Inspiration for a new business can come at any time, even when driving down the iconic Route 66 as part of your honeymoon. This is what happened to Robin Knox last year just weeks after selling his final equity stake in Intelligent Point of Sale (IPOS) – the electronic till software system he co-founded from his kitchen table in 2012.
“We had sold IPOS to the payments firm iZettle in 2016, kept an equity stake but then sold up when iZettle itself was bought by PayPal,” explains Robin. “I travelled to Australia, Indonesia and the US and took some time out. But during that drive I started to think about the house we were renovating back home and home security! When I got back, I ordered a new system and found that they haven’t moved on from the 1970s.”
From this came Boundary, a smart home security alarm business which Robin brings to market next May. “I had always wanted to start again and do something bigger,” he explains. “It was a similar play with a utility product and people paying monthly recurring fees, but it was different in that it was hardware and B2C not B2B.”
Creating a new venture in the same market is, according to Crawfurd Walker our Chief Revenue Officer, important in helping to de-risk the move.
“Entrepreneurs can use their existing knowledge and contacts and provide a bit of comfort,” he says. “However, sometimes they fancy getting involved in a different market they have an interest in or where they see a good opportunity. Where possible they will try to use the same team as before if they have been successful and bring in industry specific expertise if required. Again, it is about taking uncertainty out of the equation.”
Robin followed this pattern, retaining professional advisers, finding new hardware experts and discussing the business model with previous investors.
“I also quickly hired an operations manager because I decided this time around there were certain parts of the business I wanted to focus on rather than doing everything,” he says. “Also, it helps me prioritise more time with my family.”
It also gave him space to evaluate the strength of his new idea.
“We conducted market research including eight-hour long interviews with members of the public, which gave us peace of mind before ploughing money in,” he adds. “We had to design and build the hardware for the alarm before any sales came in so overheads have been high.” By the time we launch the business will have consumed the guts of £3 million.”
So aside from business and operational risk, financial risk must also be accounted for by those starting again. Robin says he and his tech partner have put in a combined £1.2 million into Boundary.
“We didn’t want to bet everything so we set a limit of 10% of net worth into the business,” he explains. “Yes, I’ve worked hard but I have also had luck along the way and I don’t want to jeopardise what I have built up.”
Simon Martin, of St. James’s Place Wealth Management, says it is vital that entrepreneurs create a financial plan to protect their personal finances. “Cost out everything you will need for the business, your family and lifestyle,” he says. “If you have a significant capital holding then consider the most tax efficient way to manage these funds, such as in trusts. Look for diversification for your funds and consider diversifying away from the new business.”
He says there are no fixed rules regarding how much personal capital to hold back, with it depending on the individual’s risk appetite and often age. “But be prudent. A new venture could be rewarding, but you can also lose everything,” he says.
Robin’s final advice for getting a new venture right though is more physical than financial. “Take a break after you leave or sell a business. Let yourself get a little bit bored before launching straight back in,” he says. “We started again almost straight away, my lifestyle up to this point had meant I was living on Deliveroo, coffee, beers and adrenaline as we built it up. So much so that I ended up in hospital with a stomach ulcer. But ever the entrepreneur it was all about timing. We felt if we didn’t move quickly, we would get left behind in the marketplace. That and the passion I felt for the product meant I had no choice. I’ve been careful this time to carve out some time with a personal trainer to make sure my health receives the priority it should.”
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This article is written for the St James’ Place Entrepreneurs Club newsletter. The opinions expressed by third parties are their own and are not necessarily shared by St. James’s Place Wealth Management.