By Ritam Gandhi, Founder and Director, Studio Graphene
Launching a new business may seem like a daunting experience, but the process of transforming an abstract concept into a fully functioning product or service can be hugely rewarding. And, for entrepreneurs located near one of the UK’s many thriving start-up communities, the infrastructure available to help launch a company has never been better. Across the UK, the desire to launch a business is clearly rising – between 2012 and 2017 there were 3.5 million start-ups launched across the country. This is an impressive feat, and the UK government has clearly taken note, introducing new reforms in a bid to support early-stage firms, such as access to finance and R&D tax credits. However, while birth rates may be flourishing, young start-ups now face an increasingly difficult challenge of transforming into fully-fledged SMEs.
One statistic offers some perspective of how serious this problem is: of all the companies established in the UK in 2013, only a little over half (53.7%) were still in existence by 2017. It’s great to see that entrepreneurs are not being deterred to launch a business by the chances of it failing – yet the big question for them is how they can ensure their start-up is able to effectively pass the three-year milestone and become a scale-up.
Since the launch of Studio Graphene almost four years ago, our team has experienced first-hand the challenges commonly faced by start-ups in their formative years. So, for entrepreneurs in the midst of launching a new business, how can they maximise their chances of becoming a long-term success?
Is there demand for your product?
Right from the onset, a start-up must be able to determine whether there is any actual demand for their proposed product or service. It may seem like a relatively simple (and obvious) question to consider when creating a new business, but such simplicity is often overlooked by many entrepreneurs, who make the mistake of creating an unnecessarily complex and niche proposition.
An idea may sound fantastic in principle, but will it have the broad market appeal to grow in the years to come? Is it an easily scalable product, and are there routes for international expansion? These are some questions that need to be considered. Create a niche product that appeals to a limited audience and the opportunity to scale and grow is limited. Create something that has mass-audience appeal but isn’t likely to remain in high demand also leads to the same problem.
Achieving the right product-market fit is important when launching a start-up, and must be constantly reviewed across the various stages of the business cycle.
Take small steps instead of one large stride
Every day we hear of young companies successfully raising several million pounds, entering into partnerships with huge brands or reaching massive milestones in terms of customer acquisition. However, while targets like this can serve as fantastic motivation, start-ups should not fall into the trap of setting huge goals that are simply unattainable in the short or medium term.
Growth should always be measured through regular and achievable targets – they reduce the cost and risk of a particular decision not delivering the desired results, and also allow start-ups to responsively monitor shifts in technological trends and customer preferences. The challenge for young businesses is effectively managing their limited resources, and this makes it extremely important not to overexpose the business to unnecessary risks by thinking too big or too far ahead.
Many start-ups are at the forefront of innovation; and in the UK we are seeing first-hand how young businesses are completely transforming their respective industries. To ensure more start-ups are able to reach their full potential, they must ensure they have the right product-market fit, and also set small and attainable company milestones. Combined, both of these factors will help lay down the foundations for a start-up to successfully surpass the three-year milestone and become a scaling SME with a bright future.
For a decade, Ritam worked as a consultant for the likes of Accenture and Bank of America Merrill Lynch before, in 2014, going on to found Studio Graphene – a firm that specialises in developing blank canvas tech products.