She says that had she not experienced the failure, she might never have gone on to write one the worlds’s most popular series of books.

JK Rowling’s most memorable quotes, taken from the video, include

I talk about the benefits of failure – simply because failure means a stripping away of the inessential – I stopped pretending to myself that I was anything other than what I was and began to direct all my energy into the only work that mattered to me – the one arena in which I truly belonged – I was set free…

it is impossible to live without failing at something unless you live so cautious you might as well have not lived at all – in which case you have fail by default.

The knowledge that you have emerged wiser and stronger from set backs means that you are, everafter, secure in your ability to survive.

You will never truely know yourself until tested by adversity. Such knowledge is a true gift and it is worth more than any qualification won.

Rock bottom was the solid foundation on which I rebuilt my life.

What can entrepreneurs learn?

Firstly, failure is a part of life and a part of business life. It might be small – you missed out on a contract or sale. Or it might be bigger – your business fails. It might affect your marriage and it affects your finances and the car you drive (or perhaps, for a few years, you just walk).

Secondly, to avoid failing, means taking no risk at all – so means could never achieve anything thing and therefore is failure by default.

Thirdly, having experienced failure, whether small or great, the opportunity is to use it to strip away the inessential parts – to know yourself and focus on what you do brilliantly.

Only when you know what you can do brilliantly can you truly be successful.

Hence, failure is the rock on which all future innovation and long lasting success is based – just as JK Rowling said.
Thirdly,

Google Chief Exec, Eric Schmidt say ‘we celebrate our failures. This is a compnay where it’s absolutely OK to try something that’s very hard, have it not be successful and take learning from that’.

In some ways this is good – as it is a fast growing sector with very high levels of innovation (and failure rates). On the other hand, it means that we see the same errors of strategic business thinking repeated again and again.

So, to help out, I’ve laid out the three key mistakes that I’ve seen after 11 years working in digital innovation.

You may have some of your own – so please feel free to contribute.

1.) 1 in 100 Chinese customers

Many business plans start with this fallacy. They begin with the population of the world, or a country or a business sector and then say – ‘if we could only get 1% of that market’ then we’d have a business worth £x million.

Of course, this is designed to make ‘1% of that market’ sound tiny. But this is because you are working top down.

Take China for instance. The population is 1.3bn people. Okay, so 1% is 13 million. Is that a lot? Well, it is greater than the population of London. It is around half the UK’s working population. 13 million is also around about the peak level of TV viewing in the UK of the England vs Slovenia world cup football game.

So, when a start-up business begins with a huge numbers and asks if you could take just a tiny part of it – 1% say – they are making the mistake of working from the top down.

Instead, it is better to ask, what does it cost to gain a single customer? From which you can then ask what it would cost to reach 13 million viewers – well advertise around a major England football match – but to win 13million customers is going to require constant marketing and conversions of leads from your advertising. To give you an idea, a single 30 second TV slot reaching 13 million world cup fans would cost £300,000.

The error then, is to work from the top down. Begin, always, with what does it cost to acquire 1 customer? And then argue whey you customer acquisition costs will reduce as you gain size and momentum.

2.) If I build it – they will come

This is the Google error. Okay, okay, Google had one massive success – the search engine – and ever since, every product has failed to deliver or failed to dominate its market in the way that you’d expect the Internet giant to do, given their brand reputation and quality of engineering.

Take a look at this great article about why Google projects fail – and you’ll find that it is because Google does not do marketing. Amazing really, as their income is entirely dependent on classified advertising that they themselves don’t do marketing.

Apart from one success, Google has delivered many greatly engineered products – but doesn’t lead the market in any of them.

That is because Google still believes that if they build it – the customers will come. Well, that simply isn’t true for anything but the most ground breaking of products (such as search). All the other products are great - and could be excellent if they included marketing.

So, why don’t business start-up entrepreneurs include the marketing? Well, simple – because the costs are huge! And, if fully costed, probably make the idea untenable.

Therefore, the successful entrepreneur has two options – reject the business idea – or do it anyway, but use stealth marketing. That is use the new (and therefore) cheaper channels – such as PR or social media or digital marketing – using freelance contracts. But you do need to be very good at this.

Either way, for consumer products, marketing will be 50 to 60% of your costs (okay, this may include commissions to 3 parties) and for industrial products, this might drop to 15 or 20%.

Nevertheless, fail to include enough marketing spend, and unless you have an utterly amazing product, you’ll end a failure.

