How to start a successful new business

With 20 years in business support behind him, Joe Pearce is no stranger to the ups and downs of start-up culture. We spoke to him at the Exeter Innovation Hub, to hear his advice for launching a successful start-up.

Step One - Define Success

The first thing anyone who wants to start a new business should think about is: what does success mean to you?  When people think about start-ups, they often think of the big stories in the press: companies that have experienced rapid, exponential growth. Similarly, people tend to see start-ups as tech firms who are developing new innovations, because of these prevailing narratives. This all creates the impression that start-up success means launching a business which either attracts a lot of investment or is high-tech.

But in most cases, that just isn’t true. In fact, most start–ups remain small businesses throughout their lifecycle, and that’s fine – if it’s what the founder wants. For example, starting a small shop that enables the owner to pay their mortgage, have a family, and take holidays, was a successful start-up and is a successful business.

Ultimately, success can mean many things. It could mean running a small business sustainably for many years. It could be making a deep impact on a few people. When starting a new business, it’s up to the individual to think about what they want to achieve. My perspective of an entrepreneur reflects a definition I heard from Martin Lackeus of Chalmers University and is simply somebody who creates something new, of value to other people, through a process of trial and error.

Viewing start-up culture like this really helps: it encourages people to focus on this broader impact, reflect on what matters to them, and build a business that aligns with their values and motivations. 

Step Two – Focus on the Problem 

Next, it is crucial for new founders to focus on the problem they’re trying to solve. They need to obsess about the problem. Especially early on, it’s crucial for new start-up founders not to lose sight of this, when their resources are precious and limited. Going off in one direction before fully understanding whether it’s the right one can be incredibly costly. 

You see a lot of new founders obsessing about the solution, before they have fully understood the problem. They really start to focus on the solution – an app, for example – and go ahead to build that solution. But what is the problem? How many people experience it, and where do they go to solve it? Perhaps there’s already an app out there that helps and you need to create something different, or maybe an app just isn’t effective when another solution would be. This comes back to design thinking principles around user-centric design. When you really understand the problem and who experiences that problem, then you can better understand what sort of intervention would be effective in addressing it.

Once you’ve understood the problem, think about how you can affect it. Different entrepreneurs come with different personal experiences, motivations, and skills, and initially adopting an approach of self-effectuation means focusing on how to solve the problem with your particular skillset and resources. That’s why you can have two businesses set out to tackle the same problem and end up with completely different products. That’s a good thing. Entrepreneurs are a diverse bunch; focusing on your strengths and preferences is key to creating a good solution. 

At that point, a helpful tool for developing your solution is backcasting: thinking ahead to where you would like to be, then working back to identify the steps needed to get there. This is where other people are essential. 

Step Three – Talk to People

The idea of developing something in secret and launching it into the world is long gone. Instead, we’ve seen this democratization of the start-up process, which has brought so much helpful advice into the public domain and opened the door to collaboration at an early stage.

Today, people shouldn't be worried about talking to each other. In fact, they should take advantage of it. If you can talk to people who are working in your problem area, you can get valuable insight and feedback to understand where the barriers are, what the opportunities and challenges are, what’s worked in the past.

While new businesses should still protect their intellectual property, good product or service development is much better delivered as a process of co-creation, where you’re getting user engagement and market feedback at an early stage.  

Step Four – Find your product-market fit, then take the plunge

All the time when starting a new business, you need to focus on developing a product-market fit. You want to build the evidence that tests your value proposition against the market and gives you the confidence to know that, ultimately, people would pay for it. 

Market validation is crucial. You need to go out and find people who challenge your thinking and inform your solution. As Eric Ries outlines in the Lean Start-up, developing your product is an iterative process. When you are starting up, you need to learn, learn, and learn some more. It’s about going out to your potential market, then coming back to the drawing board to make improvements.   

Then finally, when you have a product you are confident in, you need to take the plunge. At the end of the day, there is no better market validation than the market itself.  

When will you know if you are ready? A great strategy - provided you have the feasibility to develop your product - is to build a website with a product description and price tag. Then, when people buy it, you will have that perfect seal of approval telling you it’s time to invest. 

How can the university support founders looking to start a new business? 

At the University of Exeter, we have a range of support available for budding entrepreneurs and innovators, to help them get things right in those early stages. We deliver two-day workshops on design-thinking and business modelling that give people some of these core principles, enabling them to develop and practice these techniques.  

For businesses which are more innovative and technological, we’re able to provide access to a range of resources through our Exeter Innovation Accelerator, which includes access to our Entrepreneurs in Residence, experienced business owners who have been there before and can share their insights.