Business models and the mistakes startups make with Dirk Bischof
As a part of our quest to champion purpose-driven entrepreneurs across the world here is the story of Dirk Bischof, the eleventh of our Humans of Happy Startups Series.
The Happy Startup School first met Dirk at our Summercamp in 2016. We often feel very lucky to attract so many experienced founders willing to share knowledge & support at camp, and Dirk is no exception.
Dirk Bischof
Founder of Hatch Enterprise
Based in London
Dirk, welcome! Tell us more about your company Hatch, and the hlp you provide for startups
Hatch supports people to launch, grow or scale a business they love. Since 2014 we have supported over 350 entrepreneurs to get their business off the ground and to find ways to sustain and to grow it.
We started out with a vision of making business support available to entrepreneurs in our local, South London communities. We knew that the model of business support via the incubator/ accelerator model works, as demonstrated across platforms like Techstars, Bethnal Green Ventures etc. But we knew that the entrepreneurs we wanted to work with did not want to build tech businesses and hence would not be able to access such support as their businesses were not (yet) investable.
How was it you came into entrepreneurship?
Entrepreneurship was instilled in me at a young age, beginning at my father’s engineering business after the fall of the Berlin Wall. It wasn’t like there was much choice for him than to become an entrepreneur. It was either joining the unemployed masses as his old state-run company got sold off or start his own business buying some of the machinery and working with the people he knew.It was a brave step that put our family to the test.
I was about 14 and experienced first hand how someone built-up a business from scratch, often helping out on the weekend cleaning machines and making my first dosh.
In 2014 I co-founded my first social enterprise supporting young people to explore their professional ambitions whilst enabling vocational teachers, trainers and their institutions to understand training methodologies developed abroad, exchanging best practices and innovation across borders and how to implement new ways of doing things.
We grew this social enterprise from a tiny voluntary organisation in 2004 to a company with 9 staff, working across the UK and, via partners, in 10 EU countries, facilitation life-changing work placements and trainings for hundreds people on an ongoing basis. It was there I learned to structure new project ideas, write funding proposals and deliver projects. It felt like this was my second vocational training — one that would last me 10 years.
I think I must have written some 50+ project proposals ranging from £5K to £300K in value, from 3-months to multi-year projects involving anywhere from 2–10 partners, locally and internationally.
It was pretty manic, and a huge learning curve.
I also failed the first time around 2008 as we thought we could build a renovation and home improvement company. Whilst these exist now, in the form of social enterprises, backed by larger charities like Shelter to do all the in-house fixing and making good work. We weren’t ready and within 2 years shut it down; thankfully without any financial losses apart from the time we spent building it as a side-project. But it was an invaluable lesson in finding your place in the market and how to exploit it, and also how not to.
My journey to entrepreneurship wasn’t a straight forward one and for the best of 15 years since coming to the UK, I wondered what the hell I was doing. Now, it all seems to fit together magically. I always wanted to be an entrepreneur, I always wanted to help other people, and I thrive creating new things, relationships projects, and businesses.
When we created Hatch in 2013, it came forth from the journey I was on, I had developed a thorough background in fundraising, able to approach funders, understand their language and come up with projects that would become reality. By that time I was helping people informally with their businesses, structuring start-up processes and helping them to figure out how to get their business off the ground. I then understood that entrepreneurs themselves could be customers.
I realised also that they didn’t have much money when starting out — not the kind of money we as an organisation would require to do the work we do. This meant we had to find long-term partners, funders and sponsors, able to match the financial resources needed to support hundreds of entrepreneurs a year through our 6-week, 12-week and year-long programmes. It was a business model decision to become a charity.
Our first large corporate partner was J.P. Morgan. I approached them to ask whether they would back our venture to help especially young entrepreneurs in South London get off the ground. We launched a 2-year project with their financial backing, whilst being able to access their talent pool of employees as our mentors. This was a really good fit and we were able to support our first 40 entrepreneurs from 2014–2015. We now support 3 distinct groups of entrepreneurs: young entrepreneurs aged 18–30, social and mission driven entrepreneurs and female founders.
With all your experience helping people start businesses, I could ask you questions all day but what I’m keen to focus on for this interview is business models and helping readers carve out the right financial path for them.
During the early stages of a business there is often an “exploration” stage when it comes to finding the right business model. What are your thoughts on this phase.
The period of exploration is essential.
Nowadays there are so many tools we can use, such as the business model canvas and it’s social counterpart to help conceptualise the fledging business idea.
