In October, I spoke at Startup Camp Montreal5 about the 10 Stupid Things Entrepreneurs Do to Mess Up Their Businesses, and alluded to that talk again recently at the Forum for Entrepreneurs and Executives conference on entrepreneurship. It came up in conversation again on Friday so it seems high time I actually post the notes from the talk on our blog.
I hope by pointing out common blunders, I can help entrepreneurs avoid a few of the dumb mistakes that (almost) every startup makes. I also hope that some of you who have tripped into these potholes of entrepreneurship might come forward as case studies for a collection of essays that I’m compiling. If you have a story that serves as object lesson to fellow entrepreneurs, I’d love to talk to you about it. I promise to protect identities (where necessary and/or requested) and to be gentle with you. The goal of the book is to help new entrepreneurs learn from those who have gone before. If you’re interested in sharing a story, contact me via email.
Now, on to the list of 10 Stupid Things Entrepreneurs Do To Mess up Their Businesses*
1. Think Like a Guppy
Okay, so you’re a small company. Maybe it’s just you and a couple of co-founders. Hell, maybe it really is just you. That’s cause to be judicious with your resources, but it’s no reason to whine.
Somehow in the past few years, it’s become popular to put startups in some sort of protected charitable class. You’re not a charity, you’re a business and if you want to be a big business, you have to think like one. Manage your resources, posture, negotiate, demand performance, deal.
You’re not a little fish; you’re a whale that has a long way to grow. Think like a small business and you’ll stay a small business. Think like a big business and you are more likely to become one.
2. Confuse Vision and Focus
Any business worth doing starts with a big, clear vision, that usually has something to do with owning a market, solving a giant problem, saving the world, or simply total world domination.
Still, there is a giant difference between vision and focus. Vision is the audacious objective, the big game of entrepreneurship. It is what the business looks like when you’ve achieved your goals.
Focus is how you get there.
Focus is critical because it provides the actionable steps to make a vision a reality. Focus prevents companies from running off course, or worse, chasing after the shiny objects that pose as opportunity. As importantly, focus provides a measure of progress and keeps ambitious entrepreneurs from becoming overwhelmed by their big vision.
Smart entrepreneurs dream big, but focus tightly. You can eat an elephant, but you have to do it one day at a time.
3. Confuse activity for focus
There are no idle entrepreneurs. Indeed, time is the enemy of startups, and every founder is busy, busy, busy building the business. Or so it seems.
Lots of activity doesn’t necessarily mean lots of progress. If you’re unfocused and doing the wrong things, you can be mighty busy doing little of value. When you’re lost, don’t just drive faster. Stop. Breathe. Assess. Focus. And maybe even ask for directions.
4. Fall in Love with Technology
Of course you love your technology; every entrepreneur does. It’s the product, after all, that people will buy. So you give it all your attention, defend it when criticized, convince your self that your baby can’t be ugly.
While dedication to technical excellence is admirable, in a startup it’s the wrong target for your affection. Instead, fall in love with your customers. They will tell you what to make.
5. Focus on Fund Raising Instead of Building a Business
I know. You need capital to build your company and venture capital is the fastest path to cash in the bank. Or it used to be.
While few VCs will openly admit that they have much worry, truth is that the venture capital industry is in upheaval. The perfect storm of the residual dot-com mega-funds, cash-efficient business creation models of the Web 2.0 cycle, and a global economic meltdown leave most funds with capital they can’t invest, capital calls they can’t make, or new funds they can’t raise. VCs are trying to re-engineer (and, in many instances, simply save) their businesses. And while they may be saying something different, they really aren’t spending as much time thinking about how to invest in yours.
But even in the best of times, the best way to raise capital to build your business is to build and sell products and services that people want to buy. In fact, nothing catches the interest of VCs like money coming into the company.
Consider that raising venture capital is a time-consuming activity. Consider how you might otherwise use your time. Developing a product? Talking to customers? Building strong channel partners? Then consider this: what brings more value to your company: building PowerPoint presentations for Sand Hill Road or building your company?
6. Fail To Measure
Young companies run fast, but not every startup is clear on where they’re going or what it will look like when they arrive. No doubt there will be plenty of turns along the way, but if you don’t lay down some milestones, you’ll have no way of knowing whether you’re on track or on time.
Companies of all sizes do what they measure, so measure what matters. Determine by what metrics you will evaluate your progress and by which you will be evaluated by others. Whether its development deadlines, page views, sign ups, downloads, or whatever – figure out what measurable metrics demonstrate growth and potential for your business.
Include in your metrics the sub-measures that affect the whole. For example, if the measure is a sales goal, also measure marketing and development activity that contributes to achieving that goal. That way, you have a clearer view sooner of what is going right, and possibly wrong.
Communicate those metrics to your team so they understand what they are and why they are important. Then measure and report in meaningful and actionable increments.
