Technological issues

I think that every start-up has their issues, and at Access Regional, we have definitely encountered our fair share.

I spoke in one of the initial entries about founding Director problems, leading one member to have to drop out due to other commitments. That definitely dropped us back in our timescale. At one stage, we were talking about launching in May 2012, however, it was clear that almost as soon as we’d picked this date that it was not appropriate, and was never realistic.

Once the Directorship of the company had been resolved, we then set our sights on a September/October 2012 launch, in line with new students returning. However, that’s when we begin to encounter the dreaded technology issues. Technology has produced so many advancements in modern society, but I also find that it can be one of the most infuriating aspects of life. As we are a mainly web based company, it’s essential that our website represents our values and is user friendly enough to be used by a mass market. An important thing to remember is that everything with which you are associated represents you and can have an impact on how you are viewed or whether organisations will conduct business with you. So websites, logos and emails are absolutely paramount.

Although delayed, the website was really starting to take shape. It looked really good on the programme, but as soon as we attempted to take it onto the live server, it didn’t work. Obviously a large amount of time had been spent testing every aspect of the demo site, but there was some issue. We hope (fingers tightly crossed), that this is a basic problem (rather than coding issues) which will be resolved in the next day or so, meaning we won’t be delayed further.

Even without any other issues, trying to balance full time jobs whilst creating a company creates its own challenges. What I’m trying to convey is, always expect the unexpected and although launch dates are essential to work towards, don’t beat yourself up if something outside your control pushes it back. It is much better to get your product or service right and launch it when ready, rather than rush it to market and encounter all of your issues once it’s in the public domain when it’s dangerously easy to give potential customers and investors a bad impression.

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Doing your homework

One of the key reasons why so many start-ups fail is because they think they know that there will be demand for their product or service, launch, and then realise that there is none. Obviously if you have no demand, you have no one to supply, therefore no income and, probably, no company!

Market research is a key step to take before you launch a product or service into the market. Not only if there is a demand for what you are offering, but also does a market already exist? If it does, how large is it and what competitors are there in that marketplace already? If you find that you are going to face huge multinational firms, how are you going to be able to offer something they don’t? How will you then ensure that you have sufficient intellectual property rights in place to protect yourself, so that these rivals can’t create a similar product when they see how successful you are becoming? Also consider that these competitors may have far larger resources than you, in terms of finance and people power, and benefit from Economies of Scale (the cost advantages gained from being big). People have of course entered competitive markets in the past and established themselves through a mixture of unique spins on existing products and patent protection, but this is not easy.

The other end of the spectrum is entering a market which does not yet exist. If this is the case, is it because your idea is so innovative that no one else has thought of it yet, or is it in fact because people have tried and failed in the past, to establish enough demand as this newly created market is too small?

In either scenario, once you have a clear idea of who your target market is, you should research into the market place to determine market size (how many people are you aiming at) and competition within this area. Once you’ve identified your market and competitors, you can then set about establishing if there is demand. There are several ways to do this, but essentially you need to ask people if they would buy your product. This can be done through use of online surveys, which can reach a large number of people, but your feedback may be restricted due to the nature of the beast. Another option is to go and speak with these potential customers face-to-face either through focus groups, or by simply approaching people and getting their thoughts. You will probably get a smaller response rate, but much more detailed feedback.

For Access Regional, we identified our target market as being students and young people. We tracked down figures showing how many people fitting that description were in the West Midlands area, and then spoke with people one-on-one to see if they liked the idea and if this was a service they could see themselves using.

Whichever way you decide to undertake this, doing your homework on your market could save you a lot of time and investment. It is not the most interesting thing to undertake in the company formation process, but it is one of the most key.

Financial projections: the importance of realism

When composing a business plan, and in several future business activities when you’re operational, you’ll need to create financial statements and future projections. The main models which will be needed at some stage of your business will be:

  • Balance sheet: this assesses everything in terms of assets (what you own) and liabilities (what you owe), to give a financial snap shot at a particular point, normally the end of your financial year.
  • Cash flow statement: literally how receipts (income) and payments (expenses) impact upon the cash you have in the company.
  • Profit and loss account: this gives a statement of your revenue against your costs to show your profit or loss at any given period of time.

Of the above, it is normal to prepare a profit and loss forecast for the next three years, and a cash flow statement for year one, when writing the business plan. This will give any investors or banks, an idea of what you are expecting to generate.

As you can imagine, trying to estimate what will happen in a month, let alone in three years’ time, is a huge challenge (unless you have a very accurate crystal ball).

There’s a huge temptation to put down very optimistic figures showing that the company will generate millions of pounds of profits after year one. But unless these are very accurate, chances are, banks and investors won’t take you seriously.

I showed my financial projections to a business specialist, a financial accountant and a bank manager and all said that they were happy as I had given a realistic view of where the company would be in three years’ time, and I gained credibility as a result. I am definitely not saying don’t have ambitions to become the new ‘Facebook’, but you can always amend your figures at a later date, and I can guarantee that underestimating your profits will put you in far better stead than vastly overestimating, when faced with investors.

My own financial documents have changed massively since their conception. This was mainly due to the fact that the nature of the business changed. It started off as a social enterprise, so accessing grants would be a big revenue stream, however as the ideas evolved, so has the type of business we’re creating, making all previous figures irrelevant.

As I said, there is no problem with that, and evolution is all part of business and entrepreneurialism, as is ambition, after all as W. Clement Stone once said, “aim for the moon. If you miss, you may hit a star”, but in order to gain credibility ensure realism is reflected in your financial projections.