Potential technology entrepreneurs can't just rely on past experience when starting a new venture. Sarah Gant, Centre Director of SETsquared at the University of Surrey, looks at some of the common pitfalls encountered by those who embark on their first technology business.
With Computer Weekly's redundancy tracker showing around 300,000 IT jobs lost in since July last year, there are going to be a lot of experienced people wondering if now is the time to start their own business. The Office of National Statistics and HMRC reckon that 41% of businesses start-ups survive the first three years. Not great, you might think. However, with the right approach, you can swing the odds heavily in your favour.
Perhaps the biggest mistake most would-be entrepreneurs make is to assume their experience will stand them in good stead. This is a particularly dangerous assumption if they've always worked for large companies. Someone else will have handled many aspects of the business. You need to take a critical look at yourself, and at your real skills and experience. Only the most gifted individuals have the skills to start, build and maintain a successful business. But if you don't fall into that category, you can still make the grade, providing you don't simply apply past solutions to every new problem - a tendency from which all of us suffer at times.
The starting point is to find an empathetic sounding board - people that have been there, done it, and come through it all - even if they made plenty of mistakes along the way. Technical would-be entrepreneurs often have a great product idea but no idea what problem it's going to solve, or who might buy it. Other common challenges include securing start-up finance, managing patent registrations and drawing up partnership agreements, or other legal documents. You might also need further research support.
If you are completely on your own and don't have any business partners, starting out can be a very lonely experience too. The contrast between the work/social mix in a large company and becoming a one-man business could not be more marked.
If you want to grow your business to any significant size, you will need outside investment. This means that you need to make your company attractive to investors. They will want to see a clearly thought-out business plan, backed up by numbers that show them realistic potential for a return on their hard-earned cash.
Clearly, there can be many instances where you need to seek advice. The problem is how to tell good advice from bad. Many so-called 'independent advisors' will have a keen eye for a business opportunity, and may see you as just that.
In the 1990s recession, there was little help available for start-ups. But the UK now has about 300 business incubators - not-for-profit organisations designed to help small businesses get started. According to UK Business Incubation (UKBI), the industry body for incubation and incubator centres, 90% of companies that go through incubation are still thriving three years later. In other words, spending time in a business incubator more than doubles your chances of success.
Some incubators just provide low-cost offices and basic businesses services. Others offer advice and mentoring from businessmen that have succeeded in their own right, introductions to investors and professional services providers, help with grants and patent applications, and even access to university research facilities and resources. Companies typically spend about 12 to 18 months in them. The most important thing to note is that they exist to provide guidance without commercial motive, and they're not there to direct you - you still run the show. You need to look for an incubator that matches your business and your needs.
Starting a business will always involve risk but if you've suffered redundancy, or are in the potential firing line, the risk may be less than doing nothing, especially if you capitalise on what the business incubation community has to offer.