In 1999, My partner [now wife] Katherine Jerman and I set up a digital direct marketing agency called Cheeze. It was started in the spare room of our cottage in Suffolk with a £5,000 overdraft. Back then there was no ADSL – The ISDN line was the first in the village.  I had left a perfectly good job at one of the UK’s leading digital agencies in London and we had a five month old daughter.
From this humble beginning we grew the agency to be one of the UK’s leading digital agencies, listed twice in the Sunday Times Tech Track 100 Fastest Growing Companies. In 2007, less than 8 years after founding the agency it was acquired for £10m to become a key part of the Digital Marketing Group plc. now the one of the UK’s largest digital marketing groups.
Katherine and I have now left the agency to focus on fulfilling other ambitions. I took the opportunity to present at Social Media Camp and decided to talk about setting up a business with no investment. The current market we are in, despite the credit crunch, seems very similar [dare I say, reminiscent] of the dotcom boom & bust. The Internet is the best of times, the economy is the worst of times. There is great excitement about the possibilities of the Internet [this time with proper revenue streams] and this will no doubt feel like the right time to set up a business but with markets still in turmoil will there be so much funding around?
So, with Katherine’s input I share ten tips for starting a business without the seeking external investment. These ideas are borne from experience, which we hope can be taken on for others to learn from. We have included some insights that may help you understand our experience and why we make these suggestions.
1. Choose your partners carefully.
If you do plan on starting with other partners, make sure they share your vision. If you are starting with no investment then you will have to be prepared to make personal sacrifices. The large salary, company car and expense account may have to wait. Sometimes the salary may have to wait. If you believe in the business you have to give it  your all, are you sure your partners understand that?  Look for people with complimentary skills to widen the business’s capabilities. If you are good at ideas and networking then you will need someone to focus on the detail. If  you are the quiet detail merchant  you may want a ‘front of house’ person. Each business and its requirements will be different.
Insight: [Jamie] – We were lucky that Katherine and I had different skills. We shared the same vision but also understood our relative strengths. Mine was ideas, Internet media & technology experience. Katherine’s was 20 years in the Direct Marketing industry and a ruthless attention to detail and focus on the numbers. In time we hired no. 3 – Matt O’Brien who was a statistician [important for a direct marketing agency] and a mean strategist. As the company grew, the three of us had different areas to look after understanding our relative skill sets and focusing on them. Matt is now the Managing Director of Cheeze DMG.
2. The Buck Stops Here – Get used to it.
If you have come from another job, perhaps a large company it may be a shock to realise that you have to do everything. If you start with no staff, you will be making the tea, answering the’phone, running the promotions and doing the work. There is no-one else to do it so get used to it. Nothing can be beneath you, and nothing can ever be too much if you wish to succeed.
Anecdote: [Jamie] – I remember when I started the agency, on the 7th December I was talking to media owners whilst representing a major London agency, the following day I was representing myself. It was no secret that the agency was founded in and operating from the back room in those days. When I spoke to suppliers I was often asked, “how do you get up in the morning”? I answered that if I didn’t I wouldn’t get paid. It was really such a simple equation.
3. Spend as much time planning for the unforeseen problems as you do the ‘sexy bits’.
When starting a business there is excitement about what you are going to do. You are going to change the world, make it a better place – become the biggest, the best – there is a fair amount of dreaming when you start a business which is invaluable. BUT the positive stuff is the easy bit – so focus on the unforseen’s – the bits you don’t like doing. On the business plan, spend more time on the harder bits – what happens if we don’t get paid on time ; where is the next contract coming from? If you can be realistic, think and plan for the worst scenario as much as you do for the best. Spending this time will help you deal with the bumps in the road before they become potholes.
[Jamie]: When we started the business, I suggested that we wouldn’t need an overdraft as we had some clients signed up and the contracts stated they would pay us on time. Katherine, who had the focus on the unforeseen suggested we had an overdraft ‘just in case we didn’t get paid on time’. We didn’t. My first two months salary came from the overdraft whilst we chased those late payments.
Seek a point of difference for your site now matter how small. Given the number of startups these days, there is a strong chance someone is doing something very similar to you. There must be an initial point of difference when you set out the business (please nod your head) – but what else sets you apart ? Are you the fastest growing in your sector? This is when entering awards becomes important -no matter how small the award is, you can become the ‘award winning’ Â - can you get an award or recognition to put on your site/brand? Something that has greater brand equity than your new business? Adding such logos and associations adds perceived weight to your company and will help with the trust and credibility of your brand especially in those early days.
