From Idea to Business
June 13, 2016
Team Blog – Week 1
February 2, 2012

UL0001 – A Business is Still a Business

It is important to understand that at the very core of a company, it is about the business. 

“Any business must consist of a fundamental strategy, which must be driven by a long term vision and long term goals and objectives. The business must be able to sustain growth and have proper revenue models as well as clear profitability goals just like any business in the old economy.” – Mr Inderjit Singh, The Art and Science of Entrepreneurship.

Running After Funding
There has been a recent frenzy of incubators and accelerators sprouting up, all ready to give money to anyone with an idea. On the other hand, there are so many people who are just looking to receive the money and be in the limelight. There is lots of talk about looking for raising external funds. Many start-ups focus on external funding instead of building a great product and great support to get more customers to buy. The building of a strong product/service should always be the number one priority for a start-up. 

The objective of beginning a start-up is to solve a problem or take advantage of an opportunity. It is to build a fundamentally strong business that will help satisfy its customer’s needs or wants. For the company to run and be motivated, it should make a profit. Now, there are social enterprises and NGO’s in the list of companies, though they want to do something for the greater good, they also need to be able to pay their staff and themselves. In order for a company to sustain itself in the long run, it should have a strong yet flexible business model that will be able to keep the company and it’s staff going for long.

Excessive Spending
During the dot com days, money flowed freely and there were many ways to spend it frivolously. All the limelight and money surrounding dot com startups made many enter the market, seeing as it was easy to get funding from just about anywhere. Imagine having an office full of staff sitting on US$800 chairs, was there really a need for that?

As money was flowing freely and it was a fashion statement to be a dot com company, many people wanted to fund or be funded just to be known. As such many companies did not have sustainable business ideas or good teams to execute those ideas. Many companies failed and it turned out to be quite a bubble burst for the economy.

So what can be done to avoid that from happening again.

  1. Build a strong company that would rely on customer financing.
    A company’s main aim is to sell its product or service. Focus on creating a strong product/service that caters to your customer’s needs and wants.
  2. Keep costs low and spend on necessary things.
    Even though it would be great to have a large office, with fancy art, gold coffee mugs and $800 chairs for everyone. It would be better to put that money towards the business or towards the staff benefits. This would motivate your team to work harder. When the company is stable and there are millions (profits) in the bank, then perhaps you could consider a bit of lavish spending.
  3. Hire Wisely and Keep them Engaged.
    It is very important to hire or partner with the right people for the job. It is your team that will take you that extra mile. Look at the needs of your company. Does it need a programmer, designer, writer? Then choose and place the right people in the right place. When hiring, do not only look at their qualifications, look at their interests and goals as well. This will help you to see if they are keen in the position and will they stay for long. After hiring, you have to keep them motivated as well. In a start-up company, working for long hours is a norm, especially in the initial phases. There is also a lack of cash, so increasing salaries and giving big bonuses may be out of the question initially. Look into engaging employees in other ways. Give them flexible work hours, time off to spend with family, movie nights etc… These are some ways to keep the employees happy and satisfied.
  4. Raise funding if there is a need for it.
    If it is in your plans to expand and there is a need for you to raise funds, then start looking for funding, before time. Aim to build companies that can sustain itself through its customers. This will help you keep ownership of the company and will also make the company strong, as there is a heavy reliance on making sure that the product that goes out is great.

What Investors Are Looking For?
In today’s market, venture capitalists and other investors will look very carefully at the customers you have and your cash flow. This is because in the dot com era, there were many companies who promised a lot, but delivered nothing.

If your business proves that it has customers i.e. people want your product and there is a market for it, then investors will be more keen to put in the money.

Therefore the best thing to do would be to strengthen your product and business from the ground up. Look into bringing customers, lower your costs, hire wisely and if there is a need, then bring in funding as well.

Activity 3
Watch the Kauffman Foundation Video on where Start Ups get funding from?
Click MONEY GAME to view. Video courtesy of the Kauffman Foundation.

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