Do you really need to be the next Facebook?

VV 13 Aug 2

Many start-ups expect to be selling their company for millions or floating on the stock exchange in just a few years. But not every new company can be the next Facebook, and sometimes just being a success is enough.

Media reports of companies like WhatsApp and Uber being sold for millions of pounds have set the bar high for new business owners.

In fact, a survey found new companies now expect turnover growth of more than 700% over just 3 years.

But are these expectations unrealistic and actually holding them back? We look at the reality of starting a new business.

1. Getting funding

Great expectations: An angel investor will come along, see how brilliant your idea is and invest millions up front.

The reality: One of the big challenges a new business faces is securing funding, whether it’s in the form of a business loan or investors. You might think your idea is great and could change the world, but unless you can prove it it’ll be hard to get huge sums up front.

Life isn’t like Dragon’s Den. Angel investors are still thin on the ground, so you’ve got to spread your bets.

It can be a slow, soul-destroying job getting the initial start-up capital. But remember, those who you convince to supply funds will hopefully believe in your business as much as you do.

2. Growth targets

Great expectations: In 3 years you’ll have a turnover of £100m and be employing 100 staff across the globe.

The reality: Figures from 2014 show just half of all start-ups last more than 5 years.

Slow, steady growth can be more favourable than fast, unsustainable expansion.

If you want to create a sustainable business, getting through the first year without major losses should be seen as a success.

VV 13 Aug a2

3. Balancing to books

Great expectations: There will be so much money coming in, it doesn’t matter that you don’t know about accounting.

The reality: Just because you call yourself a CEO, it doesn’t mean you know how to run a business. There may be lots of zeros on the spreadsheets and in the emails, but that doesn’t mean you’re making money.

Getting funding is only the half the battle – with that funding you’ve got to make a financially viable business. And if you don’t put in the hard work making sure the margins work, people are getting paid and your growth predictions are realistic, your business will not succeed.

4. Go compare

Great expectations: A similar firm has just been bought for £1bn – that means you’re worth that as well.

The reality: It’s hard not to compare yourself to similar firms. Especially when they’re super-successful. But the headlines about supposed overnight successes often don’t tell the full story.

It could be the firm has financial backing from a rich family member, had connections with the industry previously, or it has actually been working for years perfecting the product before launching it to market.

The best advice is to compare your business to itself over time. Set 6-month targets that are realistic such as making a set amount of sales, having the books organised or to simply be in an office.

Posted by The Secret Businessman