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In the second part of our series, Fort William businessman Angus MacDonald offers advice on starting your own business, and it is quite possible to build a valuable company in the West Highlands.
Getting the right product and building a team
At the early stage of my career I was like a spaniel with its nose to the ground, checking out everything. I was constantly on the lookout for that exciting business opportunity, the people I wanted to work alongside, and what would be needed in the business plan to ensure it would be viable.
You have a much higher chance of success in building a business in an area you enjoy and know well. For example, if I were a car mechanic I probably shouldn’t open a gift shop or estate agency as my initial startup, but if I heard of an ongoing issue with gearboxes in boat engines or wind turbines that might be the promising business opportunity I’d been looking for.
After some initial work and some reference pieces to demonstrate my solution, I’d want to ensure my product was good enough.
I’m certain potential customers would be keen to meet to discuss how I could help resolve their problem. I could quiz them about the gap in the market, level of quality needed and what prices the market would accept. If there was success with these meetings, I would start considering who I needed to join the launch team. My heart would be beating wildly with the prospect of getting going.
I would start working on a business plan immediately. A plan flushes out many of the things you need to consider, such as ‘unique selling points’ (USP), a potential client list, competitors, sourcing of the raw materials, estimate of the market size, skills of staff required, property needed, and financial backing to launch and fund the early stages. While doing this I’d start writing down assumptions for everything: how many staff I might need in each of the first three years; how much the salary bill would be; how many units would I need to sell; what would they cost me; and how much will I be able to sell them for etc.
I have always been involved in identifying the right product then selling it, and freely admit that I need a colleague to do the finances and back office role as well as someone to do the creation or manufacturing. My time is better spent in front of customers. Everyone has a skill, but very few of us have all the skills needed in a sizeable company. Great people are the foundations for great companies: invest your time in selecting them.
As I wrote in last week’s column, a business plan needs to demonstrate that you can scale up to a significant level. In my opinion it takes five years to build your team and really get your product right and accepted by the customers, then a full 10 years to make the business properly successful. Concentrate on a limited number of products at first, make that really work then you will be ready to diversify, with expansion often driven by client demand.
When you have the core launch team, a business plan and customers who have agreed in principle to buy from you, you are in a strong position to raise finance. My first business required £20,000 to launch. I approached a high net worth individual, who invested half the money and lent me, unsecured, the other £10,000 to buy my 50 per cent. This is what would be described as ‘friends and family’ investing. With the right people, customers and business plan, I believe it would be relatively easy to raise enough money to get most businesses going — unless significant capital upfront is required. Be prepared to give investors a share in the business. The right investor won’t only put money in, but will also help build the company through client introductions, technical knowhow or management advice.
About seven years ago a former car mechanic in Lochgilphead named Ewan Anderson approached me. He was leaving a wind farm maintenance firm where he managed the parts department, to start his own business with his previous employer as his first customer. Ewan wondered if I would back him, and I did. Today Renewable Parts Ltd has 30 customers, £6million in annual sales, employs 25 people, wins every award going, is nicely profitable and is growing fast.
Next week: what is needed to build a really valuable company.
Angus MacDonald has built significant businesses in renewable energy, recycling, online education and publishing while based in the highlands.