What do I know?
Very few people have made as many expensive mistakes as I have. These are the often painful lessons I have learned along the way.
A little background on me. I am a failed accountant (passed all the exams, but still can’t do my own tax returns) who discovered that I can start companies. I am now on my 5th start up. The earlier ones include Virgin Money, The Virgin One Account, Virgin Wines and Naked Wines.
My top tips:
- The two pint test. If you can’t explain why your business is going to be able to offer something your competitors can’t in the space it takes you to share a pint… and then answer the 3 main objections in one more pint….you don’t have an idea. Stick with the day job. For example… Naked Wines invests in independent winemakers, to get exclusive wines, at preferential prices, which we pass back to our customers. Shimples. The mistake… when we set up Virgin Wines all I knew was that I wanted to be in the wine business and I wanted to be online. It wasn’t enough. We burned our way through over £20m before we learned the lesson!
- Prepare for the valley of death. When you launch, EVERYTHING is against you. Your variable costs don’t vary. Your fixed costs are too high. You can’t get the price you need on your stock. Most of the marketing ideas fail. Your lemons ripen before your plums. Prepare for it, and don’t be surprised when it happens. Remember, a fool is an optimist that thinks this time things will be different. It won’t. The early days will be black.
- Only ever work with a small number of very good people. I have Jayne-Anne Gadhia to thank for this. When we set up Virgin Money in partnership with Norwich Union, NU wanted to send us hundreds of middle managers, project managers, change agents etc. Jayne-Anne sent them all back and instead recruited a handful of young, inexperienced, unruly ruffians. Who then worked their balls off to launch a financial services business (complete with regulatory consent, an IT system, marketing campaign, staffing everything) in 10 weeks.
- It’s 2.0 or nothing. If your business doesn’t have an unfair advantage over your competitors by using the power of the social web, you just haven’t thought it through hard enough. For example at Naked Wines, the money to invest in our winemakers comes from our customers. Over 50,000 Angels invest £20 a month, so that we can fund our winemakers. Everyone wins. The winemakers get to do what they love – making great wines, rather than selling them. And our customers get better wines for their money than you can any other way.
- Don’t believe your own bullshit. When I launched Virgin Wines, it didn’t work. At all. I wasted two years because I could not accept the obvious. It was just a crap idea. Once I grudgingly accepted that, and changed the business accordingly, it took off.
- Don’t debate, prototype. Launch early, launch often. So many companies waste their best efforts debating stuff. The original objective gets lost in a cloud of ego and arse-covering. The outcome looks something like Frankenstein’s daughter, crossed with a camel. It’s late. It’s over budget. It is crap. Don’t bother. If someone has an idea, tell them to mock it up. If they can and it looks half decent, find out whether it has legs by launching it to your friendliest customers. if they like it, build it properly. If not, shut it down, clean up the mess and walk away.
- Ride your luck. My lucky break was meeting Richard Branson, who offered me the job of setting up Virgin Money. Despite the fact that I had no experience of financial services. Or setting up new businesses. Or managing people. In fact it was hard to find someone LESS qualified than me to do this. My initial jubilation turned to sphincter twitching, gob-dribbling fear, when in no time at all a Powerpoint presentation became a real company with 100 staff and several million pounds invested in a marketing campaign. The first few weeks were awful. Nothing happened. Every time Branson called to see how it was going, I lied. Then with 2 days to go to the tax year end, the security guard came to call me… at the front door was a post office van, loaded with £30m of cheques. We had blown our launch targets out of the water. We were heroes.
So…that’s my dirty laundry on the line. How about yours? What have you learned the hard way?
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Conduct wide research. I set up an online art business promoting new, up-and-coming artists. The idea was good, but relied on lots of sales. I vastly over-estimated the public’s interest in original art & their appreciation of the difference between mass-produced prints and originals – primarily because my research was done amongst people like me; not the general public. So, when the promised marketing investment didn’t arrive, we were really screwed.
I had ideas to create one or more businesses – largely because I had to think of alternative sources of income as my employer was down-sizing, initially 40%, then again, again, and again, until finally a further 50% of diddly squat – and – with diversification I survived yet again… Magic? No, not happy days, needless to say. One of my business ideas I sort of saw happen – I had no involvement in it, just shared an element of commercial euphoria – the business is sadly no more, but then again that is the same sad story of so many many businesses too, so I don’t feel so gutted. Ironically, one of my business ideas has not been tried and tested in my locality!!! Oops?
I have whatever I have relatively intact – ****’ing RBS apart! A business venture could have seen that take off, or left me bankrupt, I neither had balls of steel, or someone else’s money to kick start something, so not endangering my family’s lifestyle became eminently more important…
We all make choices, sometimes right ones, sometimes wrong… At least I can wake up and buy more wine than we can seemingly consume, so that helps Naked Wines a tad!