This time of year it’s not uncommon for thoughts to drift in the direction of doing something fresh, something different, and making the new year a new start.
For some, that means thinking about throwing off the shackles of their current employer, and starting their own shop. I did that, many years ago now, and have never regretted the decision.
But it’s not all plain sailing and plenty of newbies don’t make it beyond the three year mark. So here are a few pointers for you, if you are thinking of starting your own business, followed by advice for employers.
The divorce might be messy. From your employer’s point of view, you wanting to leave – probably aiming to take some of their clients away from them, staff too – is a betrayal; a potential competitive threat, and a disruption to business they could well do without (setting up my new firm made the FT, the Times, The Independent, The Telegraph and the Economist, as well as the trade media, and that wasn’t the publicity my employer was seeking). So they might resort to the law, to stop you or make life difficult.
That happened to me. My employer’s initial reaction was what might be characterised as ‘emotional’ and they engaged lawyers, right up to litigation partners, and expressed an intention to sue me, as “ringleader”, for loss of profits and much else. Had they succeeded, I would have lost my house, my savings, everything. Let me tell you, that’s scary.
Fortunately, we were advised by some excellent people at Lewis Silkin and after a while, the emotion died down and we negotiated a settlement.
Your employer will start by looking at your contract of employment, and at the duties you owe them as a Director, and at client contracts, to see if you have broken any of them.
So, make sure – as we did – that when doing any pre-startup planning, you do not breach your conditions of employment, or anything else.
- Do not use any office systems to draft plans or communicate with fellow plotters, so you need to buy personal laptops / phones and set up a separate communications network.
- Do not plot in your employer’s offices.
- Do not take client lists or anything that could be considered confidential or the IP of your employer.
- Do not plot in your employer’s time.
And set money aside to pay for a good lawyer; you might not need it, but it may come in handy…
Clients may not join you as expected. We were allowed to approach a number of clients – after going through various hoops – and although some joined up quickly, others did not.
Some reasoned that sticking with a big-name PR firm was a safer bet than going with a start-up. One client told me that by leaving I had betrayed my employer and he thought that reprehensible, which is fair enough.
Some clients you have never worked with before will be attracted by the reputation of the people on your team, others because they guess that small and new = energetic and (relatively) cheap.
Some talented mates in another financial PR start-up, who had a great reputation amongst investment banks for the quality of their work, were told by the same bankers that they would not hire them, until they had established a track record in their new business. Catch 22 and all that.
The point is, you really don’t know which existing clients will join you and which will not. You don’t know which intermediaries will recommend you and which will not, so you need to mentally prepare yourself for disappointment, and you need to have enough money set aside to tide you over, should initial assessments of business fall short.
Staff may disappoint you. There’s a massive amount of work involved in setting up a new business, and its essential that you don’t try to do this entirely solo. You will need to find folks willing to join you. We identified a couple of really talented people who said they wanted to join us, but who eventually decided that they could not bear the risk involved. That’s fair enough – make no mistake, it is risky – but having staff pencilled in who then cancel on you may damage your plans.
You don’t have a credit rating. One thing that had not occurred to me, was that the new business, by definition, doesn’t have a commercial track record. So we found that most suppliers refused to offer us credit. If we wanted business cards, pens, paper, filing cabinets and all the mundane necessities of a business, we would have to pay in advance (one company did give us 30 days credit and as a result of their trust in me, I used them for the next decade).
But whilst stationery and similar are arguably trivial matters, getting office space is different and very expensive, in terms of up-front deposits and so on. And whilst I know that you can use drop-in spaces and shared occupancy offices, in my experience these are not great places to base a permanent business; plus they tend to be expensive (and often, many of the costs are hidden). So you may end up sharing an office with someone, or taking on a fag-end lease. Try asking the clients you know will join you, for money up-front, to help fund your initial costs.
Your offer is probably not hugely distinctive. I suspect that for most people, when they start out, they are dealing with some of the same clients as before, with some of the same colleagues as before, doing the same sort of work as before.
However, whilst that may be fine to get you going, being a small, me-too player in a world of more established businesses, with new me-too operations springing up all around you is not a terribly attractive place to be. After all, from a client perspective, when faced with a range of suppliers, all offering essentially the same thing, the rational thing to do is to hire the cheapest. And there will always be folk out there who will bid more cheaply than you.
