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Top tips for starting your own business
With youth unemployment at record highs, one way for young people to get a job is to start their own business.
Instead of waiting for someone else to hire you, why not set up a company and employ yourself?
But how do you launch a business during an economic downturn?
Peter Day, presenter of Radio 4’s In Business, has interviewed generations of young start-up entrepreneurs over the years, and here he summarises the words of advice they have shared with him on taking the DIY route.
LESSON 1: HARD TIMES ARE GOOD TIMES TO START A BUSINESS
The way the start-up entrepreneurs tell it, it is tricky to start a business at any time – not just during a recession – but their particular business idea is so niche, so focussed, and so special that they shrug off the gloom and just get on with it.
Image caption Steve Barnes co-founded Appetise after he and his friends identified a consumer need – their own
The upside of starting a business during a downturn is that things can only get better as the economic climate improves, and you will have learnt an awful lot in the difficult times that you can use in the easier ones.
Steve Barnes of the start-up internet fast food delivery service Appetise.com says he has only known economic gloom, but that has not stopped him.
“I don’t know what a boom feels like, to be honest. I don’t really know what to expect.
“When you’ve got such a small start-up business I don’t think it is really going to be affected at all. There’s plenty of opportunities in a recession.”
But what should your business actually do?
LESSON 2: FOCUS ON THE IDEAS STARING YOU IN THE FACE
Lots of people go about finding their niche by using business school tools such as market analysis or sector research. Clever, but remote.
Why not start a business based on a need you yourself have, that is not properly addressed by existing suppliers?
Image caption ‘Silicon Roundabout’ in east London is the capital of the UK’s tech start-up boom
You experience the gap in the marketplace, and you fill it: easy-peasy.
University campuses are full of ideas for businesses. For example, David Langer was at Oxford University when he co-founded Group Spaces.
It started as a service for Oxford University clubs, and is designed to make life easy for secretaries and treasurers trying to do admin for clubs, societies, and hobby groups.
Group Spaces now has two million users worldwide, helping club administrators in more than 100 countries.
It was purely to solve a problem that we had as students Steve Barnes, Co-founder, Appetise.com
The company employs 10 people, working near East London’s start-up hub Silicon Roundabout and has recently raised £1m ($1.54m) in investment.
The fast-food delivery service Appetise.com was an idea borne by students from Warwick University which has now gone UK-wide.
“It was purely to solve a problem that we had as students,” says co-founder Steve Barnes.
“Trying to order a take-away, we used to order in groups of 10 or 20 people and trying to organise that over the telephone is a bit of a nightmare.
“Whereas now everyone can sit down individually at the computer, place their order and then submit it all in one order and it’s very easy to see an itemised bill to see who owes what.”
Keep it simple, and answer an in-your-face need.
If you have got the need, and the idea, then come the operational problems – but even they are less daunting than they used to be.
LESSON 3: YOU ALREADY HAVE THE TOOLS YOU NEED
Most homes and most students are already equipped with quite a lot of the tools any business needs to reach a worldwide audience from day one.
Image caption A laptop and a mobile phone is all the infrastructure a new business needs to get up and running
Computer power is so cheap that many school or university leavers have their own machines, with processing power unimaginable a few years ago.
Laptops can edit sound or movies, design software, and keep track of all the details of a start-up business at minimal cost.
Internet connectivity allows a start-up entrepreneur to collaborate with video conferencing at almost no cost, an extraordinary breakthrough.
The internet also enables a new business to reach a specific, even worldwide marketplace with a minimal outlay.
And very young people are often instinctively able to use the new technology that makes all this happen.
They already know things that great big companies have to pay specialists huge sums to get done.
LESSON 4: CASH IS KING
Now, what about funding?
Starting any kind of business always used to need money: from savings, relatives, angel investors, a bank loan. The latter is reputedly horribly difficult at the moment.
Image caption Warren Bennett of A Suit That Fits funded it through credit-card loans and cash from up-front orders
For several reasons, including the technology mentioned above, not having pots of cash is now much less of a problem than it used to be.
Several of the start-up entrepreneurs I have met needed only credit-card loans to get their businesses up and running – a potentially costly route, mind.
Warren Bennett, 30, is co-founder of the bespoke tailoring service A Suit That Fits – now 6 years old, the company sells around 15,000 suits a year.
Find out more
Listen to In Business on BBC Radio 4 on Thursday, 19 January at 20:30 GMT and Sunday, 22 January at 21:30 GMT
Warren had the idea while volunteering as a teacher in Nepal, where he had stumbled on a good local tailoring business.
Back home in the UK, Warren and a friend started what he says was the world’s first online bespoke suit-making business.
The company now has studios across the UK for people to drop into to have measurements taken for a suit that is made thousands of miles away in Nepal.
A Suit That Fits was funded solely through credit cards and by asking customers to pay in advance. It is a business that lives off cash-flow, not bank borrowings.
Not having to depend on outside investors also means the founders get to keep a full stake in the business they founded.
And there are many businesses devised around generating a cash flow that finances the rest of the company’s operations – asking for up-front money from customers that can be used to pay suppliers and manufacturers later on.
Positive cash-flow is a business wonder: funding your business expansion out of cash flow is even more wonderful.
One Internet start-up founder told me what they say in Silicon Valley, USA: if you are making a profit you are not growing fast enough.
You should be gobbling up investors’ money to fund your hell-for-leather growth.
LESSON 5: TELL YOUR STORY
Whether you are pitching to a potential sponsor, mentor or customer, it helps to tell a good story.
Image caption Arnold Sebutinde shows off one of his portraits, which he created by drawing with both hands
In my experience, young entrepreneurs know how to tell a story, both their own and that of the business they have set up and the needs it is trying to address – plus the adventures they have had on the way.
Arnold Sebutinde, aged 27, from Birmingham runs Spontaneous Portraits.
His story, which helped him get funding and a mentor from the Prince’s Trust, is compelling. Arnold got into trouble, and spent two and a half years in prison.
While serving his sentence, he made use of his talent for drawing and started to sell portraits of inmates and their visitors, for £2.50 a time.
After being released, he continued to build his business, and posted internet videos to highlight his special talent:
“I got a commission to draw the England cricket team, and posted a video of me drawing, but I’m drawing with both hands .
“I did this to get the word out, so people would talk about me as this artist who draws with both hands.”
Story-telling is a vital part of running any kind of business, but it gets neglected as companies get bigger and bigger and more and more arrogant.
Start-ups have great stories to tell.
LESSON 6: DON’T TAKE TOO MUCH NOTICE OF THESE LESSONS
Just get on with it!