3.) I haven’t built anything, haven’t done anything but if you give me lots of money, this will all change.

You may laugh, but this is the most common mistake.

Often it comes from someone who is thinking in a corporate way – ie. build the plan and then persuade – rather than an entrepreneurial way – ie. let’s have a go and see what happens / we learn (but without spending too much money or time.

The difference is massive.

One the one hand, you have a highly practical ‘go out and make it happen’ approach – which whilst it will be messy, will actually deliver some results. And those results – either good or bad – can be used to devise the next step in the business strategy.

On the other hand, you have a planner who shows no sign of being able to implement something on a tight budget.

Now, no matter how much cash you raise – your budget will always be tight in an entrepreneurial start-up business. In fact, if you can’t run a tight business, you shouldn’t set yourself up as an entrepreneur.

So, the reason that so many business plans don’t get cash – is because they don’t get started. Investors and business angels want to speak to your customers to see if you are any good. If you don’t have customers – there is no one to speak too – and the risk level on your business idea goes through the roof and the investment cash stays in the pocket.

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What do you believe are the biggest start-up mistakes? Let us know by adding your comments below….

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In addition to the known cuts, the events in Greece and Europe have put further pressure on Governments (especially Spain and Portugal and hence, implicitly UK) such that cuts will come faster and sooner then previously expected. Successful entrepreneurs are already preparing for an increase in business failures and a loss of national business.

This explains why the current owners will also meet £9m worth of liabilities as part of the sale.

However, the key is that it shows how long term liabilities can sink a business. How on earth did the independent get it self into this state? Probably by negotiating cheap print deals in return for long term commitments? And, of course, staff redundancy costs and office leases…. Time for a new way of doing business – contractors and freelancers and short term contracts, anyone?

Are you wasting money? But more importantly, missing out on talent?

Dear successful entrepreneurs,

Here is my warning…

Just remember if you do employ traditionally (and ignore the freelance model), here is what you will be paying for sooner or later.

• paying for stationery to make your employees feel comfortable and valued
• paying for storage to store the excess stationery they order
• paying for staff to file bits of paper in the endless lever arch folders they felt they needed in order to do the job
• paying for someone to reduce the filing and throw away the useless information stored
• paying for an intranet to allow triplicate filling of digital copies of all items filed
• paying for server costs to allow maintenance of digital files
• paying for someone to go through all the digital files and delete them all

and then

• paying to provide email support when staff break their email accounts
• paying to stop your staff doing silly things, like downloading viruses or looking at pornography
• paying for human resource staff to listen to their whinges
• paying staff to smoke cigarettes
• paying managers to provide written staff objectives which staff can then safely ignore
• paying staff to have new ideas on how to do things better, which ultimately don´t work and then paying someone else to take down the new idea and get on with doing it the way it works best

and then

• paying for staff to have grievance procedures which can be brought against any managers whether legitimate or not – all payable out of company time and resources
• paying for senior management to sit listening to pointless complaints
• paying for someone else to wash up the mugs that staff use and don´t wash  up (do they do that at home?)
• paying for the tea and coffee
• paying for someone to clean up behind them
• paying for management to regularly walk around the office to ask staff to please throw away old paper, bits of sandwich left-overs and old newspapers and magazine

and then the obvious stuff

• paying for holidays
• paying for sick leave
• paying whether they do their job properly or not
• paying to hire staff (recruitment fees)
• paying to hire the temporary replacement when on maternity or paternity leave
• paying for someone to fill a key role during maternity
• paying to make weak staff members redundant because firing average performing staff is too long winded and every business opts for the more expensive but quicker route of redundancy
• paying for holiday rights accrued whilst on maternity leave (whilst also paying the person who fills the maternity role the same holiday rights)

and then

• paying for an internet connection to allow them to keep on surfing whilst in your office
• paying to post personal letters and provide their homes with a suitable supply of pens
• paying for mobile phones and laptops so staff can work from home on Fridays and have a nice long weekend

Okay, you think I’m being a little extreme? I promise you, I have seen all of these in the business I created and it was a problem of employed staff and never an issue with freelancers and contractors.

I do accept that if you have contractors in your office, which you will almost certainly want to do, that you will have to pay for their office space too and provide tea and coffee etc. You may even pay them slightly more such that there is no real National Insurance or employers tax saving (it might just get paid to the freelancer to allow him to cover these costs himself).

