For start-ups - Perhaps the best 'secret' around!

United Kingdom

The sad fact is that one in four start-ups in the UK will not make it beyond the third year of trading. (Source: Office for National Statistics)

According to Business Link, the closure rate for start-ups is double that figure.

And in some sectors, for example the restaurant trade, the rate of closures is even higher.

‘Learning from failure is an essential part of the entrepreneur’s experience’, said Rachel Elnaugh.

She invested in several start-ups who pitched for funding in the Dragons’ Den but her own Red Letter Days company very nearly came to grief. Finding out the mistakes made by others can give insights into some vitally important steps when you embark on a start-up.

Earlier this year I visited an exhibition for small businesses and saw a presentation by ‘a serial entrepreneur’ who had raised hundreds of millions for companies and for his own businesses. As he gave his top tips for start-ups, all around me the audience were diligently taking down notes.

His ideas were generally good ideas, but they did not really jell with my own experience in starting two new companies and advising many other small new businesses. I didn’t say to myself, “Yes, he hit the nail right on the head,” and there was little overlap with what other entrepreneurs have told me were the critical things that they had learned as start-ups.

So here is the first of my 12 Golden Rules for Start-ups based on lessons learned from small new businesses that were forced to close and others that have succeeded.

The first ‘rule’ is particularly relevant in current times when money is scarce for investing in a start-up, consumer demand is low and price competition is strong.

‘Fail Fast, Fail Cheap and Fail Safe’

Starting a new enterprise is risky business, so make sure you check the water for rocks below the surface - before you dive in. It is better to take the risks into your reckoning at the start rather than find out later, to your cost.

Budget to set up cheaply, on a shoe string.

Plan how to get your first sales as soon as possible, proof your idea actually works as a business.

If it doesn’t work, get out fast.

Safer to commit only what you can afford to spend on a new venture, rather than risking it all.

Even if your first attempt is unsuccessful, you will have learned a lot, without spending more time and money than you can afford. Lots of us started with a desk and computer in the bedroom or a corner of the lounge. Keep your overheads to a minimum and spend your budget on what counts – winning customers and sales.

Once you have proved to yourself you can attract customers and show a profit on your products/services, check out what worked well and what didn’t and find where best to concentrate your time and money in building from there.

With a proven concept early on, you should find it easier to secure further funding too.

About the author:

Mac McInerny is a founding director of MC Management & Communications Ltd and topenterprise uk ltd and non-exec director of a small services company. He has a degree in Law and his formal training includes sales, marketing and financial and management accounting.

Mac is a consultant with over 15 years’ experience and has advised start-ups and small enterprises, from an art business and a health spa to import/retail and small companies in data management and biotechnology.

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This article is intended to contribute to informed decisions by business owners, directors and managers. It does not constitute professional advice in all individual cases and should not be interpreted as giving specific advice or guidance.

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