a full application. The one we opted for only had one customer, while the others made up the bulk of the revenue.’ He made the right choice by going for the one customer product and the company was sold to Yahoo! for a fortune.

Lastly, but by no means least, comes the question of financing. The classic mistake is to raise enough money to start a company but not to have anything in reserve to cover a shortfall in working capital. Amidst the excitement and optimism of starting your own business, that’s an easy thing to do.

The latter may be proving especially painful in the current environment. According to stats from the government’s Insolvency Service, company liquidations have increased across England and Wales in the second quarter of 2008. Over 3,500 companies took compulsory and Creditor’s Voluntary Liquidations this quarter, an increase of 11.6 per cent on the previous quarter and an increase of 15 per cent on the same period a year ago.

However, if you can get those three basic principles right, your business will certainly be in a stronger position compared to the competition.

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