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New Start-up – Ready for the Challenge ?

Published on Saturday, 28 Jun 2014
No solid prediction parameters can foretell the susceptibility to acute high mountain sickness nor a successful business start-up.

Many mountain climbers visiting high altitudes for the first time would be eager to know more about their Acute Mountain Sickness (AMS) susceptibility in advance.  Although various tests like VO2 Max, SO2 at simulated altitude are derived, the correlations are weak and are not good predictors for AMS vulnerability.  It is a common phenomenon that those mighty runners, trekkers and climbers at low sea level perform poorly at high altitudes.  Some take only moderate training can ascend much faster than those with strenuous trainings.  The position in the queue becomes a different story at high altitude.  More important, failing to adapt to high altitude would claim one’s life.

For starting a business, if there are good predictors to check the successful rates, wasteful efforts can be saved as 70% of the new start in HK would cease to operate in 5 years.  Even the new establishments continue businesses, the founders may not be better off when comparing with the benefits of retaining senior positions in well-established organizations.

The CEO of an automobile manufacturer who held a managing director position in the interior and M&E company many years ago did successful leaderships in both organizations.  In between these periods, it was a nightmare.  The interior and M&E company was a subsidiary of a conglomerate and he started this branch from scratch and turned it to a reputable company in several years.  This man, extremely clever, energetic, possess every character trait of a successful businessman.  After the interior and M&E subsidiary had been in shape, he quitted and started his own business with friends.  To the awe of everyone who knows him, the business failed ferociously.  The reason was obvious.  Those partners were all used to be directors and giving directions.  Not many focused on scrutinizing the mundane works.  This ended up with products not fulfilling the required specifications, time slippage and hence, cash flow difficulty and some other problems.  This man abandoned his own business and joined the automobile company as manager and did some road shows for recruiting more capital for development.  He succeeded in strengthening the stand of the organization, gained the trust of his peers and the founder, climbed up the ladder and became the CEO in a few years.

A director of the famous contracting firm quitted his post and started his own business as the distributor of products a few years ago.  This, again, is a man, who is clever, energetic but a bit calculating.  The products are relatively new to the industry and are not prevailing. He worked hard to promote the products and his company.  To his contrary, after 2 years, the orders he received were still on a trial basis and non-promising.  It would not be difficult to envisage the pressure and vulnerability to failure he was facing.  If there is no miracle, the firm will not last for long.

Being a person who had gone through the process for a small new start-up, I grasped some little secrets of building a sustainable business.   Intelligent should not be the determining factor and of course, one must not be an idiot.  One must be above average in every faucet and excels in some critical areas.  The crucial areas depend on what type of business people are in.  Sufficient capital, network, interpersonal relationship, eagerness to succeed, perseverance and know-how are almost common factors among industries.

In the 1st scenario above, the company failed at poor operation.  They had a star grade directing personnel and spotted the right market.  They had a network to get the order but could not meet the requirements of their clients.  Sufficient funding soon became insufficient when payments for goods were not received.  In the 2nd scenario, the founder went for emerging markets.  Although the return might be high if he could make it, the chance of success was low.  Besides, few friends would spend effort to help.  This exercise may consume most of his savings and end up with nothing.  These were business geniuses but could not run their own businesses right.

In the construction industry, when starting a business, most of the jobs or orders are by referral.  You must give a reason why people would think of you when they need similar products, service or expertise.  Is that your products are good, inexpensive, with high benefit/cost ratio and at the same time delivering reliable service/expertise, or just you are the one they want to help?

In the construction industry, the easiest start up should be consulting.  Both the required capital and risk are low.  There is also entry barrier that one has to grasp some degree of expertise.  As a new start, the fees must be low or you would not be able to compete with big names.  As a result, new start up can only engage a few staff and use one’s own overtime hours to compensate for the reduced fees.  This process may take 3 to 5 years or even longer to let the prospective clients know your existence.  It is like running a marathon than a sprint.  Don’t try to diversify so early or even try it.  Stay focused and trust the common parlance, “Less is More”.  In addition, you must give your friends a reason to think of you when they need your service.  It would be magnificent that people would deliberately spend extra efforts to help you getting projects.  Interpersonal relationship counts.  Behavior, integrity, reliability affects relationship.  Of course, even sinners have their friends but their friends may not help most of the time.  So, one must win the trust of the majority to increase the chance of getting help.  In consulting industry, the perils of success in the order of importance should be expertise, interpersonal relationship, perseverance and power to discern.  Starting a business needs tremendous efforts, faces adversity more than usual, rides on emotional roller coaster for years.  If you are not good at these, stay in your position may be a better choice.  The sad thing is, most of the people would rate themselves better than the realities and hence, make inappropriate decisions.

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