Six tips to become your own boss
Swapping the day job for running your own business is more achievable than we think, says British entrepreneur and founder of Innocent Drinks, Richard Reed.
“If you have ever organized a wedding or a holiday for a group of friends you have got what it takes to set up a business,” says Richard Reed, who founded his company in 1998 with two friends from Cambridge University.
“It’s just about getting a group of people to do a certain number of tasks in a certain amount of time for a certain amount of money. It’s like organizing a wedding without having to have arguments with the in-laws about what color the serviettes are.”
Richard Reed has been looking for the next generation of start-up businesses to invest in and says that many people with aspirations to run their own company often over-exaggerate the risks involved and under-estimate the potential upside. So what are some of Richard Reed’s tips for budding entrepreneurs?
1. Get the idea right and work with a team
“It is about the idea, your commitment to the idea and your ability to execute that idea,” says Richard Reed.
The product or idea is fundamental as it is this that investors will have to believe in if they are going to part with their money. However, they will also look at whether the team behind the idea has the skills to deliver it.
“I always say to people who are thinking about setting up a business, why not think about building the team from the beginning,” says Richard Reed.
“We now invest in businesses and we are much more nervous about businesses which are a single person entity… because somebody needs to be thinking about the finances, someone has got be thinking about the marketing, someone has got to be thinking about the selling.
“You need all those things for the business to work and it’s very rare to find someone who is as good financially as they are creatively, or as good selling.”
Richard Reed says you can try and find this “band of brothers” on social media sites or by advertising. But for those do want to do it all on their own…
“Work out what skills are needed for you to be able to execute your business well and make sure that you’ve got those skills. If you don’t, make sure you find someone that does. It’s like a jigsaw puzzle, you’ve got to see the bigger picture. What are all the pieces that I need to make sure this business will work, which ones can I cover, which ones do I need someone else to cover.”
2. Be creative about funding
To kick start the business you will need seed capital, or an initial injection of money. Then once the idea is up and running, it is time to seek further investment to grow the business.
“You can try the banks and I think there are more options available to people these days. The government has done quite a lot to make start-up funds available to small businesses, but we got turned down by 20 banks in a row,” says Richard Reed who stresses the resilience you need as an entrepreneur when approaching potential investors.
“If you’ve got a good idea, you are committed enough to it and you are prepared to keep going, you will find someone that does believe in it.”
There are also ways of structuring a business without securing the initial funding, he says. Some people sell their product to the consumer in advance, before they have to pay out for it.
Richard Reed also encourages creative thinking around new ways to secure investment, such as crowdfunding.
“Rather than get one person to give you half a million quid, you could get half a million people to give you a quid each.”
3. Don’t confuse branding, marketing and advertising
“They are actually three different things,” says Richard Reed.
“The brand is basically your look, your tone, your identity, what you stand for. Marketing is how you go about creating demand for consumers… what is the price of the product, how is it packaged, how is it sold. With advertising it’s totally just pay a load of money to make a load of noise about your product.”
For Richard Reed, advertising is the most expensive and definitely one of the most likely to fail. He recommends advertising only once the name, product, packaging, price and distribution are all in place.
“Advertising is a brilliant way to burn through a lot of cash very quickly, so treat it carefully,” he warns.
4. Risk vs. reward
The rewards of setting up a business are great, he says.
“You go from nothing to something that you have created and you meet so many more interesting people, you learn so many things.”
The advantages are that you are in control and can shape the business the way you want. However, he admits working for yourself also comes with costs and risks.
“The practical advice I give people is don’t bet the family home. You’ve got to go into it with your eyes wide open, most small businesses fail. If you start betting the family home, then what you’ve got is not just the trauma of the business failing, but then it has a huge knock-on effect to your personal life.”
5. Hard work, long hours, no excuses
“I read this article saying that setting up a business you essentially have do five years of work in one year, and I think that’s about right,” says Richard Reed.
He says a good test of whether you have the staying power and commitment is if you can come home after your full-time job and work on your business plan rather than watch EastEnders. There is no blaming the economic climate either.
“There are as many opportunities in a down market as there are in an up market, but if you find yourself blaming the externalities all the time – well I can’t set up a business yet because of the economy or because of the weather or because I have a job – then you’re not thinking like an entrepreneur,” says Richard Reed.
“An entrepreneur accepts that the world is the way that it is and goes about changing it rather than waiting for someone to make it easy for them.”
6. Start small, start young
“At the age of four my mum found me trying to sell jam jars with rose petals in as perfume for 2p to my neighbors. Aged seven I was going round cleaning their windows. At age 11, I was buying Smurf stickers and reselling them in schools,” says Richard Reed, who started his entrepreneurial career young.
Anyone, he says, could go home today, and for instance, make some jam and start selling it. There are no limitations and no set path to success.
“I never would have thought it was possible for someone like me to set up a business, but then I found myself with a group of friends and we decided to give it a go. It turns out it is possible – not easy, but definitely possible.”