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What happens when your business runs out of its runway?

Several months ago we faced some serious challenges. We set out to launch an online jewellery business that would be a game-changer and sell our products around the world. We continue to be optimistic that we are on the right path to achieve this. What we hadn’t planned for was what would happen if we didn’t manage to get the business off the ground before we ran out of money.

When the online sales didn’t come as quickly and frequently as we had hoped, we had to (and in particular “I” had to) ask ourselves some very serious questions. These were:

  1. Are we sure we want to continue pursuing our vision and the idea we had for our business in the first place?
  2. If so, how are we going to afford to keep the business on its feet until it becomes profitable?
  3. What changes do we need to make to ensure we achieve our goals more efficiently?

Most importantly, I learnt something SUPER important when trying to answer these questions: To get REAL answers that can help us as a business and team, we need to face REALITY.

Reality however was something I had not been able to face until then. I believed so much in our passion, drive and ideas, that I did not realise that we were just a few months away from loosing our business. Unlike some of our competitors, we had not raised millions in funding and, it seemed, to get a converting jewellery e-commerce site in front of many thousands of potential clients, we would need more time, money and people. Reality eluded me, and I refused to acknowledge that changes were necessary, NOW!
Thanks to my friends and business partners and their support and brutal honesty, we did manage to finally sit down and speak openly about what was going on and what we were now going to do. So what did we do? We decided we did want to continue towards our initial goal, so we now needed to answer question 2 – HOW to make enough money to do so. Our answer at the time was: Vertical Integration. Over-night we put the online businesses on hold and invested all our time and remaining funds into growing our wholesale business-to-business operations. Six months later, this part of our business pays all our salaries, is profitable, covers all our overheads and what remains is invested into our online projects which we are finally committing time and money to again.
This left us with answering question 3 – WHAT changes needed to be made. We changed so much over the last 6 months, but if there is one thing that stands out it is our efforts to regularly “keep it real”. Keeping it real is thinking about the challenges of our business, without using some magical fairy tale goggles and seeing things for what they really are. This includes, at times, detaching ourselves from our emotions or our egos and making hard choices when they need to be made. 
The ups and downs are never-ending. The important thing is to know when you are on a down, and to find a way to quickly make the changes necessary. Nothing is worse than pretending that you have an amazing business just to feel and look better, when what you are really building is a massive money-sucking black hole.
So what happened when our business ran out of its runway? We faced the music, made some difficult decisions and in the end, literally started a whole new business which has ended up being the cash cow to our original vision, which we are now once again pursuing with excitement and conviction.  
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Tangible lessons learned as an entrepreneur – 2 years later

The truth is, this is not a post about what I now know. It is about what I now do, that I did not do 2 years ago when I first took off on this adventure.

I read a lot of articles about entrepreneurship and how to be successful. They all have a common theme and the advice is usually such that it would apply to everyone. They are super inspiring and I have internalised many simple truths from what role models like Branson have to say. What they never did manage to share however is anything so tangible that I could use to change my actions immediately.

So here are a few things I think are super important and have become a part of my daily existence.

1. We succeed as a TEAM – Even if you can not yet hire people, find a way to get more people on your team. Get help from everywhere you can as people on your side are the best ambassadors of your brand and can help with getting more things done. I mean, get interns, family members, mentors, outsource all over the world and then go out and get some more interns to be a part of your adventure. Yes, our permanent team is only 5 people, but our extended team is more than 20 people around the world. The point is, we have never ever let our status as a start-up limit us in terms of how much we can do and who can join our team.

2. Learn to work in a virtual world and forget the old office stereotype – We have 3 offices on 3 continents. We decided to be global from day 1. Despite advice from many to choose one market first and then grow incrementally, we decided we wanted to do things differently. We use tools like Elance, Skype, Wunderlist and Google Apps to find and work with the best people for the job and these guys are all over the world. In a typical week we have skype calls with people in South Africa, India, Hong Kong, New York, Belgium, Lebanon, Slovakia and Israel.

3. University did not prepare me for this. To survive in the modern world you need to learn on the job and never stop learning – How good our products, websites and marketing are all depend on our ability to be the best and never remain comfortable in this position. We are still trying to figure out what we are all good at in our company, but every time we figure out we are good in a certain role… we take ownership and start the journey of 10,000 hours to perfection in that role. For us, learning is not a 20% of our time rule, it is 100% of our time. No matter what we do, we always try to look for the angle on what the work is teaching us and how we can improve.

4. Focus, prioritising, systems, processes, and delegation – in my view, the 5 secrets to transforming a start-up into a business. We’re still a start-up but here’s how each one of these concepts is getting us one step closer to growth and increased profitability.

  • FOCUS: Chose a business model, chose an idea, choose a brand name and stay focussed on one things at a time. One of the biggest weaknesses in our business in its early days was our lack of focus. We were all over the place, jumping from one idea to another. I feel like we have finally found a way to focus on what is really important. We test and review the results. If we were wrong, we refocus.
  • PRIORITISING: Even when we found our focus, there was still always more to do. Perhaps this is one of the hardest lessons I have had to learn, and believe me, I am still learning. The ability to choose what strategy to pursue, what tasks to do and what resources to commit when we have far more options than resources, is in my opinion one of the most important things we can learn as entrepreneurs. 
  • SYSTEMS: Every time we spend time on developing a better and more efficient system for a part of our business, we immediately see a drastic increase in our productivity. As we are a small team, systems allow us to do less repetitive and boring work and spend more time on developing the business.
  • PROCESSES: By standardising how we do many of our tasks, it becomes easier to become really good and fast at completing certain tasks. Even more importantly, systems and processes make the next point much easier to do well.
  • DELEGATION: At first I was a total control freak and wanted to do everything. By delegating to others what they are good at, I found that most people can do most things much better than I can and if you can give them ownership as well and accountability for what they do, then you also have a happy team member.

