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.
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