Five lessons learned: Mike Welch

Understand your market

When I started out, tyres certainly weren’t a fashionable market. Nevertheless, I spent a lot of time thinking about what sort of business I might want to get involved in, and I realised that the best business execution you can undertake is in a market that you understand. I worked as a tyre fitter and salesman after leaving school, so I knew the marketplace. I decided to use that experience and build something in a niche that I understood. It’s very difficult to go in and disrupt a market – especially online – without first knowing where the opportunities lie.

Never do business on a handshake

Years ago I trusted a prospective investor on the strength of a handshake. He pulled together a shareholder’s agreement and I signed it. I ended up with a shareholder who hadn’t invested a penny and who wasn’t obliged to do so because the agreement didn’t back it up. I then spent the next six months simultaneously trying to run a business and get rid of this shareholder. It was stressful, but on the back of it I learned all about the importance of having the right legal governance in place. Even in a small business, it’s critical to make sure you have enough control to call the shots. Don’t do business on a handshake – take good advice and get the fundamentals in place early.

Own your numbers

I used to think that running a business was all about selling things – but if you don’t understand the moving parts of a business, the commercial parts, the financial parts, then it’s very difficult to make decisions and to know what it is you’re selling. What I mean by that is every single metric in the business that makes up its DNA. Being able to recite your numbers isn’t owning them. Owning them is about understanding how they impact one another and the rest of the business. The difference is being able to look at a set of numbers – a balance sheet, a cash flow report – and straight away single out the ones that are problematic or significant. That takes a lot of practice, but until you’ve got that knowledge you’re not actually running your business.

Don't raise "dumb" money

In the early days it’s difficult to bring in talent at the sort of level that you might want because you can’t afford big-hitters or truly excellent people. But what you can do is sell your dream to seasoned investors and experienced people in your industry. Invite them to invest. Get the benefit of them sitting on your board or as a mentor to give you advice, insight and encouragement. Reach out for the absolute best talent no matter who they are. Reach out to the superstars of your market and encourage them to believe in what you believe in. If they do, you might be lucky enough to get them on board as investors.

Excelling as a digital business means excelling in business

The best digital businesses are the ones that are run as excellent businesses full stop. Having the right fundamentals within your business, irrespective of whether you’re online or not, is what’s going to make you excel. If you want a great digital business, you can’t go far wrong if you stick to the principles of running a really great business. With digital you can scale very quickly, you can be online, you can be global from day one – you can do lots of things that you wouldn’t ordinarily be able to do. It is an enabler of growth like we’ve never seen before. But the basic principles underpinning all of this are the same for any sort of business.