Success of start-ups rests on preparation, not business plans

Many people dream of starting their own business, but in nearly every single attempt that I have invested in, mentored and even directly experienced, the preparation has been woefully lacking.

The trigger for starting a business should be the completion of a preparation phase. Unfortunately, the reality is that the trigger has no correlation to preparation. In its most basic form, budding entrepreneurs attempt to overcome the procrastination of preparing for a start-up by jumping straight into it – à la Nike’s “Just Do It” tag line. It should be clear why this is disastrous, especially if one quits their job as a way of forcing themselves to work on the start-up.

There is a lot of preparation that can be done before you quit your job, which lowers the risk not only for the start-up but also for your quality of life. Having personal expenses with no income while preparing for your business is not the smart choice.


The first step in preparing to build your business is to actually understand all the facets that you can cover before leaving your job. Looking at personal expenses is one such facet. This includes understanding clearly what your expenses are and preparing a personal budget. Next is estimating a conservative timeframe for your business to become cash-flow positive, adding a wide margin of comfort and saving up enough cash to cover this period as well as contingencies. A good idea would be to also add enough cash to cover the time needed to find a new job should the business not take off.

Another oft-neglected facet that can easily be addressed before leaving your job is building the right personal network for your business. This includes finding investors, talking to potential employees, developing relationships with vendors and suppliers, and building a relationship with key clients. Building a network takes time, as relationships do not develop overnight, and it is therefore a good idea to spend a few years working on this facet before attempting to launch the business.

Of course, the end result of building your network is to convert these relationships into business. Having clients sign up ahead of time is rare. However, having anchor investors, a core employee team and key suppliers signed up will drastically reduce your risk.

This leads into the fact that negotiating certain contracts, especially for those of you without negotiation experience, is also best done ahead of leaving your job. It is not necessary to nail down every last point, but even agreeing the headline items can take time. These contracts would include employment contracts, where understanding compensation models with respect to performance-based pay can be daunting, as well as contracts with service providers such as legal counsel and auditors, and last but not least, with suppliers. Shareholder agreements are also best done ahead of time.

A third facet of having a long lead time is the legal incorporation of the company. This is especially true in our region, where first-time entrepreneurs usually find the process confusing. Hiring the right legal firm or a set-up consultant can drastically cut this time down, but at great financial cost.

A word of caution. I am not proposing any reduction in your responsibility to your employer. There are not only legal and ethical issues to be cognisant of, but also reputational issues. If you are seen as shirking your work and using it as a stepping stone to your own business, even if this is not true, the damage to your reputation will be significant.

There are other facets, and the above examples should be enough to get any budding entrepreneur to understand the realities of building a business. For some reason business schools seem to teach people how to create beautiful, well thought out business plans. However, I have rarely seen a start-up fail because of a flaw in the business plan, but rather because of a gap in the entrepreneur’s reality and the actual reality of the market. The official name for this gap is “lack of experience”, also known as “you haven’t failed enough times yet”.

Sabah Al Binali is an active investor and entrepreneurial leader with a track record of growing companies in the Mena region. You can read more of his thoughts at al-binali.com

business@thenational.ae

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