Putting the business into e-start ups

Got a good e-business idea? It is never too late to turn that idea into a sound business. And you can do that by learning from the mistakes of those who have rushed into e-business before you, and come unstuck.

Expectations around the first wave of dot com companies were unsustainable. Many attracted investment on the basis of perceived potential, rather than sound business plans. They were run by visionaries with good technical ideas, but weaker business skills. And they believed they were in a new age, where the building blocks of good business practice had changed. The result was a wave of companies that lost control, went to the market unprepared, and failed after spending large sums of investors' cash.

Here is how to get your e-business off to a sound start:

• Think about your idea. Would it make sense, and money, in the old economy? If so, it is probably sound.
  
  
• Get a balanced team of managers around, include people who say "No" and people who have experience of managing business start ups.
  
  
• Write a proper business plan based on achievable revenue targets. Question whether they really are achievable.
  
  
• Keep spending under control. If you need to spend huge amounts on advertising at an early stage, ensure you get value.
  
  
• Don't rush to the market. Don't overplay the first starter advantage. Others may have the same idea, but you want to be the one who makes the idea work.
  
  
• Use today's technology, not tomorrow's. The Internet is still slow, fuzzy and technically limited. Your business has to make money in that environment.
  
  
• Don't forget that the market will always need experts and middlemen. Find an idea that rationalises costs for others or delivers a proven service or product in a new way.
  
  
• Look carefully at sources of investment. There is very little cash available now to back Internet ventures, and that which is available comes at a high premium, including a hefty equity stake. Investors are now looking for technology businesses typically with intellectual property assets that are unique and protectable, such as new software that is deliverable over the web.
  
  
• VAT is another hot topic that can trip up net visionaries. The general rule is that VAT rules apply to the Internet as much as they apply to any other business. Generally, VAT requirements follow the purchaser. But that would mean web businesses registering for VAT wherever a user was to be found. Not easy. Get good advice, and don't start trading without it.
  
  
• One overriding tip? Know when to ask for help and ask early! Whether it's brain-storming with your management team, discussing development with your business advisors, or negotiating with third parties, accept that their view might be better. Listen to what people have to say and use the best advice to drive your business forward.

"Moore Stephens Bulletin" Winter 2001