[Katherine] – My background was in offline Direct Marketing. I understood the value of the Direct Marketing Association and sought to get the agency DMA registered as soon as we could. Adding the DMA logo to all our literature was an important credibility step as we started to grow. In time we sought and achieved many other accreditations from Google qualified to IPA CPD accredited, which we also won awards for. In the early days these were useful badges to display. As your business grows they are still beneficial and when all else is equal it may give the client a reason to choose you over a competitor.
5. Get the cash flowing.
Cash flow, or lack of, is one of the largest killers of small businesses in the first two years of life, so you need to find ways to generate cash flow as quickly as possible. An option can be bank loans or factoring but both of those will ultimately cut into the bottom line – no-one will give you cash for free. Why don’t you incentivise up front payment [at least partially] for your product or services? We are still in a recession and if you are in a service industry, no doubt your customers are going to be claiming poverty and seeking a discount. So offer them a discount that has an incentive for both parties. With bank interest almost negiligible at the moment, why not offer a discount incentive on prepayment – “Its better than keeping it in the bank”. Prepayment reduces your risk of not getting paid, so there is a value in having that up front, even if you have had to tighten the price a little.
[Katherine] -We  started the business with a few contracts so the money was in the pipeline, but our first invoices were not paid on time. As the agency grew we were buying increasing amounts of media on behalf of clients which we were 100% liable for. In time we had credit insurance to cover the risk but in the first year the business didn’t have a credit rating of its own as it hadn’t been trading long enough. So if we booked media for others it was a risk. By offering a discount on our fees for prepayment we negated the risk and generated cash [the fees bit] for the agency up front, not 30 days hence. This strategy enabled us to leave the overdraft rapidly and never to go back to a debt position in the eight years before acquisition.
6. Get it in Writing. Always.
If you are doing anything for money, make sure you have the terms of the deal in writing and agreed [signed] by both parties. Â You need a contract to work and make sure it is your own, not theirs. Investing in a decent legal contract that is tailored for your business is an essential start up cost. Don’t settle for a website template version – it is cheap for a reason.
A contract between two parties states who is doing what, for how much, what is expected and by when. This immediately removes any issues that may arise from mis-communication or unfulfilled expectation. It also serves as a legal basis to get paid. If someone does not want to sign a piece of paper, then you have to ask yourselves why. If they “don’t usually sign contracts” then you should already be walking in the other direction.
[Katherine] – You can have great relationships with clients and suppliers but asking them for the details of how you will work together in writing is not being disrespectful. It serves as a clear basis for everyone to work from. It will also ensure you have a solid and legal reason to get paid. Getting the requirements and expectations in writing saved many disputes over the years. As the business grows, anyone can pick up the paper and understand what has been agreed, by whom and for what. Also, the person with whom you did the deal may not always be in the company, “my word is my bond” won’t get you very far when the person leaves the company. Â Don’t leave home without it.
7. Look after the pennies.
Look after the pennies and the pounds will look after themselves. Pay attention to every invoice. Is the sum right, does it have the correct currency? It is shocking how many invoices are incorrect or not clear. Query them – send them back. Make sure you are only paying the invoices when they are correct for both parties. This is not the same as ‘sit on your invoices’ – an efficient accounts department/person is possibly the most valuable asset a business can have. Paying bills on time and communicating with other accounts departments when bills are not correct will help you maintain a good credit period and credit ratingwhich will become important for cash flow. Dragging your heels with invoices will just lead to losing your credit status.
[Katherine] – As an agency it was our responsibility to manage invoices for media bought on behalf of our clients. 30% of all invoices we received were incorrect. Either the invoiced amount was not right, the inventory had not been delivered or trivial things like the agency commission was missing. Initially I, then in time the accounts department spent a lot of time checking the invoices and communicating with other accounts departments to ensure the agency was only paying for correct invoices.
