What to look for when assessing whether an emerging company has got what it takes to succeed.

• Innovation

  Small companies looking to compete with large, established incumbent players need an edge. Customers are more likely to look at unknown brands if they feel the product offers a benefit over competition, is easy to use and increases efficiency.

• Operate in existing markets

  It is generally harder to persuade customers to buy a product for the first time. Being the first product to market can offer greater upside however it also increases the risk of failure.  Many of the more successful technology companies have offered a new twist on existing products and have eventually replaced the incumbent market leader; Microsoft (IBM), Google (Yahoo), Apple (Nokia), Facebook (MySpace), Uber (Halo).

• Have a clearly defined business strategy

  A growth plan needs defined milestones leading to further targets. Whilst a strategy may evolve reacting to shifting market conditions, the plan needs to remain focused with ambitious but achievable benchmarks.

• The larger the market the better

  Large markets tend to have fierce competition with companies used to shopping around suppliers to source the best deal. This creates an opportunity for small innovative companies to differentiate themselves from competitors.  Additionally,  a small share of a large market can equate to significant revenue to SMEs.

• Identify consolidating, acquisitive markets

  In many markets the market leaders stay ahead by buying smaller competitors. They are often attracted to innovation they can fully exploit with their greater marketing power and recognised brand.  SMEs can achieve higher valuations if the acquisition price represents what the innovation could be worth to the market leader.

• Strong management team

  The management teams of small businesses will often not have proven track records. It is essential they are assessed on their ability, drive and focus as essential requirements of successful entrepreneurs.  The success and failure of companies is often directly correlated with the strength of the management team.

• Requisite funds to perform the business plan

  Even the best laid plans experience bumps along the way. It is essential a growth business allows for this in their funding requirements.  Additionally, not all business succeed with their first business plan, AirBnB was close to closing before they realigned their business with their customers’ needs and managed to raise further backing for expansion.

 

 

Important Note

The information in this website is provided by CSS Partners LLP. This website has been approved for the purposes of section 21 of the Financial Services and Markets Act by Charles Street Securities Europe LLP (CSSE), which is authorised and regulated by the Financial Conduct Authority. CSS Partners is an appointed representative of CSSE.

Any views or opinions expressed in this blog are those of the author alone, except where specifically stated that they are the views of CSS Partners LLP.