You’ve spotted a gap in the market and come up with a great idea, but with more than half of start-ups estimated to fail in their first year, and a further 90% in their second year, how do you make sure that you don’t join the growing list of statistics?
There’s no one reason why some start-ups fail, but there are some common contributing factors – growing too fast, too much investment, too many overheads – which can all lead to an overstretched business struggling to pay too many bills.
In 2009, I set up Bullion By Post, an online bullion dealer delivering gold and silver bars and coins through the post, with just £10k. Today, the company has a turnover of £55m.
The tips below illustrate the importance of taking the ‘learning to walk before you can run’ approach.
I studied economics at Sheffield University before working at ASDA where I developed and launched the website for the George clothing range. When I was left some money by my mother in her will, I decided to invest in bullion as the idea of having my own gold and silver bars and coins had always appealed to me. But I experienced poor customer service with established bullion dealers who weren’t interested in ‘small’ orders from members of the public, preferring to focus on trade orders.
While researching the industry I realised that online was the way to go and drew on my e-commerce skills to create a comprehensive website offering a transparent service for customers.
My economics degree is undoubtedly useful to help me keep a tight rein on the finances, and I decided early on just how much I was prepared to risk for the business. For success, it’s essential to play to your strengths and work hard to fill gaps. Once you are in a position to recruit, take on staff who have those missing skills or experience you need.
My aim was to re-invest all profit straight back into the business to help it grow. I started as a one-man band, answering calls and talking to customers, labelling and stuffing envelopes, posting orders, and paying myself a minimal wage.
When orders picked up I called on friends and family to help out. I was very cautious about overspending on overheads, starting off in a small office and I only moved once the company had outgrown the premises. I took on my first member of staff one year after setting up.
Following my experience with several established bullion companies, I discovered that customer service was low on their priorities. I was treated indifferently due to my relatively ‘small’ investment and I used that experience to realise how I could offer a much better service.
Our customers often want to discuss their options but do not want to be pressured into making a quick decision. We understand that many of our customers have been thinking about investing in bullion for a while before they even contact us and it’s imperative to offer a transparent service. It’s essential to offer good customer service to build brand loyalty and to ensure customers recommend you to others!
Great relationships with suppliers have been critical to the success of the business. I have always invested plenty of time in building relationships with our suppliers and we aim to be their first choice customer to deal with.
For my second personal purchase of bullion, I decided to contact the bullion manufacturer directly and discovered that they had an office in Birmingham’s Jewellery Quarter. I got on well with the supplier and approached them when I was setting up Bullion By Post. Luckily they had a spare room in their office and let me set up rent-free. It enabled me to keep costs down, as I was able to get the bullion directly from them before posting out orders.
It’s a key part of business to be nice to suppliers. It may sound obvious but you would struggle without them and remember, they may also be approached to recommend someone – and you want to make sure that you’re number one on that list!
I didn’t have a detailed business plan for Bullion By Post. I had a very clear idea from the start about how much I was prepared to risk and what I wanted to do. I had a clear forecast of my start-up costs and overheads, but not my sales as I knew it was almost impossible to forecast at the outset.
I drew on my experience as a customer and identified what had been lacking and how I could improve upon it. Often start-ups get too fixated on the financial forecasts and where they expect to be in year one, and year two, etc. It’s not that clear cut and to a degree you need to be flexible and adapt according to peaks and troughs in demand.
Rob Halliday-Stein is the founder of Bullion By Post. www.bullionbypost.co.uk