The Bottom Line on Startups and Mistakes

This is 30 minutes of business studies gold dust. Evan Davis brings together three superb speakers for this edition of The Bottom Line to discuss the nature of startups in the UK and also the related topic of innovation and adaptability. Some terrific insights here for all A* students and I would highly recommend that you download the podcast for your own enjoyment too.

Here is a link to the podcast:

http://downloads.bbc.co.uk/podcasts/radio4/bottomline/bottomline_20111006-2100a.mp3

Matt Brittin - MD Google UK
Lara Morgan - Founder Pacific Direct (made a fortune in hotel toiletries)
Luke Johnson - serial entrepreneur (Pizza Express, The Ivy, Prada, best-selling author & FT columnist)

Some key points made (in broad order of discussion) [my points of emphasis in square brackets]

Starting a Business

Only 10% of people will ever start their business

Entrepreneurs need a “desire for gain”, not a fear of loss

Starting a business provides great freedom and creativity [than working for someone else] - links to motives for being an entrepreneur

But starting a business can be lonely - requires great self-motivation and persistence [qualities of an entrepreneur]

Most entrepreneurs who “make it” - have taken 10-15 years to build a success [rarely such a thing as an overnight success]

It is not really about the “idea” - it is about the execution of the idea [how important is the business idea?]

Business angels are under-rated - they are key to getting good businesses off the ground [sources of finance]

Friends and family finances - can cause emotional problems [a potential downside of raising finance from relatives!]

Retained profit was key to the growth of Pacific Direct - the main source of finance [a hugely important point - profits reinvested in a business for growth]

Bank funding is much easier to get when the business has a track record of profitable trading [banks see startups as high risk and are very unlikely to lend to them]

Setting up online enables a startup to check the viability of an idea much quicker, but a website alone is not enough

Do startups create jobs? Many online startups are run by just one or a few people [the govt is probably unwise relying on encouraging business startups as a way of reducing unemployment!]

Barriers to entry - are they lower for startups? [depends on which market a startup is trying to enter]

Startups have almost no chance in many markets - e.g. Google, Apple and Amazon dominate their markets [startups are better targeting a niche]

Online advertising - creates huge opportunities for startups because it allows targetted, measurable advertising [but online advertising just one part of a promotional mix]

A dramatic cultural shift in attitudes to entrepreneurship in the UK - many people turning to the idea of starting up - more advice, more role models [more competition for startups, but perhaps less risk]

Locations for startups - entrepreneurs benefit from working together / alongside each other [location benefits of collaboration]

The importance of trial & error in successful innovation:

Tim Harford - Adapt: the importance of making mistakes [great book - highly recommended]

No business plan ever goes to plan - but that is not an excuse not to plan! [business planning as a key discipline - but doesn’t have to be complicated]

A business plan is a good discipline for a startup - focuses on the practical and pragmatic issues

Attitudes to failure - is it ok to fail? [in the USA failure is tolerated more than in the UK?]

Entrepreneurs tend to be optimists - but they need to take calculated risks to limit the downside (don’t risk it all)

Small companies have a key competitive advantage over big ones - they can admit mistakes and change direction quickly

Flexibility is part of an ability to succeed

Online - allows firms to experiment very quickly

Experiments, pilots allow testing [test marketing]

Firms need to be able to let go of projects that don’t work [recognise when a startup idea is not viable]