Learn from those who have done it before

A good idea plus investment – is that all a startup needs?

Never has the UK been such a great place to start a new business.

The Centre for Entrepreneurs recently reported that, in 2015, a record 608,000 new companies started-up on our shores – and tech startups in particular are multiplying. The expanding number of supportive hubs and networks is helping, as is greater investment in the sector: angels and VCs raised over £2.5bn to fund technology companies in 2015 – again, an all-time high. Then there’s the emergence of alternative finance platforms, like crowdfunding, new online angel clusters, and peer-to-peer platforms, which together topped £3.2bn according to Tech City News. It’s easy to see why so many budding entrepreneurs are deciding to take the plunge.

So why is it that, with all this support and investment, roughly 50 percent of businesses still fail in their first five years? It’s an unacceptably high failure rate and it’s consistent across all sectors. Whatever the industry, budding entrepreneurs face a set of hurdles that are, in half the cases, too high to get past.

Some of the most-cited reasons for failure include the UK regulatory environment and tax systems, then there’s patchy bank lending habits and poor cash-flow management. But are there other factors?

Anyone who has ventured into running their own company knows that starting and growing a business is a tough journey. A good idea plus funding, simply, aren’t enough, and terminal problems can arise from many varied and complex situations.

To make a business ‘match fit’, it’s essential that entrepreneurs create a detailed business plan for the sake of consistency, coherence and, the bottom line, skills training. The skills required to build a £1 million company are an integral part of any plan, and are very different to those required for a £10 million company. Similarly, the skills required to build a £10 million company are again, very different to those required in a £100 million company.

Consider an entrepreneur’s counterpart working in a large corporation – that person is likely to receive extensive and ongoing training as part of their career development programme. They’re also being exposed, day in day out, to a multitude of different skills and disciplines – and they have the ability to ask questions to skilled colleagues and management. It’s clear how someone taking the entrepreneurial path can easily fall behind.

pexels-photo-57825My view is that all startups should spend at least 10 percent of any investment they receive on training – as individuals and as a team –  to learn the skills necessary to sustainably build and develop a business. If investors insisted on this as a condition of any funding or grant, I firmly believe that we could bring the UK’s 50 percent startup failure rate down significantly. Moreover we’d generate a stronger, more resilient and iterative startup culture here.

So, my message to any entrepreneur starting out is to get you and your new team ‘match fit’ by investing in the growth of your business from the outset. Via personal development plans for you and your team, we can equip those starting out with the skills needed to plot, predict and handle the growth curve without breaking stride.

Read more about Geoff’s experience and find out what he can offer aspiring University entrepreneurs on his Future Worlds Mentor profile.

Get in touch with Geoff Baker

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Geoff Baker

President Elect,
Institution of
Mechanical Engineers

Geoff is a Chartered Engineer and President Elect of the Institution of Mechanical Engineers (IMechE). He was MD/co-founder of Plant Asset Management & ATL and believes passionately about the entrepreneurial ability of engineers to create new businesses to help grow the UK economy. He encourages engineering innovation and entrepreneurship through his blog www.entrepreneurialengineers.com

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