Dr Malcolm Parry OBE of the Surrey Research Park shares with us his tips on starting a science-related business.
1. Vision - define the vision of what your product/service will give to customers in the context of what need or solution your business will provide to them. In essence, for what demand are you intending a supply, and what is your value proposition?
2. Flexibility and focus - always ensure that in defining your vision and the purpose of your business that you continually and systematically scan for technological, political, regulatory, social, and demographic changes that can help with delivering your value proposition to customers and then continue to do this to improve a business. Be flexible and open-minded, neither be distracted nor seek perfection, try to see if the need you meet or the solution you offer can be done at a less than perfect level than your bigger vision.
3. Define the demand - what product or service am I going to be suppling to meet this demand. Validate your product: it is important to often think “I am wrong” so that this starts a process of analysing your product/service from all angles to help give it some context in relation to the market.
4. Use as many tools as needed to test and develop your ideas - use standard business modelling processes to help you understand how your business is going to work. This involves defining customer segments that your solution or supply will address. Look at the way you intend to build a relationship with these customers and the channels that you intend to use to reach them. Define the expected revenue streams and the promotion and sales channels you need to put in place to secure the revenue. Part of this process is to understand the key activities, resources, and partnerships that you need to create the product or service on which the value proposition is founded and ensure that you understand the cost structure to do this.
5. Process - recognise that building a business is a process. This process involves a number of work streams in the business, which need to be developed. Assuming it is a technology business then the first is the technology journey from proof of principle to a quality warrantable product or service. The second is market journey that can start at no market interest and goes through identification, potential field trials and, critically finding the first customer and then to building rational economic purchases and then recognising the need to continually add to this to maintain a competitive advantage. There is a need to grow a company of people to deliver these journeys, which involves bringing in skills and finance from outside – judgement is required to bring in skills when needed and looking at the cost of securing these. The team and how you manage it is critical to the process. Remember that if you are not only selling a product or service your business will become part of a supply chain for other businesses that will depend on your businesss.
6. External factors - in scanning the business, social and technology environment there is a need to take account of the regulatory and policy environment in which the market operates. So, what regulations need to be respected and what policies are there to support your business such as government funding opportunities like ‘InnovateUK’ programmes that can be used to help you build your business.
7. Structure - create a structure in which to travel these journeys. That is to create the company and shareholder agreement on which you can build a business and to put in place the right governance team that can deliver results and give confidence to investors or other funding streams. Make sure those involved in the governance structure understand and trust the process to allow you to be able to follow the journey.
8. Investor strategy - make your business is attractive to investors. That means not viewing the transaction with investors as one in which the question is ‘what can investors give me?’ but one in which you ask and answer the question ‘what can I give investors?’
9. Intellectual Property - if you are likely to need equity funding then protecting Intellectual Property (IP) is important. IP management is critical to the process of attracting the necessary funding for a business. If outside funding is going to be needed take advice from a patent lawyer to protect these assets into which investors are buying a stake.
10. Wisdom and market knowledge - look to find some ‘grey hair’ on someone or organisation who can sit behind the business and mentor/coach you develop the business. That can come from a well-structured and balanced board.
11. Search and scale – a common fault over which you need to take care lies in the two phases search and scale of the development of your business. A tip is to make sure that you do not rush through search phase by the attraction of scaling. The search phase when you are looking for the 'demand for your supply' needs intense work. Many start-ups trip up by deciding to scale too quickly by taking on staff too soon for example, and as a consequence consume resources (burn cash) when a longer period of searching for a market or looking for a better potential market, which may prove more lucrative, would have been more of an astute move.
12. Iterate and pivot – there is also a need to create a balance between hanging on too long to the initial business idea if it is not gaining traction. It takes flexible thinking and, to a degree, courage to work through the challenges of searching for markets. This process is helped if the initial team comprises two particular levels of entrepreneurial skill. One is the inclination of looking out from the company and holding the company vision up to the market and the other talent is to be able to look back into the company to manage iterative changes based on feedback from the market. Do not forget to work up and down the internal supply chain in your company.
13. As part of managing these phases it is important use the financial talent in your bank to add to the talent mix that helps to define when to begin to move between searching and scaling as well as dealing with the prosaic issues of ensuring registration with HMRC and Companies House. A good place to start is to root your business in a strong relationship with a versatile and helpful bank as it will offer good products and services that deal with operational issues and have the capacity to grow with you, as well as advise on how to automate receipts as they flow in.
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