However, in my recent business which ceased training in Aug 09, I did not encounter abuse of these or any of the other issues with freelance and contracting staff; only with the traditionally employed.

The point here is not that using freelancers and contractors is primarily about a tax saving – although it may a secondary benefit – it is that you have a different grown up relationship with fellow business people who share your desire to make the project work.

And, you have the minimum of distraction from achieving the goals of the project because you do not have the bureacratic and overbearing risk of employment law hanging over every decision you make like the sword of Damocles.

Do you know the story of Damocles? It is worth knowing and no, you don’t want to be Damocles.

Instead, if you are an entrepreneur build a business which stays true to its founder – entrepreneurial. Build a business that is exciting and focused on achievement of goals and objectives and the fun and enjoyment that comes with that.

Find the best freelance and contractors you can. Pay them well, pay them fairly and a bit more. Share bonuses with them if you have financial success. Create an atmosphere of business partners working together to achieve win/win results.

You will have more fun, your team will have more fun, you’ll all perform better and you’ll all get better results. And yes, you will save money too – but this isn’t about saving money – it is about creating the right atmosphere in which success is most likely to flourish.

Be brave and do it and don’t compromise. After all, you do call yourself an entrepreneur don’t you?

Alan Sugar

Alan Sugar, a UK entrepreneur with more than his fair share of grey hair, stoked controversy by stating that 85% of UK businesses that failed to receive bank finance had nothing to complain about.

Amid the controversy of whether he actually said this or not, we can still ask ourselves whether he has a point.

Essentially, he is saying that the reason that businesses don’t get finance is because they aren’t good enough.

His description is that many entrepreneurs are living in a Disneyworld.

Okay, let’s start with what did he actually say. He said

“The problem is that some younger people who have lived through the last 10 years or so of business and prior to that 10 years they may have just come from education, they lived through that period of the last 10 years where they think the irresponsible manner in which the banks dealt is the norm.

“Let me tell you, you lived in the Disneyworld, you have lived in the unrealistic Disneyworld in the way banks dished out money.”

“The moaners are bust. They are bust and they don’t need the bank – they need an insolvency practitioner.”

Okay, actually, he has a point.

Perhaps it is not so much our education or some people’s youth - but perhaps it is because our businesses became more and more unhinged (or leveraged) and the value they added became less and less clear.

Not so much that we became lazy during this period of excess – I certainly worked harder than ever – but we became relaxed. Relaxed about profits believing that so long as revenue was growing, we could always sell the business. Relaxed about staff performance, knowing that replacing mediocre staff was hard and may not deliver any improvements.

It is certainly true that during this time of excess we’ve seen huge salary and employee wage rises. Which is understandable, because you now need to earn a small fortune to buy a small flat.  Again, perhaps we became to relaxed about profit and too willing to share it with those who didn’t put up the risk in the first place.

We’ve also enjoyed higher taxation during the boom years which has swamped the public sector in money and built weak competitors that are poorly attuned to drought conditions.

Essentially, we have lived, as entrepreneurs, too well for too long and the arguments for the war on talent etc has encouraged us to turn a blind eye to poor or average staff performance and that coupled with the increasingly restrictive employment  legislation and ‘fear of losing good people’ has perhaps been the root cause.

Still, Alan Sugar is right when he says most businesses are not worth investing in. Especially those businesses built in the boom years and used to the easy sales that came with that time.

We now face a period of hard work grinding out results and delivering clear value. And that requires a major shift in the way we run our companies. It has been argued that the success of new start up businesses – or restarting enterprises -  is down to the quality of implementation and not the idea. This is a major shift in thinking.

The good news is that in this environment we can forget about our competitors and their threats to steal our carefully nurtured talent – we can now just get on with paying a fair rate for a great days work and focus entirely on the quality of implementation.

As entrepreneurs we have the opportunity to turn our businesses around or begin again, but this will be achieved mainly by going back to the simple things, making a profit always and being intolerant of mediocre performance from highly paid staff and becoming crystal clear about how we add value to our customers.

New businesses need to be value driven, they need to be grown without debt or with small business angel investments in order to prove the business model. And all business investment needs to be justified in clear revenue terms, questioned on a regular basis and pulled if it fails to achieve its objectives.

Growing a business without debt is hard work, but it is the most certain way to achieve success as it allows you to adapt your business model as you learn about how the market responds to your offering.