by James Caan’s
If you’ve ever shaken your head at the contestants on The Apprentice and thought “I could run a business better than them”, you’re far from alone. But as businessman and Dragons’ Den star James Caan knows, succeeding as an entrepreneur isn’t always easy, which is why he’s launched a new Business Secrets iPhone app, free for a limited period, with tips and advice.
“I had to do it the hard way because there wasn’t the information available,” he told MSN Money. “If I could have accessed something like this to take me through the step-by-step journey, it would have made a massive difference.”
So if you’ve got a great idea, here are James’ top 10 things you really need to know to get it off the ground – and some of the most common mistakes to avoid.
More tips on starting your own business
1. Do your research
There’s no reason to take unnecessary risks if you do your homework. “Before launching an idea, product or service, the most fundamental principle is to research it correctly because if it’s not going to work, you could have found out sooner,” says James.
“If you go into it blindly, not researching the market, product and competition thoroughly, you’re taking unnecessary risks.
“And one quality that you need is how to measure risk because, once you understand it, it no longer becomes a risk, it’s a calculated decision.”
2. Finances, finances, finances
“Understanding how to manage your finances, your cashflow, your break-even point is all key,” says James. “One mistake is not understanding the difference between cash accounting and accrued accounting, where businesses rely on their monthly profit and loss to make decisions.
“Monthly profit and loss is what I call accrued accounting. For example, it’ll show the business has generated £100,000 worth of revenue and costs were £70,000. In your head you’ve made £30,000 profit.
“The problem is the business may have generated £100,000 but it’s only collected £60,000. And the money that actually went out was £80,000. So you’re actually £20,000 light in your bank account. Underestimating the impact of cash accounting is a key mistake.”
3. Don’t be afraid to ask
“One of my key strengths is having the confidence to ask enough questions,” says James. “What I find strange is far less experienced people are reluctant to do the same because they think it’s a sign of weakness, whereas someone with 25 years experience of business doesn’t feel embarrassed.
“If you don’t ask enough relevant questions, you’re taking too big a risk.”
It’s all part of having the right personality for the job, he says. “As an entrepreneur, you need to be somebody who can influence people. Business entrepreneurs aren’t followers they’re leaders, visionaries not managers. Make sure you’re able to project the difference.”
4. Never stop networking
“Even after all the years I’ve been in business, at least one person tells me something I didn’t know about the market, an opportunity, customers, every time I go to a networking event,” says James. “In business, you need to be out there to network at every opportunity. Look at it as part of the fabric of your business, something you do naturally and regularly.
“You can’t be an introvert. If you’re not visible in your business, then how does anybody know what you’re doing? You can’t just say, ‘I’m not good at it’ – if so, you need to question if you’re ready for business.”
5. Surround yourself with the right people
From working with professional partners to hiring employees, your business depends on who’s involved.
“A business is only as good as the people in it so attracting the right people is really key,” says James. “Recognise that you need to have people around you who complement your weaknesses.”
6. Get online
If you’ve dismissed Twitter and Facebook as a waste of time, think again. “Social media is critical,” says James.
“In any business, one of the fundamental objectives is how to attract clients. If you haven’t embraced social media, I truly believe you’re missing a fundamental ingredient of success.
“There are people today who market their services on Facebook, who promote their products through Twitter. I use Twitter, LinkedIn, Facebook, the whole thing because it’s the way to do business in the future.”
7. Know when to walk away
“In business sometimes people do deals for the deal’s sake, but that can be very detrimental,” James says. “They take on a customer where there’s little margin and say: ‘At least I’ve got something’. The problem is that, while you’re spending your time delivering a deal that doesn’t make any money, you’re not looking for the deal that is going to make you money.
“One of the best lessons I’ve learned is being strong enough to walk away and only do deals that make sense.
“A lot of the time people justify it as good for the brand or a great customer, you can come up with 1,000 reasons to do a deal that doesn’t make money. The problem is when the business doesn’t make any money, you can’t pay your overheads and you don’t have a business.”
8. Get your timing right
It’s not just what you do that makes a difference, but when. “There’s a right time and a wrong time to do things,” says James. “Understanding the sensitivity and impact of timing is critical.
“There’s a time to invest and a time to increase your overheads. For example, the market now is pretty flat, now’s not the time to be investing because the revenue doesn’t support it.
“One thing I see a lot is people getting the timing wrong and investing too early, hoping the revenue will come and it doesn’t.”
9. Don’t get emotional
When you start a business, friends and family can be invaluable, whether it’s providing funding or just being there for support. But they’re not always the best employees.
“One common mistake is that people recruit friends and family,” says James. “But are you hiring somebody because they’re qualified to do the job, or are you hiring them because they’re somebody you like?
“The principle is you should be hiring against skillset, not emotion.”
10. Know the law
“Governance – VAT, PAYE, statutory accounts, employment law, HR policies – is one area that a lot of entrepreneurial businesses struggle with,” says James. “The problem is it’s not good enough to say ‘I don’t know’. Once you set up a company, you have an obligation to understand. If you don’t, the chances are you’re going to make mistakes, which can be very costly.
“You can’t say, ‘I’ll go to my accountant’, because when you sign a set of annual accounts, you are accepting responsibility.”
“One year, we’d miscalculated our PAYE. The following year, the Inland Revenue said, ‘You owe us ‘x’ amount of money’. I told the accountant, ‘I think you guys have got this wrong’. And he replied, ‘No. We prepare your accounts. You have to check, agree and sign’. He was absolutely right. And that was my biggest lesson.”
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