Building a business is tough ! Why do we do it ?!

Building a business… lots of people want to do it. Not everyone is cut out to do it and there’s no magic recipe to build a successful one.

Of course, there are lots of things we can do to make our chances better but, the 9/10 failure rate still exists for a reason.

This sounds negative but it doesn’t stop people from starting something and never will (if it did they shouldn’t be building one anyway).

As a founder and investor, watching people build businesses is what gets me up in the morning. There are so many capable, smart and brave founders out there building amazing businesses that we never really see in the media.

In today’s newsletter, I wanted to share some of my thoughts/ramblings on what I see as the current state of the startup scene, the mistakes I made building my first business, some observations and some interesting stories I’ve heard:

BUSINESS ADVICE
My Mistakes.

My first introduction to the world of building a business was my family’s music business. Though before that, just like your cliche founder story I’d sold stuff to kids at school. I remember taking orders to make shoes for people (out of paper!) and selling tickets for a “save the flies” club in my mum’s garden.

But, my first proper business experience was taking over the music business and digitising it. I was 19, freshly dropped out of uni, and making every mistake in the book. These are my top ones and how to avoid them:

1) I didn’t bring on a HR company straight away.

This mistake ends in a lawsuit, so it’s safe to say it was a pretty huge one !

One of my team was using our warehouse to hold their own stock, was incredibly toxic and tried to turn staff against one another. I did what I felt was right and let them go. They didn’t take this well at all, even though they were in the wrong, and filed a lawsuit because we hadn’t given them the right employment contract, or followed the right process.

It cost us 10k…

The lesson: hire a HR company straight away and make sure you have the right contracts in place. It’s boring but absolutely essential !

2) I got burnt by the development agencies building my product.

Because I don’t code, the only route available to digitise at the time was working with a development agency. I had no idea how development worked, so the inevitable happened:

I committed to a fixed scope that inevitably wasn’t right, the agency did the product work so didn’t build the right thing (they didn’t have a dedicated product team), they weren’t transparent and would come back every two or three weeks with their progress (or lack of)– there was absolutely no alignment at all.

Not only did this happen once or twice but three times.

Now, I always tell founders to make sure the agency they work with challenges them, uses their previous experience to inform their current work, makes sure the founder is in control and has total transparency, has a product team and has a successful track record.

3) I focused on revenue over profit.

I became obsessed with revenue and didn’t look enough at the profit. It looked like we were doing well, but because I had a business that sold stock that just sat in a warehouse– if we didn’t monetise it, we had to pay for it.

I just laser-focused on shifting stock, but when we looked at the numbers we didn’t have enough to cover our overheads.

It totally changed my perspective from that mistake. If you aren’t making profit, you are pushing problems further down the line.

Even for tech companies, ignoring profit is a big mistake and another mistake I see founders making really regularly.

The learning: Get to revenue as soon as possible and prioritise profit as soon as possible.

4) I hired too many people and didn’t pay them enough.

Early days, I hired a bunch of people (way too many) which meant I couldn’t pay enough so the quality wasn’t where it needed to be.

My learning from that experience is to hire less people and pay them the most the business can afford.

People joining a startup won’t expect corporate salaries to begin with, but won’t stay with you long term if you can’t pay them well - and you will not get the best talent.

Your business model must have a long-term strategy to be able to generate the revenue to bring in great people.

I’VE BEEN WATCHING
Richard Branson. 

I recently watched a Richard Branson documentary. He’s worth an estimated 2.6 billion USD, but the thing that struck me the most is that he’s a pretty normal and unremarkable guy. He just excelled at spotting gaps, and trends and joining the dots.

His first venture was Student, a magazine for young people. There wasn’t any at the time, so he slotted Student into this gap. From that business, he started a mail-order records business that transformed into Virgin Records and on and on. I also didn’t know that he bought and sold world-famous Heaven nightclub in London.

From there on, it was really about spotting boring industries and making them fun again. Virgin Atlantic made airlines less rubbish, Virgin Bank did the same thing with banking. Virgin Energy, Virgin Active and Virgin Fuel followed.

All of these things seemed to be gut instinct and the brand just took over. People didn’t question how Branson could go from records to banking to fuel- that was the Virgin brand.

One thing guaranteed is Branson didn’t have the skillset to go into all of these industries and just take over. He’s smart, but not a genius. He trusted his gut instinct on things, had an eye for trends and had an eye for hiring the best people and netting them get on with it. His mantra is very much “who” not “how”.

Building a successful business isn’t about being the smartest person in the room, that can actually be a downside. In reality, it’s about connecting the dots– spotting gaps, identifying trends and finding the right people.

THE FUTURE OF BUSINESS
Startups are stronger than ever.

There’s lots of doom and gloom out there about the lack of funding, low valuations and lack of exits, but I see this as a good thing.

2020-21 was, as we found out, a powder keg for VCs and startup funding. Lots of people could see the bubble coming and a lot of founders were burnt, but paradoxically, I think it’s put us in a place where we’re now building ‘realistic startups’.

Because there’s less money about, less funding, less reliance on VC, the current climate is breeding smart, thrifty Founders.

I’ve seen this across our portfolio and the founders I speak to every day.

Many of them don’t want to chase unicorn status and many are extremely cautious about stepping on the VC treadmill, or if they do working with VC’s who are happy with sensible exits.

Instead, we have founders who are cash savvy, doing as much as possible with as little as possible, and building sustainable companies.

I’ve also seen some founders who have struggled to raise, build their offering and validate their idea offline first, without tech or huge funding. This looks something like spreadsheets, Typeforms, Airtables or good old fashioned consultancy.

Building and validating an idea without spending tens to hundreds of thousands of pounds only makes sense to me !

Despite it being a tough environment, as an investor, I’m really enjoying this new wave of founders and startups. They will be some of the most successful (albeit potentially quietly successful) businesses of the last 10 years.

YOU MIGHT BE INTERESTED IN
Our upcoming webinar.

Intellectual property 101! With Mo Abbas.

Hear from Mo about:

🛡️ Brand Protection: Essential trade mark registration guidance.

🎯 IP Strategy: Strategies to secure your innovations.

🌱 IP Portfolio Growth: Expand your IP assets alongside your business.

📚 IP Rights: Insight into your full range of intellectual property rights.

Trademark Brothers specialises in turning complex intellectual property issues into straightforward solutions.

Register here to join here: https://lu.ma/nmnuun9j 

Again, thank you for signing up to my newsletter ! I’ll be sending it out every month.

Always open to feedback, content suggestions or collaborations. Tell me your thoughts.

All the best,

Matt Jonns