We are able to start the customer discovery journey using various tools such as avatars (customer personas), figuring out who these illusive customers are or will be.
What most people do not appreciate is that this takes time and resources, but that it is time and resources well spent.
For social entrepreneurs or those starting a not-for profit business or charity, the journey is often two-fold, there is the ultimate customer group, the end user but often they may not have the financial resources to pay for the service. This means a second customer group has to be developed, that with donors, funders and sponsors. They are essentially very different to the end user. They require a different language and different activities to tap into them.
We generally talk to our early stage entrepreneurs about running a series of well-structured experiments to validate their MLP’s (remember, Minimum Loveable Product, thanks Laurence, Co-founder of the Happy Startup School), as opposed to just “launching a business”.
It’s so important to discover the one or two things that new customers love about your product or service. And then to make that a little better, maybe to get it to a slightly enlarged geographical area over time, or to a slightly different customer group to continue to grow, think going from B2C to B2B.
Anyone starting in business has to be prepared for a 3 to 5 year journey to see if the idea and experiments can become a business, 10 years to make it successful.
Starting and sustaining a business is one of the hardest things anyone can do. Exploring business model variations, whilst carefully assessing and evaluating the early business experiments is a useful activity.
Is there a point along the road in which a startup should make a decision about running their business with a focus on one business model or do you think it’s possible to run several business models in tandem?
An excellent question.
Up until Hatch, I was always of the opinion to have my eggs in different baskets, to hedge my bets so to speak.
This can work but will ultimately introduce inefficiencies, potentially even mission drift.
I’ve seen it and its not pretty if two of your services that you equally like, take off at the same time, but that one is a much more mechanical version that will, over time, make money but suck the lifeblood out of you. Whereas the other one is a relationship-building business you will thrive and be happy in, but take longer to build.
This is just an example, but trying to focus on different things within one startup is not a good idea.
Sure, you can do them both, sometimes living of the fruits of one, in other times off the income from the other. It can seem like you’re already diversifying your funding streams. Don’t believe the hype, it’s an illusion that will consume your time and energy if you’re not able to quickly put resources and a team behind it to sustain it.
Since stating Hatch, and having been mentored by some of the most amazing entrepreneurs and people in my life, I came to understand that there’s a difference in “doing less but doing it really well”.
At the beginning when we started Hatch we could have focused on 3 distinct areas and my trustees gave me the option.
They said they would support me with any one of these, but I would have to choose one.
It was of course supporting entrepreneurs as the one thing I wanted to do for the next 10 years at least. This meant shutting down the other 2 side projects over a relatively short timeframe, telling people we would no longer work with them, and letting go of financial income streams.
However, this allowed everyone to pull together, in one direction, which I believe is why Hatch got off the ground so quickly. Everyone is super-focused on providing the best possible experience for entrepreneurs we work with, be this via a one-off workshop or event or a longer-term enterprise programme.
Doing less but doing it better is definitely right up there on my top advice list. Think about it. Human beings can only focus on one thing at a time, really well. We are essentially terrible at multi-tasking.
Any tips to help startups decide on which model is right for them?
This is a tough question. I’ve always been someone who really tried to maximise my personal value proposition being a fundraiser, wanting to address challenges I see around me, together with what I knew was possible and achievable. As mentioned earlier, deciding on a business model will take experimentation.
For people starting out, there can be such a thing of too much input, too much advice, too many voices, too many opinions. This is where an entrepreneur needs to trust their decision making, having fact-checked them with selected people (e.g. a mentors/ business coach) and ideally having these decisions backed up by hard data (like working out yourNet Promoter Score). A good business model will generally emerge over time.
If you’re thinking how much time is it worth spending to discover whether it’s the ‘right’ business model? How do I know whether it’s better to make some more money first (being employed), to build up bigger reserves and then run better experiments, whilst keeping the roof over the head?
Being an entrepreneur is always exciting and scary, you’ve got to lean in to whatever you’ve decided to do but I think it helps not taking the journey too serious, try and have fun with it too, make new friends, find people to work with, discover and explore. Sustainable revenue and business models can emerge from the unlikeliest of places!
Having helped many many entrepreneurs, have you recognised any common mistakes startups make when it comes to business models? If so how can they be avoided?
There are many mistakes to be made. In fact, I’m writing a book at the moment where I look at business model mistakes and how to follow a plan of action to avoid the most common ones, especially when starting out.
