Other Links

Back at the start-up! by Simon Baker

13 March 2009

Lessons Learned Part 1: The first article in a series contributed by Simon Baker. Successful Entrepreneur, Investor and ex REA Group Managing Director and CEO Simon Baker is back at the front of an early stage business. Simon discusses his experience and shares some advice on starting up a business in a challenging economic climate...

This is the first in a series of articles about the trials and challenges of setting up a new business in today's economic climate.  These articles are based on a series of articles that first appeared on the blog of Simon Baker called www.myceolife.com.

Over the last 3 months we have been setting up a new business called Classified Ad Ventures (CAV).  The business provides a series of investing, consulting and new products to online classified sites around the world.

As we set up this new business, we are learning and re-learning what it takes to make this happen and I thought I would share some of the lessons we are learning.

Clarity of Mission is Critical

When you have a small business, it is extremely important to make sure that you have absolute clarity in what you are doing - your mission in life.  This mission should be simple and easy for anyone to understand.  The ultimate test of this is the elevator test - can you clearly articulate what your business does in 30 sec?  If not … think again about what you are doing.

In addition, you need to make sure that you have a real business model with real revenue and profit potential.  I look at business models all the time and often they are based on aggressive assumptions or are just poorly thought through.

Focus on What Matters

Having worked out what the business is going to do, you need to make sure that everyone is focused on making that mission come true. You need to constantly communicate your vision and make sure that everyone's roles are tightly aligned to that vision.

What is equally important is working out what you are not going to do - that is, the ability to say no to things. In our businesses, the team often comes up with great ideas and I spend time on asking the simple question “how is this going to help deliver our mission and bring in revenue?” More often than not, these ideas don't actually add value and are more of a distraction.  Saying no is as important as saying yes!

Make Sure You Have Sufficient Funding and Resources

Great ideas without the money to make them happen are just great ideas. Therefore, it is important that you have enough funding to get the idea off the ground or at least have enough labour to make it happen. Often the labour can be sourced on an equity basis where labour is provided in exchange for equity in the business. This is not my preferred option as equity should be treated as gold and cash used to pay for people as often as possible.

Build a Strong Team

No business can truly happen unless there is a strong team in place. Building a strong team is probably the most important objective for any founder of a business. At CAV, we are focusing on building a strong team and in doing so, I prefer to work with people I have worked with before as I know their skills and work styles, and they know mine.  Sourcing these people is about helping them gain buy-in to the mission that you want to achieve.  You need to make sure that they not only understand it, they passionately believe in it too. 

To help secure the team and make sure that they are aligned around the mission of the business, I believe in sharing the upside with them – this means giving them some equity and sharing in the growth of the business.

Keep a Close Eye on Costs

You may have raised some money.  However, this is not revenue. Therefore, it is important that you keep a very close eye on all costs. At CAV (and its subsidiaries), I personally sign off on all costs before they are incurred and make sure that there are strong cost control procedures in place. We want to create as much runway as possible to get the business off the ground and wasting money is not the way to do that. 

Simon Baker is the ex-Managing Director and CEO of the REA Group (also known as realestate.com.au).  During his 7 ½ years with the REA Group, he lead the growth of the business from revenues of $4m, losses of $6m, and market cap of $8m in 2001 to revenues of $155m, profits of $22m, and a market cap of over $500m in 2008.  Since leaving the REA Group in mid 2008, Simon has been setting up a new venture called Classified Ad Ventures – focusing on informing, investing and innovating around online classifieds.

Written by: Simon Baker

Candidate & Client Quotes

• Advisory + M&A