Start Up, Take Off

Real Business Magazine
September 2008
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The teething years are a trying time for start-ups, but a comprehensive business plan will keep you focused – and help see you through to maturity.

“Companies are like children. At the start they are hard work. They keep you awake at night and make you work flat-out through weekends and holidays. But gradually they become less effort. Eventually they grow up a bit and you can start to sleep through the night again.” Stefan Wissenbach knows all about rearing firms. He’s founded four, and his latest offspring, The Wissenbach Group, gives financial advice to entrepreneurs looking to turbo-charge their company’s growth. He’s an expert on getting firms through their infancy, and – crucially – on what they need to do when they mature.

Take business plans. Every start-up’s got one. But what do you do when your first one is obsolete? “You need a three-year plan,” advises Wissenbach. “It should show your target end stage, with the ideal P&L, turnover, cost of sales, staff costs. Then start to think about how you get there. I recommend entrepreneurs break down the three-year plan into 90 day chunks. You can then analyse what you need to do each month, each week and each day.”

The goal, he says, is for the plan to keep you disciplined and focused. “Business plans allow you no room for failure. They show you whether you are moving fast enough, whether your costs are too high and whether your sales are growing at the required rate. It shows you at any moment whether you are on track.”

But, says Wissenbach, the plan is a two-way document: it influences you, and you influence it. “The plan should be a living, breathing document. Keep it in front of you, not on a shelf gathering dust. Make changes, every week if you need to. If your product or the market changes, modify your timetable. In my company we meet every Monday morning to discuss the business plan. All of the staff attend, and we discuss figures, progress and goals. Everyone gets to contribute to the debate. If you are keeping secrets from your staff, you will never get them to buy-in to your mission. Are you cheating your staff? Is that why your plan is secret? Be open. These weekly discussions ensure that we are up-to-date and the plan is relevant. Sometimes we only spend five minutes, but that is time very well spent!”

Wissenbach says a well-run firm will make the transition from start-up to mature business seamlessly. “There should be no sudden changes. Your plan will keep you on course like an aeroplane heading for its destination. You just need lots of little touches on the rudder.”

A reliable plan will stop you losing faith in your mission. Too many start-ups believe they can mature in a couple of years. The reality can be a shock. Graham Whitworth, founder of smoke alarms manufacturer Sprue Aegis, found his plan to be perfect in all but one detail: the time frame.

“It took us seven years before we felt like we’d made the transition from start-up to small fast-growth company,” he says. “Our initial plan wasn’t executable until year four or five. Unforeseen problems caused delays: barriers to entry; slow retailers; a lengthy certification process. It took long hours and a hell of a lot of commitment before we finally posted a profit and then everything changed. If it sounds like a long time, look at James Dyson. It took him ten years to get going!”

Whitworth says young firms need to focus on their long-term goal, and not get demoralised by short-term problems. Many niggles and obstacles will vanish the moment you start turning a profit. “That’s when you’ve made it. Our bank manager didn’t want to know us before then. Suddenly we got a call from him – and from other banks, too. Investors change their tune; they know their faith in you is justified. Psychologically, you are a prisoner until you are making money. Crossing that line is a great moment!”

Being cash-positive can be the tipping point. At call centre behemoth The Listening Company, founder Neville Upton employs 2,500 people, generating £55m sales a year, but he reveals he endured six painful years trying to get established. “Our first business plan lasted about an hour. I totally underestimated the time it would take to achieve certain goals. Life as a start-up is hard. We had a million in the bank but couldn’t get credit for stationery. Cash upfront only. Even buying and installing computers is hard, as you don’t have a large IT team. You just do it yourself.”

Then business took off. “It was the middle of 2004, six years after we’d started,” says Upton. “When you are young, blue-chips don’t want to know you. They might love your concept, but they are risk averse. Blue-chips only buy from blue-chips. So you rely on the early adopters of your product – other entrepreneurs usually. As you build up a track record, the blue-chips start to offer you tester contracts to see how well you perform. In 2004 we started getting massive contracts and we really took off. Since then, we’ve grown at 40 per cent a year.

“Being cash-positive plays a big part. Big firms are wary of signing contracts with loss-making service providers. Your competitors make your potential clients aware of the fact you don’t make money. Then suddenly that isn’t an issue. Suppliers give you credit. Angels and bankers relax as they know there won’t be any more cash calls.

“Colleagues will react, too. Announcing the firm is in the black renews everyone’s faith. They know their jobs are safe and the company is on the right track.” Upton says to capitalise on the momentum, you need to keep renewing your goals. “We revise our business plan every month. We ask whether we are developing people in the right way; what improvements we need to make; and how our strategy is performing. Your vision is the same no matter what stage in the company’s life you are at, but you need to keep refining your tactics constantly. Our next challenge is growing the firm to 5,000. That will keep us energised.”

“A robust framework is essential for businesses entering their secondary growth phase,” says Phil Jones, sales and marketing director, Brother UK. “Having a game plan ensures the business remains controlled, without the need for the directors to hand-hold every employee in their day-to-day tasks. There’s always a need to push people to perform, but this can be achieved without them feeling micro-managed. Focusing on the big objectives and the critical factors in how to deliver them is where your time needs to be spent as the business gets bigger, as well as leading your people through any growing pains you experience along the way.”

One pay-off of maturity, as Stefan Wissenbach notes, is that you get to improve your work-life balance a little more. At London’s biggest car-sharing firm, Streetcar, Brett Akker and Andrew Valentine say they can at last enjoy the odd holiday. “For the first six months of trading it was just the two of us,” says Akker. “We were living and breathing Streetcar. We didn’t have an office and met every customer in person. I never turned my phone off; I’d take calls at 3am. Raw adrenaline got us through. Now we have 80 employees, and can take two weeks off in the summer.”

He says successful firms keep the same work ethic. “We don’t want to slow down. Andrew and I man the phones one weekend a month to make sure we are in direct touch with clients. Even if we leave work early, at 7pm, we keep our mobiles on and keep checking email. When you love what you do, enthusiasm keeps you going. We could work less but we don’t want to. Why would we, when this is what we love?”

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