Launching a successful business in the finance sector can be a particularly challenging task.
Although rapid changes in technology and patterns of human behavior mean that new opportunities are constantly emerging, the markets are dominated by some very powerful players and it’s often difficult for newcomers to get a foothold. If you’re ready to take the plunge regardless, these are the key things you will need to get right.
Research and understand your market
What is your unique selling point? How will you stand out from the competition? A surprising number of people go into finance without really knowing the answers to those questions. It’s not enough to have a great idea if there are already other companies out there doing very similar things.
To be successful, you’ll need to understand what customers want, whether you plan to trade business to business or directly with the public. The good news is that this doesn’t have to mean commissioning expensive market research. There’s a lot you can learn from what’s already in the public domain. The trick is to ask the right questions and work out how your ideas can be developed so as to appeal to your target customers more strongly than the competition.
Related: Game-Changing Strategies for Success in Business
Understand the regulatory framework
The finance sector is one of the most tightly regulated areas of business there is and, in order to operate within it, you’ll need to make sure that you meet all the legal requirements. If you don’t have a lawyer in your team, it is essential to hire one. You’ll need to make sure that you have the correct accreditation for the type of business you intend to conduct in every jurisdiction where you intend to conduct it.
You’ll also need to ensure that you understand what you need to track and what reports you to need to produce as you operate, as well as who to send them to. If all this sounds rather laborious, remember that, as Alex Friedman has noted, business prospers best when it takes account of other people’s needs. Thorough regulation keeps the financial world from being overwhelmed by unscrupulous operations which would make it difficult for companies like yours to do business.
Investigate funding options
Finding funding is difficult for most start-ups and it can be particularly tough in the finance sector. This is partly because most finance companies don’t have a lot of tangible assets that can be sold off if they go bankrupt and creditors want to recover their money. In order to attract funding, you’ll usually need to be able to demonstrate that you’ve already tested your central idea on a small scale.
You’ll need to have a solid business plan, a demonstrably capable team, and a strong set of forecasts. As a rule, with a financial start-up it’s less important to show that you can make a lot of money than it is to show that you can make money consistently and that your idea is scalable.
Identify growth options
One of the main problems that finance start-ups run into is that scalability is a real challenge. Each stage of expansion tends to require a significant injection of fresh capital, and it’s difficult to access funding bit by bit. You will usually be faced with having to expand your operations in large steps.
This can present issues with recruitment – will you be able to ensure that new staff members are as capable as those in your original team? It can also present difficulties as you try to balance it with breaking into new customer groups. Finally, it’s worth remembering that established players can become hostile as you start to grow and may use their greater liquidity to make offers to customers that are difficult for you to compete with.
Invest in security
Every business is vulnerable to hackers. Often they just do what they do for kicks, but in the highly competitive world of finance, corporate espionage is also a serious risk. This means that you’ll have to take security seriously, investing in up to date software or keeping your data in a cloud-managed by an organization with a spotless security record.
Remember that your security is only as strong as your weakest link. Make sure that everybody in your team understands the risks so that they will create strong passwords, avoid leaving themselves logged in when computers are unattended, and take other appropriate measures to keep the company safe.
By taking this approach, you can begin to shape a business that has what it takes to survive in the sector, giving your creativity and ingenuity the framework necessary for success. The world of finance may be tough, but if your business makes it, the rewards are commensurate with that and you could do very well indeed.