So at some point early on, you need to give serious thought to how to differentiate yourself, and create a business offer that (in the words of MKS) is Big, Simple, Unique and True.
You won’t be young and interesting for long. Whilst you remain new, and thus interesting, you will find that many prospective clients will readily agree to see you, so new business efforts are initially not terribly taxing.
But, “new” only lasts for about twelve months, and then more, newer, companies come fresh out of the box and take attention away from you.
So spend every possible moment out there, networking and chasing business. You really don’t have time to procrastinate on this, as once you pass the 12 month mark, getting meetings suddenly becomes much more difficult.
Geography matters. If you set up a business in a geographically distant area, or one of low levels of economic activity, you will have a problem, because the risk is that you will end up working for predominantly small clients (who don’t have much money), being pretty much a jack-of-all-trades (because there’s not enough work to specialise, and clients don’t want to pay for too many external firms), and that’s not an enticing prospect.
But this is the age of Zoom, Teams and remote working, I hear you say. Yes and no. Winning clients is a contact sport, and if you expect people to pay big money to hire you, they will want to see you, in the flesh, to suss you out. And if you want to network (and you do, like it or not), you have to get yourself to somewhere where you can efficiently meet large numbers of people. Locally you will find that the same old suspects keep turning up at your local networking events, and that gets you nowhere.
So I suggest that you need to base yourself – or at least have a significant presence – in London or some other economic hot-spot. And ideally, not one that is dominated by a single industry (I did a lecture tour for the PRCA and we visited Aberdeen post-oil heyday. I thought it had been nuked, there was so little going on…).
Stop talking and get on with it. The number of people I have met who have told me “I’m thinking of setting up my own business” is enormous. But vanishingly few people turn those words into action. After all, it is a serious financial risk, and the emotional cost can be pretty high, too.
The point is, there are loads of dreamers out there, who procrastinate and dither, and delay, and wait for ‘just the right moment’ and then wait some more, and so stay dreamers forever. And if you don’t watch out, you may become one of them. So, if you really want to set up your own shop, join the achievers and leave the dreamers behind, stop talking about it and start taking action.
How to stop folk leaving to set up on their own, if you are their boss. It’s perfectly natural that some folk will want to leave to try and do things on their own. What you need to consider is (a) do you really care if a particular individual leaves? Sometimes having folk leave really is no big deal (and can be a relief); (b) are they leaving because you are doing something wrong? Do you have the wrong culture, or is your business behind the times? Or is it just that the leaver has a level of ambition you cannot satisfy?
The thing is, if someone gets to the point of making the emotional decision to leave, there’s realistically nothing you can do about it. Sure, you can have the lawyers remind them of their obligations; you can offer them more money and promotions, but they are likely to think that your generosity is a bit late.
So stopping folks leaving is something you have to work on, constantly, from the start. In a nutshell:
- Keep improving your firm’s commercial offer – are you achieving high productivity levels >£150K, for example, so folks know they are working for a high-quality business?
- Keep a close eye on people who have been with you >5 years – they are the ones most likely to get itchy feet;
- Do you give your people as much interesting, meaningful work as possible?
- Do you promote and support folk, fast?
- Do you treat people fairly?
- Do you pay well, or do you adopt the Dilbert approach (pay above average people below average money)?
- Do you make your business an exciting place to work, rather than a sweat shop (at Arthur Andersen, one of the world’s biggest and best accountancy firms, we worked colossal hours but it always felt like we were living in the fast lane)?
But if none of that works and someone good is heading for the exit, try to keep your emotions under control; treat them reasonably, because (a) their venture may fail, and you could rehire them, (b) you don’t want remaining staff to think you behaving badly, or more might choose to exit, (c) if you lose your temper and “fire” them, their contractual restrictions may fall away, making a difficult situation worse.
And remember, the chances are that if someone does leave, in 12 months’ time your business will still be standing, and you will look back and wonder what all the fuss was about.
Whether you are a boss or a leaver, as always time is short and there’s much to do, so good luck and get cracking.