How do I launch a start-up business?
Launching a start-up business presents formidable challenges for inexperienced and seasoned founders alike, and it is not surprising that a substantial number of start-ups fail for all kinds of reasons – some of which are avoidable.
Navigating the early days of your start-up’s journey and commercialising your idea requires substantial amounts of time and commitment. Overnight you need to develop and deploy a broad set of hard and soft skills, not least relationship building, confidence and perseverance. Understanding business and finance will also stand you in good stead when working with incubators, accelerators, tax advisors, lawyers, banks, investors and other finance providers.
Our “That Light Bulb Moment” series will guide you through the key stages of setting up and scaling your business. It will sign-post you to headline commercial and practical considerations, explain and analyse fundamental start-up topics, help you to avoid common start-up pitfalls and enable you to identify and react to threats and opportunities efficiently.
This introductory article focuses on the steps you need to take to launch your start-up business following that light bulb moment, highlighting some of the headline stages and processes and identifying questions that you should be raising and discussing with your key advisors at the outset.
Following that light bulb moment, you will have dedicated months to refining your minimum viable product to meet your target market’s needs, identifying who your target market is and its appetite for your product, understanding the sector and your competition, and getting to grips with the difficulties your business might face in the short term, not least in the face of recent global events including a new US President-elect, Brexit, a global pandemic and fast-emerging disruptive technologies.
You will also have committed time to brainstorm a business name and logo, create an edgy brand, determine optimal distribution channels, develop a marketing strategy, draft content and designs for your website, App or other platforms, prepare a draft business plan with a cash flow forecast and other financial forecasts, rehearse an elevator pitch and draft a compelling pitch deck to attract potential investors, liaise with budding entrepreneurs and encourage friends and family to invest in your idea. All of these steps are pre-requisites to building a strong and resilient start-up business.
There will be other financial considerations including whether you have the necessary funds, which is particularly important if you have chosen to leave your previous employment and commit all your time and resources to your start-up business. To reach a sensible conclusion, you will need to perform a break-even analysis and calculate when your business will become profitable, as well as understand the point at which you will need to start raising funds. Depending on the nature of the business, it might not be unreasonable to forecast losses during the first couple of years.
Now that you have laid the foundations to build your start-up business, you should be asking these 20 questions:
- What funds do I have available to launch my business and how long will they last?
- Will launching my business put me in breach of my existing employment contract?
- What business structure should I trade through?
- If I trade through a company, how do I prepare the company’s constitution and what are my responsibilities to Companies House and as a director and shareholder of the company?
- Where and when should I open a business account?
- How do I prepare a Business Plan?
- What vesting arrangements should the founders commit to?
- How can I raise finance to launch and scale the business?
- How do I value the business?
- How do I prepare an Executive Summary and Pitch Deck to circulate to potential investors?
- On what terms should I sell shares in the business to investors?
- How do I employ staff, and on what terms?
- Should I offer shares in the business to reward and incentivise top talent?
- How do I protect business intellectual property?
- How do I stay compliant with data protection legislation?
- Do I need terms and conditions to limit liability when contracting with suppliers and clients?
- Do I need to lease office space, and on what terms?
- Do I need to comply with any specific regulations or obtain any specific licences to trade?
- Do I need any specific insurance policies?
- What is my exit strategy and does this align with my co-founder’s exit strategy?
Start-ups are particularly exposed and vulnerable to pitfalls that could be costly or even fatal, so getting advisors on board and getting your house in order before launching or scaling your business is critical. Getting the right advice at the right time will allow you to focus your efforts on running and developing your product and will give your potential investors confidence in both you and your business.
Investors will, as part of their due diligence on your start-up business expect you to have considered and implemented arrangements and entered into agreements concerning matters such as founders’ vesting, the founders’ and employees’ terms of employment, protection of intellectual property, the use of data, policies relating to the website or App and suitable limitations of liability in contracts. Meeting these expectations will give your prospective investors confidence about you, the sustainability of the business and any business valuation. The benefits of getting your ducks in a row at the outset will far outweigh the inevitable stress, distraction, time and costs associated with future remedial work.
The Corporate and Commercial team at Greenwoods GRM can draw on its vast expertise and network of advisors to answer each of the 20 questions above and to support you and your business at every stage of its journey from inception to exit.
Having worked with founders of businesses at different stages and across a range of sectors, we understand and appreciate the different types of pressures that founders and start-ups face, and the specific challenges that launching and scaling a new business entails. Crucially, we recognise that each founder and start-up business is unique, and our focus is on helping your business achieve its goals, and to give you back the time you need to establish and drive your business forward by providing you with clear, focused and timely solutions.
We recognise that the start-up ecosystem is besieged with complex jargon and acronyms. To boost your start-up journey, build your confidence and equip you with some of the tools you need to work with your professional advisors, we have prepared a comprehensive Start-Up Jargon Buster Glossary and a list of commonly used acronyms. You can access these here.
Whilst the issues being covered in this series are particularly relevant for start-up businesses, established businesses will also benefit from the issues raised and discussed.
For our professional adviser subscribers, there will also be issues here to signpost your start-up and SME clients to.
Please contact me to schedule a free no-obligation consultation to find out how we can support your business.
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This update is for general purposes and guidance only and does not constitute legal or professional advice. You should seek legal advice before relying on its content. For advice, get in touch with your usual Greenwoods GRM contact or scroll down to complete our enquiry form.