Another smart start-up

It was my first day running my own company. I stepped over a pool of vomit on the way into my office, which was in an old factory in Melbourne’s Fitzroy just around the corner from a methadone clinic. Not a great omen. It got worse. It was the middle of a cold Melbourne winter and the heater wasn’t working. I was sharing my office with a bunch of people sitting around in old army coats bought from the Salvos.

I opened my laptop and checked my new email account. Nothing yet. And then I sat there paralysed. There was so much to do. But what to do first? Where could I go for help? Who could I ask? Would it work? What the hell was I doing anyway? In fact, what was I thinking?!

There were many mornings like that. Anyone who has started their own business can relate. The loneliness, the exhilaration and the terror of the day-to-day existence can be exhausting. In fact, research I have done with entrepreneurs through both Monash and RMIT universities reveals that the first few years of starting a business are usually the hardest for any entrepreneur. Some burn out and don’t make it. Others start off making dumb decisions that hold the business back and distract the owner. Many just lurch from day-to-day wondering what happened to their dream for financial independence, opportunity and freedom.

I had no excuse. I had been researching and writing about start-ups and fast growth companies for almost 20 years trying to answer the following questions: who are they? Why do they start businesses? What mistakes do they make? How do they succeed? Why do they fail?

So I knew how hard it was going to be. I knew for instance, that only very few companies ever get over $2 million revenue or employ more than 20 staff. I knew the common mistakes that stop micros getting major. And I knew the pitfalls that stopped start-ups in their tracks. And armed with that knowledge I avoided many when building my own company. (The stuff-ups – some very dumb – I will write about in a separate story.)

Four years on and I now run a successful medium-sized business with more than $2 million revenue and 20 employees.

But I always vowed that I would go back and start a publication that would provide start-ups with everything they need to start smart: the news, ideas, trends, warnings, tips and motivation that would help Australians in the process of researching, planning and setting up the business, right through to the first few years of starting up. It would be written in an intelligent but highly accessible way to aid absorption.

And now we have it – StartupSmart.

Who’s starting up?

The start-up market is huge. In Australia about one in 12 people are thinking about starting their own business at any one time. Of course, for many, it stays a dream, which is a shame. All those unborn business ideas floating around the hemisphere! But many do make the leap: often just by dipping a toe in the water. According to the Australian Bureau of Statistics, 320,000 actually start a business every year.

Now, that looks like a colossal amount. Who are they all and where do they come from? There is surprisingly little research done on start-ups. But from my research and observation I have identified four start-up types that want to start smart and will make up our community.

1. “Accidental” entrepreneurs

Of the two million enterprises operating in Australia, 1.1 million employ no one but themselves, the Australian Bureau of Statistics reports. That is 1.17 million businesses being run by people who have either bought themselves a job, are consulting, freelancing or running a small part-time business on the side. Others are just in between jobs.

Some decide this is enough. They love running their solo operation. They are very happy running a business they can control. This includes the mums at home on maternity leave who start a venture to pay for the holiday in Bali. Or the journalist freelancing on the side, or the tradie who likes to do a bit of work for himself on the weekend.

Sometimes, they see a larger business opportunity and instead of returning to the grind, they suddenly resign, shocking their friends, and decide to give it a go. I call that group the accidental entrepreneurs: they stumble upon the opportunity, find they like the challenge and that the fledgling venture might have legs.

2. “Conquer the world” entrepreneurs

These people are under 30 years old and include students, graduates, post grad and international students. It also includes work and corporate dropouts: those young people who try a job for a few years and work out pretty quickly that they can do it better than their boss and that they hate working for others.

They are internationally focussed, connected to the world through social media, bold and are not afraid of a risk. They often lack networks, business acumen and money but they don’t have families yet so they have a “nothing to lose” mentality and learn quickly on the job.

They communicate through social media and often their business idea is built on technological disruption. They start their businesses in the spare room of their parent’s home, focus on a niche and use their knowledge of technology to do things quicker, better and cheaper, stealing market share from incumbents who never see them coming.

3. “I can do it better” entrepreneurs

The “I can do it better group” are 30-50 years old, are very well educated, very technologically savvy, have had 10 to 20 years experience in their industry and use their savings, angel investor funds, payouts and investment money to launch their own company.

They are ambitious (like me) and want to build a fast growing business. It is this group by the way that end up dominating many awards – such as the Smart 50 – and often end up on various rich lists. Half of them will start out in the spare room of their own home and half will move straight into an office. The reason they start their own business is they can do it better than their boss. They are very innovative and are often experts in their profession, but they struggle at the start because they lack business knowledge and they often don’t know what they don’t know. They are also used to the support of a corporate structure.

4. “My turn at last” entrepreneurs

This group are 50-75 year olds and they share a little bit of the “what do I have to lose” attitude of the “conquer the worlds” – although they certainly don’t want to blow their savings. They have raised a family, held senior corporate positions and for various reasons, put their entrepreneur zeal on hold until the last kids pass through VCE.

They are very intelligent, have great networks, huge knowledge of their industry, love a challenge and they will never retire until their knee joints give out… for the third time. This is a rapidly expanding group and surprisingly, technologically savvy, as they are patient and have more time to learn online than the time-poor 30-50 lot.

They will start their business in the family billiard room that has been turned into a home office and while ambitious, also want to enjoy the journey. We will see more women in particular join this group as their families grow up, their husbands want to cut back on work and these women say, “my turn at last”.

Entrepreneurs will increase

I expect that in the next few years each of these four groups will grow as technology gets better and cheaper, and social marketing reduces the costs of advertising and sales. Imagine if the army of well educated smart mumpreneurs now dabbling with part-time businesses decide not to return to the corporate world and to give their business a red hot go.

We are also seeing a dynamic group of Gen Ys and Zs coming through who seem far more entrepreneurial than the Gen Xs. This might be a product of their age, but these young people have grown up in control, with their networks at their finger tips and I expect they are not going to find happiness working for the man.

But the biggest surprise will be the well-heeled baby boomers who at 50 are as fit as a mallee bull, realise they are only half way through their working lives and don’t want to spend the next 20 years being patronised by well meaning 25 year olds who just wish for God’s sake, they would retire. They will bugger off but not to the golf course. They will find enterprising entrepreneurs to back and take active roles as chair, CEO or directors. Or they will start their own venture. I keep meeting people in their 60s who tell me that they are having a fabulous time running their new business.

But the challenge for many will be getting the business to what I call the magic moment – and it is a moment – when you realise that the business is established, you have return customers and that you are not going to blow away in the next gust of wind. That is the point when you really start to grow from a sustainable base. That is the time you begin to employ two, three five people at once.

Not many people get to this point and it often surprises people how few medium- and large-sized companies there are.

Today we launch StartupSmart, the daily publication that will help you start and build your business.

And something else. I will always remember my first mornings when I would arrive at work and wonder what the hell I was doing. It won’t happen to you. You can start the day smart by signing up to our early morning email that will tell you everything you need to know that day: special news for start-ups, a news wrap, your daily task, new trends to get you thinking, the latest tax and legal advise and all the love and support from our great group of mentors, dedicated to helping you start-up smart.