Next month will mark the twentieth anniversary of Octopus. A lot has changed since 2000, when three of us – all graduate trainees in our early 20s – decided to leave the relative safety of a big fund management company to set up on our own. While there have been lots of highs (as well as a few lows), the pull of being an entrepreneur, being part of building something, is as strong today as it has ever been.
Why become an entrepreneur?
In a world where most people dread going to work (it’s not a coincidence that the most common time for heart attacks is between 8 am and 9.30 am on a Monday), I feel hugely fortunate. The work/life balance conundrum has never reared its head for me – I’m doing something I truly love so it simply doesn’t feel like work.
There are lots of ways to explain the joys of being an entrepreneur, but there’s a simple way to sum it up for those who haven’t done it yet. I have three children and like most parents, I love them dearly. Octopus, however, comes a close second. It’s like a fourth child and I naturally, without question, want to protect every little part of it, particularly its people and its culture.
For anyone considering setting up on their own, I’d encourage you to take the leap. And to do it now. The world is changing more quickly than ever before, and these changes create huge opportunities for entrepreneurs who think and behave differently. Adding to this is the fact that setting up a business has never been easier. Technology means it’s quicker, simpler and cheaper than it has ever been; you don’t need an office, almost everything is online, and you can rent rather than buy whatever you need. Likewise, you can test and get feedback on new products or ideas in minutes, rather than weeks.
Thanks to government support for smaller companies and entrepreneurs, the UK has created one of the best places to build a business in the world (it’s second only to the US). The funding, advice and broader ecosystem are all here already. As a result, high-growth small businesses have become the heartbeat of our economy. These companies, despite being relatively few in number, employ almost two million people and contribute more than £110 billion to the UK’s economy.
For those who do decide to start their own business, it won’t be easy. There will be challenges around every corner, but they’re all surmountable. Below are four of the biggest lessons we learned in the early years spent building Octopus.
1. You don’t need a “big idea” to get started
Many people assume that you can’t start a business without some kind of magical big idea. That’s never true. You don’t need to reinvent a whole industry, or design something totally new, to be successful. Great businesses are almost always about how they make their customers feel. And there are endless opportunities to do a better job here. In fact, it’s almost impossible for most people to think of a company they truly love being a customer of. Start with your own life – think of the products and services you find most frustrating, or the companies you least trust. Then make it your mission to offer customers like you a better choice.
2. Finding customers
The early days of most start-ups are about survival. And survival only comes from paying customers. Almost all your energy over the first few years should be spent selling. Don’t be tempted to spend time making your great product a little bit greater; it’s much better to get into the market and see what it takes to get people to buy it.
There’s no real substitute for cold calling. In the case of Octopus, we spent nine months cold-calling potential investors for our business (using the Yellow Pages). In hindsight, these nine months were some of the hardest of my life, but the process opened my eyes to what it takes to get a business off the ground.
We applied the same logic when we started building the customer base for Octopus Investments, the first business within the Octopus Group. In this case, our customers were financial advisers. In the first few years, we spent 75% of our time travelling the length and breadth of the country attempting to persuade financial advisers of two things:
- Octopus products would solve some of the problems their customers faced, and
- that we were a company of our word.
3. Love them, hold them, squeeze them
Retaining a customer is eight times easier (and cheaper) than finding a new one. Yet almost every large business seems to forget this. Loyal customers are taken advantage of and the resulting customer churn is accepted as a normal cost of doing business. Neither of these things should be OK.
Your customers pay your wages. They are the reason you have a business. Treat them well and they will reward you with continued business. Our reaction to our first customer (thank you, once again, Mr Gower) was to call him up, thank him and tell him all about why we were different to other investment companies. In hindsight, I probably shouldn’t have told him he was our first customer, although he definitely came off the call understanding just how much we valued him.
I always try to apply the same logic to every single one of our customers. Do the 2,000 customers who join the Octopus Group every day now feel the same love and gratitude as Mr Gower did when he first joined? Because that should be the bar.
When you start to scale, empower your front-line staff to keep this sort of thinking. Rather than giving them rules to follow, encourage them to use their imagination to show they care for your customers. And never forget this simple test – if your business was a person, would you choose to be friends with it? If the answer is no, take action to improve.
4. Hiring (and keeping hold of) the right people
Once your business starts to grow, you’ll spend a huge amount of time hiring people. Hiring is a bit like a marriage; you don’t marry someone because “they’ll do” or “because they’re better than the others”. You marry someone because they’re “the one”. The same should be true for the employees you hire.
Never, ever compromise, even if it means there’s no one in that role for months and months. Be clear about your company’s culture and make sure you hire people who are right for you. And recognise that you will get some hires wrong. Even if you’re some kind of human Jedi, you’ll still get two or three people out of ten wrong (culturally or functionally). When you recognise this, move quickly to remedy things. It’s better for them, for you and for the business.
Once you find great people, you need to motivate them and make sure they want to stay. Trust is hugely important. Treat your team like adults rather than kids; trust that they won’t need thick rule books about dress codes and hours. Give your people the autonomy and the flexibility to work in the way that’s best for them and you’ll find them far happier, more productive and more likely to stick around.
High-growth small businesses of the future
Entrepreneurship is about the journey, not the endpoint. It’s about having the freedom to do what you want and to seeing the difference your business can make – on its employees, its customers and the world around it. And even if it doesn’t work out, I don’t think you’ll regret it. In fact, I’d bet that you’d try again.
You can read more about high-growth small businesses, their challenges and opportunities, in our recent High Growth Small Business Report.