Business Model Mistakes:
- Not knowing your customer.
It’s one of the things you can get wrong so easily. Marketing and selling to them takes time because we are human beings and often need to establish trust with one another. Once I trust someone, I am ready buy from them. But it takes time to understand the language my customer uses, figure out their daily activities, their pain points and things that makes them happy. Where can I reach them and what marketing channels should I use, which channels do I actually enjoy servicing myself?. At the beginning the solo-founder is everything and everyone, CEO, CFO, CTO, secretary and legal council. Its important to make sure enough activity is devoted to the hardcore activity of designing and building a product, then testing it with a good model for analytics to help understand ‘the customer’, only to then re-design and build that very product, just better, and ship it. Good founders ship! Get the next iteration of your product out there, don’t be too precious about it, just get better feedback. - Underestimating costs and overestimating revenues.
I often used to plan with twice the costs and half the revenue for new activities. It’s nice to be positively surprised if it’s not like that. Especially at the beginning, its also tempting not to value ones time. I always ensure that entrepreneurs pick an hourly or daily rate for themselves and then to build that into their financial models. Often, this very quickly allows someone to price their product or service realistically. We all need to live and provide for ourselves and our families, if you’ve got one. Valuing ones time also taps into confidence issues. At the beginning entrepreneurs doubt themselves whether they are providing something of value. Its only natural I believe. Yet, its still important to immediately put my own costs into my product or service. Only then can I work towards a sustainable business model. - Deeply understand the types of customers the organisation has.
This one is especially important for social businesses or not-for-profit ventures. One being the end customer/ end user and the other being the ones who buys the product and finances it. Think TOMS shoes, where buyers purchase a pair of shoes and one pair goes to someone who couldn’t afford one. These are 2 different customers types and they require very different activities to be done by the business. Another example would be Change Please, a social business we supported that employs homeless people to make and serve coffee out of coffee carts across 8 London locations. Again, it serves two types of customers/ users. - Silence the voice that says “I am by myself and don’t have anyone to help me”
This final point is not a mistake but one of the most common things we hear. You can make quantum leaps having 1 amazing friend, a mentor, a coach or a co-founder on board with your business. They can make a big difference. What we’ve built with Hatch is to have a whole community of support, from lawyers, financial coaches, mentors, social finance professionals and impact investment geeks around us. It helps us to continue to find answers to the tough challenges we’re faced with: supporting entrepreneurs that come to us with amazing business and social business propositions for problems we do not know how to address yet. For us, building a support-community around ourselves was a business model decision. We knew we needed one to do our work and support entrepreneurs. At the same time, we are at the heart of it, able to work with amazing people around us and help us find better answers. How can you design your business model to access support whilst growing it?
Great tips there Dirk, thank you for sharing. Finally, tell us how we can find out more about what Hatch are offering
Hatch helps people explore their business ideas through our 6-week Launchpad, once you’re ready to grow and know you’ve got what could become your business, we offer further support via our Incubator, a 12-week facilitated learning programmes plus an additional 3-months of support via mentors and coaches. We also have a Female Founders Accelerator for ambitious entrepreneurs ready to scale their business.
We also run 2 main events a year, one will be held at the Royal Institution in the 3rd May week, focusing on Doing Good Business. It is a conference for anyone wanting to start and grow a mission-driven business and how to work with larger businesses and corporate partners in doing so. It will be a fantastic opportunity to get to know how to raise the right kind of money for your mission-driven business, how to access the right networks and we will also make it interactive with live pitches and lots of support packages and possibly even some investment money on the table. Stay tuned by saying Hi on Twitter @DoingGoodBiz (or signing up to our newsletter: www.hatchenterprise.org)
The other event we run is the Hatch Weekender. Under our Dream, Learn, Play theme, we give entrepreneurs the chance to be together in natural, inspiring and communal grounds in Oxfordshire and to just be. It’s a weekend that has been described as ‘truly transformational’ by people attending, ‘allowing the entrepreneurial self some space to think and to reflect.’ There’s more info on it here: www.weekender.hatchenterprise.org
Be sure to stop by if you’re in South London, we’re easy to find or come to an event to access the support you need to launch, grow and scale your business.
Thanks for sharing your wisdom with us, Dirk!
At The Happy Startup School we help startups quickly explore their ideas and potential revenue streams through our Happy Startup Canvas. If you need help with your idea, find out more. And if you enjoyed this post, please click that little green heart and follow our Humans of Happy Startups publication :)
