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DEVELOPING NEW BUSINESS IDEAS188

finance With the typical business start-up, venture capital is not the most
likely source of funding. The ability of Jeff Bezos or Frederick Smith to
structure multi-million-dollar deals is unusual. Your own savings,
redundancy payments, a remortgage on your house, loans from friends
and family, bank loans, credit from suppliers, government-funded start-
up loans or research grants, with possible additional funding from
business angels, are all much more likely options to begin with.

The underlying question to answer here is the extent to which you are
able to access the level of finance required by the proposed business
idea in its current configuration. Can you reduce your financing needs
by gaining extended credit from suppliers, for example, or by gaining
the free use of resources, like Richard Branson, who secured the
premises for his first Oxford Street record shop rent-free? Or can the
need for finance be reduced by a different configuration of the business
model, like the franchise model which gained the cash-strapped Body
Shop the means to achieve rapid national distribution?

contacts The significance of contacts as a resource should not be
underestimated. Contacts can open doors to customers, suppliers and
sources of finance. They can offer temporary facilities; they can provide
endorsement to third parties for you; they can contribute insight and
ideas for further development; and they can use their own networks to
put you in contact with additional specialist expertise. Karan Bilimoria
used his extensive network in India, for example, to source a beer bottle
which would survive distribution to the UK.

Sometimes a customer’s loyalty to an organisation’s employee exceeds
loyalty to the organisation. If you currently working for a firm, how
strong are your ties with customers – if you strike out on your own, will
customers risk coming with you rather than stick with the security
blanket of the established organisation? And if the customers do come
with you, how will your previous organisation react commercially?

An established network of contacts is also an important selling argument
to providers of finance. Strong contacts allow you to overcome the
objection that you are new to the business – you may be a ‘start-up virgin’
but your strong contacts will form an important part of the ‘the 50,000
chunks of experience’ evoked by Nobel prize-winner Herbert Simon, of
the Department of Psychology at Carnegie-Mellon University, as
prerequisites for successful entrepreneurs. Ask yourself: how strong is
your network? How assiduously have you maintained it? How committed
to you personally as well as commercially are its members?