When I quit my job to found a startup 3 years ago, I had read plenty of articles and books about starting a business. I have read many times about how starting a business is going to be teeth-grindingly hard, or about researching your market before selling your product. All of those make sense at the time, and I knew them by heart. I thought I was prepared, but boy I was wrong. Transitioning from a steady 9-5 job into life as a startup founder was the most jarring experience of my professional life. For the first few months, it was a cocktail of emotions: excitement, anxiety, confusion and the bane of all, fear.
The first business that I started, Biliq, has since grown organically from one humble location into three locations with clients ranging from freelancers to decacorn companies. The journey to get to where we are today was filled with blood, sweat, literal tears and of course, mistakes. Below are some of the lesser known aspects about starting a business that I wished I knew when I was still wide-eyed and bushy-tailed:
1. Who you choose as an angel investor could make or break your business
If you are not in a financial position to self-fund your venture, finding a group of angel investors could be a viable option. For most entrepreneurs, getting the seal of approval and trust of an investor is such a morale booster that they would instantly sign the first term sheet as soon as it was offered. Nothing wrong with getting excited, but if you are in a fortunate position to pick and choose your investors, it'd be best if they meet the following criteria:
A. The best investors understand the business enough but still let you have the freedom to bring your own concept into fruition. They advise but not stand in the way.
B. The best investors put business growth ahead of paying dividends. It is business valuation first, passive income second.
C. The best investors understand that you have worked hard and make sure you get paid well when the results show.
2. Beware of a friendly competitor
When you first started, competitors might appear welcoming and celebrate your presence. Some would give you advice and connect you to strategic stakeholders. Some are genuine in their approach and you end up learning from them or befriending them. Some, unfortunately, do not have the best of intentions. The lesson here is to always be respectful of the playing field, but do not cozy up enough with your competitors that such relationship impedes your ability to compete. That's because once your business has grown enough that it becomes a threat, your competitors won't have any qualms about stealing your customers or poaching your employees when they have the opportunity. Be calm, but alert; always be ready to pick up arms and activate war mode when required.
3. On that note, business is war.
You either win or you perish. Kevin O'Leary is right.
4. Hire a good accountant
If you are not savvy in accountancy, this is probably the first few things worth doing when you start - get an accountant! Business decisions are best made with sound bookkeeping; gutfeel and guesswork can only take you so far. It's true that money is tight when you first started and you want to keep the overhead cost low, but do not skimp on an accountant. Fixing erroneous or non-existent bookkeeping retroactively is going to cost so much more in terms of money, time and level of stress in the future. A good accountant is often worth every penny.
Having said that, it's probably not necessary to hire a full time accountant right at the beginning. Get a part-time bookkeeper, invest in a user-friendly accounting software (these are cheap and a dime a dozen these days), and learn how to do simple financial analysis (LinkedIn Learning has great resources on this topic).
5. F&B business is hard. Do not start it unless the following criteria are met.
A. You or your partner is the head chef, head barista or simply someone that is going to oversee the day to day operations (at least in the beginning), AND
B. You or your partner are the ones that came up with the recipe and the menu.
If you have to rely on external hires to run the kitchen or (heaven forbid) create the menu, you will spiral into a world of stress and dissatisfaction that is best avoided. Remember that in the F&B business, you are in a field that is highly competitive, has razor thin profit margin, and with among the highest risk of failures. Unless you know what you are doing, put off on starting that next restaurant. :)
6. Consider partnering with your landlord instead of paying rent
Real estate will likely be one of your biggest fixed costs and most certainly one cost component that is among the hardest to cut down (Update: this rings especially true in the post-Covid world). By partnering with the real estate owner where you operate, you are not only spreading your risks but your landlord also has the opportunity to partake in some profits of your business. If the business goes well, this may eventually end up being worth more than rental fees per se.
Granted, this would work better once you have established a certain credential, but definitely consider this option when you have the opportunity. Our first Biliq location was on a rental basis - we floated the profit sharing idea to the landlord but we were turned down because no one has heard about us back then. We have since operated on a profit-sharing basis for our second and third locations. What I like about this model is that it creates a lower barrier for our business to grow organically (due to lower commitment on rental fees in the early stage), with a hope that the landlord would get compensated when the business succeeds. In both our cases, the locations have since managed to secure contracts which have ensured steady stream of income for both parties. Talk about a win-win solution!
7. Who to hire at first?
As a startup founder, if you have to choose between hiring jack-of-all-trades or specialists, always hire the jack-of-all-trades first. As the business grows, it is almost always easier to train the former to become the latter, rather than the other way around. Of course, there is an exception if you are in a very niche business or if you are filling a highly technical role. The bottom line is this: a startup has to be as lean as possible in the beginning and a bloated org chart is the antithesis of that.
In Lean Startup, the author suggests that a startup doesn't operate in a conventional method. It's a fallacy to predict what the market wants; business plans change along the way all the time (this is very true); and few months or years down the road you could end up with very different products, strategy, and customer base than what you first envisioned. Having a flexible and pliable team with the ability to multitask and switch roles quickly is imperative to the survival of a startup.
8. Your employees are indeed your best asset
Yes, you have heard this saying a lot. Almost every writing about business tips has this wisdom mentioned in some shape or form. But the fact is, no other component in your business (both tangible and intangible) can produce a better ROI than your employees. It's true that salary expense reduces the asset in the balance sheet, but as the saying goes "numbers don't tell the whole story". Always invest in your employees first before investing in other parts of the business. On the flip side, when you do need to sever an employment due to performance related matters, do it like a surgeon: cut it swiftly and let the wounds heal.
Conclusion
They say 20% of businesses fail in the first year, and 50% fail in the first five years. As scary as that may sound, starting your own business in the area that you are good at and with a group of people that you love being with, will be more fulfilling than any best jobs you have ever had. At least it is for me. :)
Do you have some learnings you wish you knew earlier, either as a business owner, an investor, or an employee? Tell us in the comment below, I would love to hear your thoughts!
About the Author
Born in Sumatra to Chinese immigrants, Hansen is the co-founder of Biliq Bali. When not seen loitering at Biliq or consulting his clients on tax (aka. boring) stuff, he usually spends time with his wife and 3 dogs. Their favorite place to hangout is at the beach or the rice field in Seminyak where the pups run free and wild.