7. Ignore Yellow Lights
Optimism is a critical requirement for entrepreneurs. You have to believe that you can do the impossible while constrained in every possible way.
Still, your optimism can not be allowed to trump your reality.
That’s why metrics and measurement are so important to young companies. It’s important to set those milestones while everything remains possible and reason rules your business planning.
As you march on, you’ll no doubt miss a milestone or fall short of some measure. Pay attention. Take time to analyze the shortfall, learn from it and make course corrections as needed.
And, most importantly, listen for that little voice that urges you to press on even when all the warning signs point to another course of action. Listen for it, not to it.
8. Hire Good People
Smart founders hire great people. Period.
You’ve got more work than you can do alone, your small team can’t move fast enough, and you’ve got the resources to bring in more people. Hiring fast may seem like the answer. It rarely is.
As much as founders need people to help build the business, people can be a time sink for founders. The wrong person in the wrong job will bury you in management hassles, and they can do more to destroy team morale than a weeks of all-nighters.
As counter intuitive as it may seem, it is far better to take time to fill a position with the absolute best hire, than to burn time managing your way out of a bad hire.
9. Neglect the Details
An entrepreneur I know calls the details of budgeting and bookkeeping, employee contracts, stock agreements, and the myriad other details of business life “administrivia.” It’s a fun word, but there is nothing trivial about business management.
In the earliest days, when you’re working on handshakes and shoestrings, there’s little need for over the top business administration, but that doesn’t obviate the need for some reasonable care. That care (or lack thereof) will set the tone for your business as it grows.
A little time and a few dollars spent with a bookkeeper and lawyer in your earliest days will save a lot more time and money later when you need clean books and protected IP to make your case to investors, customers, and partners. Forensic accounting and documentation is very expensive. You can pay me now, or pay me a lot more later.
10. Lose Site of Your Values
Every company has a culture. It’s either accidental or deliberate.
An accidental culture grows as people come on to the team, decisions are made, customs established, crises arise, pressures build and release, new challenges and opportunities preset themselves. How founders act as the business unfolds sets the tone and establishes precedent. Precedent, re-enacted time and again, grows into corporate culture.
In my experience, most accidental cultures are toxic, not unlike mold growing in a refrigerator; all the best ingredients are there, but having gone ignored or uncared for, they go to waste.
Deliberate cultures aren’t necessarily complex and they don’t require management consultants or self-help books. They simply require awareness. What do you believe and value? If this company is your legacy, how do you want to be known? How do you want your company to be perceived by its employees, customers, and community?
Let the awareness of and commitment to those values drive your business dealings and decisions. Be consistent with your values, make them part of the company, and demand that those around you do the same.
* with apologies to Dr. Laura Schlessinger for riffing on her popular book titles.
Why the pejorative tone and “smarter than you” attitude? And why pick 10 things that smart, scrappy entrepreneurs with any chance of success can figure out on their own (or already know)? Let’s give entrepreneurs some credit for reasonable intellect and focus on more subtle or less obvious challenges like:
1. Your own board members and investors can be the biggest de-focusing force. Their skills to envision product strategies and their market insights will almost never match yours; they’ll pattern match with other portfolio companies and draw conclusions that can steer you way off course. You’ll have to be the ballast in the board room and it may not be easy.
2. If you have a bold or long-range vision, your customers may NOT be able to tell you what to build. You’ll have to imagine it yourself and bring them along with you. They can describe their situation, desires, and their challenges, but rarely a brilliant product solution. That’s your job and hopefully your great talent.
3. To quote someone else, “it takes a dictator to make an iPod”. It’s ok to want your product and customer experience to be perfect, but it is not going to make you popular. Learn to live with it.
4. Being the leader is lonely. Even with great people around you. Your partner at home makes a HUGE difference.
5. Practice compartmentalization because you’re going to need to be great at it. It is hard and, if you’re a first time CEO, you will need to keep far more to yourself than you’re used to.
6. It is not enough to hire great people, you have to hire for skill mix. On the e-staff in particular, you do need uniform ambition and IQ, but you also diverse mental models. Things will go wrong without uniform ambition and they’ll go wrong with smart people who all have the same mental model.
7. Never market to your board. If you’re a first time CEO, it’s tempting to want your committee of bosses to like what you’re doing or to share your optimism. This will bite you in the ass. Balance your enthusiasm with candid, clear discussion of risks and challenges you face. Make them your partners rather than another form of customer.
8. Drive diversity across your team — diversity in age, experience, cultures, genders AND industry experience. The richness of reference and vantage points will result in much richer innovation. If everyone on the team is the same, you’ve set the boundary of the company’s imagination too low. It’s harder to do and it means not working with people we’d naturally be friends with … but it’s a better way to build a company.
I could go on, but these are my favorites…
-Deidre
Wonderful list with Great Examples. You are right that any one of those ten mistakes could mess up a business. The two that ring most loudly with me are FOCUS [rather than just being busy] and working/living within a value system centered around the Golden Rule.