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Entrepreneur vs Employee

Since I graduated and decided to not find a job and instead start a business, many of my friends have said to me, on a regular basis, one or both of the following:

“You’re making quite a brave (possibly perceived as arrogant) decision to start your own business in these troubled times… I personally couldn’t take the risk of not knowing where and when my income will come from”. 

OR

“Yes, starting a business is the dream, but I think it is better to go into employment, learn a bit, accumulate some capital and THEN do my own thing”.

I used to think these were both reasonable points and wished those who stood behind them the best of luck in their endeavours – after all, not everyone can or is going to be a business owner and many first time business owners start when they are older.

Recently however, I have thought about some valid arguments against both lines of thought mentioned above.

The first of these is based on the RISK element. What is interesting about this risk, unlike say gambling, it is not easily defined or measured. It is definitely a perceived risk and perceptions, as we all know, are heavily biased and influenced by our upbringing and the media.

So, here is my possibly biased perception of both the risk of becoming an employee and that of starting your own business.

(a) Becoming an employee:

  • You risk not being able to develop the skills and capabilities that will make you employable for the rest of your life because you are not always able to CHOOSE what skills you develop in a job defined by your employer. Given the rate at which technology is advancing, people who are not constantly improving and learning may well find themselves the miners in a country that no longer mines 20 (or even 10) years down the line. Then what?
  • You risk loosing your job. In a growing global economy people forget about this risk, but we are currently in a troubled world economy and even if a grand recovery does eventually come, the economic cycle will surely deliver a number of other recessions in each of our lifetimes. What’s more, companies go bust or contract for reasons completely unrelated to the global economy, putting all but the most valuable employees at the risk of being retrenched.
  • You risk not being happy. Many philosophers, work psychologists and more recently, behavioural economists argue that a major influence on our happiness is the ability to do meaningful work. In many large corporations it may not be possible to do this. How many people do you know who love their job? 

(b) Starting a business

  • You risk not having enough money to live. However “to live” is a funny term. Sure, if I had a family and was used to a lavish lifestyle, “survive” may mean several thousand pounds per month. While setting up this business, to me, survive means something in the region of £500 per month. An easily attainable amount (even less that what some people in the UK receive in benefits each month).
  • You risk… um, I can’t think of any others. Please feel free to mention any you may think of in the comments below.

Of course some people may say, you risk “failure” or you risk “having to sleep less” and so on. Like I said, this risk is a perceived risk and will mean different things to different people.

The second argument I have against being an employee is based on the concept of TIMING.
It seems like a reasonable argument: “Get a job, learn, accumulate wealth, exit, start a business, succeed.”

Looking at my dad as an example, I put forward my argument against this type of approach.

My father is a major inspiration to me. During his life he has changed so many jobs, always looking for something better, something to stimulate him and wherever he goes, no matter the industry, he advances within the company at a lightning speed. He is soon going to be 50 and in the IT industry age tends to be against you – not in his case. He is doing better than ever and has managed to do all this while immigrating out of Bulgaria with nothing and then returning to start again many years later.

For the past few years he has been also working on starting a chain of Montessori schools with my step-mom. There is a huge demand for these schools in Bulgaria and they have already successfully opened several. He continues to inspire me with his ability to adapt and take advantage of opportunities. Had my dad been born in a capitalist country and had he not had a son at a young age and immigrated to a country where he had to provide for his family, I think my dad would have become an entrepreneur at a much younger age and a great one at that.

His example shows me several key things:

  • Specialising – great for an employee, but not necessarily the key to success for an entrepreneur. After years of specialising, you might know a lot about the one thing you do really well at company ABC but could you start your own company to compete with ABC? There are natural leaders, but there are also those that are made through effort and learning; and to be made takes time. It is a great (level 5 – Good to Great) leader that makes a business succeed.
  • Family and marriage – your perceived risk increases with having a family as the possibility of not being able to put bread on the table for your wife and kids is riskier than if you are alone. The average age for people getting married in the UK is 27. So once you graduate, on average, you have 4-5 years before you are married. This is a window of opportunity. Go tell your new wife you are leaving your investment banking job to start a business that may fail and see how she responds.
  • The Rat Race – Good employees progress in a company. They earn more with every year and therefore the financial opportunity cost of starting your own business increases. At first this may only be the amount you would earn in a graduate position but it may easily become 6 digits or more before long. This makes the financial decision to leave and start your own business even harder when you have been employed for a few years.

In summary, I think for young people, the risk of being an employee is generally greater than starting your own business. I also think there is a strong inverse correlation between the passage of time and the likelihood and ease with which people can start and succeed at starting their own business.

One possible solution that meets employee and entrepreneur mid-way, could be starting a job in a small company where you can be INTRApreneurial. You still get a salary, you are more likely to do meaningful and creative work and should the business succeed, you are likely to have equity options available to you, helping you make the transition from employee to business owner.

Below is my presentation on Intrapreneurship presented at the Manchester Entrepreneurs: “What’s Next” event.