8. Act with Confidence.
If you are starting your business with no investment you may be small for a while – you may have small offices, you may not have many staff. None of these things are to be ashamed. Yes, there may be larger competitors out there but don’t let any of that diminish your confidence. The business is you, and maybe a few others. You have to act with confidence in everything you do. If people ask how things are going they need to hear a positive story even if you aren’t feeling too good. These are not lies, just a positive spin on the situation – remember others won’t be as ‘close to it’ as you are so they don’t need to hear about the problems.
Anecdote: [Jamie] – When you run your own business there are days when you feel like you could take on the world. Other days you may feel pretty small – this will happen. If you want people to believe in your business you must always project a positive image. If it looks like you don’t believe in the business, then you cannot expect others to.
9. Promote what you know, not just who you are.
The opportunities presented by social media and search give young businesses a great opportunity to demonstrate their knowledge. What we used to call ‘PR’ has expanded into a much larger landscape of information and knowledge sharing. The tools in which one can share knowledge now range from Twitter to YouTube, Linkedin to Slideshare and Scribd. Success in this arena relies on you sharing what you know, not just who you are. White Papers on a relevant topic to your business are a great way of demonstrating your skills and at the same time growing audience the audience of potential customers. It is no accident that this document will appear in various formats on Scribd, Slideshare, this blog and also presented live. Each version will be slightly different to target the different audience and requirements of each channel.
Anecdote: [Jamie] – When we started we couldn’t afford advertising and we couldn’t afford a ‘PR’ expert.  This was frustrating as we knew when we got in front of a prospective client we could successfully demonstrate our skill and knowledge to great effect. The problem was getting in front of more people – ‘spreading the word’ if you like. You have to remember that ten years ago there was no blogging on a big scale, no Twitter and no Slideshare so we had few outlets for our knowledge. By 2006 we had the time and the tools to actively write our blog and, with the help of Kirsty Langan our PR agent, start contributing to the trade press with commentary and opinion. If we had the tools ‘back in the day’ I think we could have connected with a lot more people a lot sooner.
10. Look for ways to ‘make money while you sleep’.
A business can really grow if there are revenue streams available when you are sleeping. Whether that is selling an online product 24/7 or generating revenue from clicks in the middle of the night, the businesses that can grow revenue away from time and materials will have the chance to grow quicker. If the core of your business is based on service based hours then look for ancillary products or solutions that can be offered. Can you write guides for your industry? Can you sell them online?
Anecdote: [Katherine]: This was possibly one of the wisest pieces of advice we were ever given. As an agency, our income was principally based on a percentage of media spend As the web grew with display advertising and clicks we benefited from this model, earning agency income on click spend through the night, on Christmas Day, on New Year’s Eve. There was hard work and time required to grow the agency to a scale to really benefit from that but it was good to have more than one revenue stream.
11. Bonus! – Â Find a mentor.
It can be a lonely place running a business. Whether you are the sole founder or you have a number of people in at the start, you often feel like you are re-inventing the wheel. Finding a mentor who can help offer a perspective on the overall business, the wider market and what you are experiencing will greatly help you gain perspective on the situation. A mentor could be a non-executive director who works on a more formal basis (but will expect some form of remuneration) or an informal mentor who is at the end of the line for a chat.
Anecdote: [Katherine] – We were lucky to have a family member who understood business which was helpful. However, we did not have any external support understanding our market. In the early years the IPA offered Mentor schemes which looked great but we just couldn’t afford them. I think a mentor would have helped gain some perspective for us at times and maybe opened a few more doors.
12. Bonus! – Don’t forget Lady Luck.
Sometimes luck or fate, will have a role to play. You can’t plan for that but you should accept it will happen. Sometimes it will be bad luck other times it will be good luck. Roll with it.
Anecdote: [Katherine] – We had our sure of good and bad luck. In the early days when we went on a a new business push something else completely unexpected and unrelated to the push would appear to the benefit of the agency. Was that luck or fate?
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Writing this has been really enjoyable, running your own business can be exhilarating. It can be tough, make no mistake, but we look back with fond memories. Trying to whittle down the ‘first ten’ points was tough. So much so we left a lot out. If you liked this, let us know [leave a comment] and we will see if we can write some more.
If you want the points without the fluff, then you can download a paper on Scribd to use. We made some slides too, they’re on Slideshare. This piece of work is protected by a Creative Commons Licence.
How to launch a business with no investment and succeed by Jamie Riddell is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 2.0 UK: England & Wales License. Based on a work at www.jamieriddell.net.
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