If there is anything we have to learn from Social Media, it is that we want to do business with people whom we trust and feel comfortable with.
Liars and manipulators need not apply.
–Shari Weiss
Deidre,
No pejorative tone and “smarter than you” attitude intended; sorry if it read that way to you. Why did I pick these 10 things? Because I see them again and again in my work with smart, scrappy entrepreneurs. Sometimes, the obvious isn’t so obvious when you are in the thick of things.
As for your list: outstanding! Great advice and exactly the kind of discussion I hoped to foster with this post.
Thank you for taking the time to add your perspective.
- Chris
I think this is great advice and in fact lends others, such as Deidre to post even more great advice. Let’s all give our two cents and make this type of conversation count.
1) Do it! Just do it!
Know all business need to make the choice on how to grow. Rest assure you will always face these issues, as a sole owner or VC backed company. Just be sure you focus on why you are investing or getting funding and how its to be used
2) Don’t pitch VC’s like one size fits all
3) Have answers ready, but don’t oversell to anyone
4) People want to be heard, let them speak. Internal and external to your business
5) A good product will sell, but a visionary product takes time. Don’t confuse the two
6) Make lists, and make sure you inform everyone what you have already rejected or sorted out of priority for the company. It saves cycles when bringing on new people, and if its a great idea that was shelved at least you know why you did and can re-evaluate with some history
7) Ass in seat is not how a startup runs. Monitor results not time
9) Sometimes being a fast follower is better than first mover.
10) Have fun. If it’s not fun on par, change course. Why keep trying to play the back 9 when the first 9 made you feel like S*&it. Don’t just beat your head against the wall.
10.1) Never take these lists for action, balance them and your daily life.
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Thanks folks, some great examples of lists to inspire Entrepreneurs and Leaders of SMEs that business doesn’t have to be all hard work and no play, or long hours and no results.
Given it’s the SMEs of this world that really drive the Economies of our Countries and our World, it’s high time we exerted our power through unity and have great fun doing it! Together we can better
1) Collaborate,
2) Exchange and
3) Prosper…
Would you like my short list to guide Entrepreneurs and Leaders of Business, Charity, Government and Community in how to do what you do better, easier, faster? Even more effectively? It’s as simple as Love, Light and Joy! And I believe these 3 things apply equally to your Life and your Enterprise, in fact everything you do…
1. Love – Start with loving yourself and whoever you’re with, and wherever you are. Then choose to — Do what you love and love what you do! You’ll soon find your best Team Members, Clients and Strategic Partners will show up, step up and give back as those who also love themselves and what you and your Enterprise does!
2. Light – Learn to tread (more) lightly on our precious Earth. As you do others who’ve gone ahead will light the way for you to learn what you seek to know, confirming what you already know, plus teaching you what don’t yet know and don’t yet know you don’t know. Be grateful, be a respectful student and learn well. You must also become the ‘Teacher’, lighting the way for those who want someone to follow. The world cannot wait until you know it all or have it perfected – that day may never come – others have much to learn and you already have much to give. Our responsibility to ourselves and our planet is to learn, teach, grow. And like every living breathing organism in this world, if we’re not growing, we dying! You already have the power to have whatever you want, just begin with:
1) Knowing what it is you most want – the more you feel good about what you want, the more you will believe it’s possible, the more you will keep moving toward having and allowing it;
2) Know what you have to give – we each have something to give no matter where you are now at – time, expertise, money;
3) Give of what you now have to give (rather than what you want to give) – and specifically to those who will most value what have to give to ensure your efforts are not wasted and truly appreciated.
3. Joy – As Human Beings, when we reconnect with our true selves, our source energy and what feels good to us, we remember the key reason we are in this world is simply to En-Joy our Life Experience! Think of the 3 Key Characteristics we most admire in Children:
1) Curiosity;
2) Daring; and
3) Fun!
Choose to re-discover your Inner Child, and your life will BE more enjoyable, your Business Ventures will BE more enjoyable, and you and your Enterprise will BE more attractive and prosperous!
1, 2, 3 simple steps. Give them a go! You’ve got absolutely nothing to lose and much to gain. You’ll never know until you do. After all, YOU could BE the ONE you have been waiting for! Whatever happens, know that the world is watching and anticipating… the true YOU! So be true to yourself and we’ll all be grateful!
I trust my contribution works for you and would love to hear your feedback.
PS: And contrary to popular belief, I believe all feedback is good feedback. The positive stuff enables us to feel good and know we’re on track. The negative stuff enables us to review our chosen direction and make any necessary adjustments.
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[...] “10 Stupid Things Entrepreneurs Do to Mess Up Their Business,” was compiled by Guidewire Group’s CEO and lead analyst, Chris Shipley (a long-time ANZA TechNet member). Chris’s insights are known ’round the globe to pretty sharp. So, don’t let these sting — instead take heed. This advice may just prove invaluable. [...]