​6 Things I Wish I Knew in My First Start-up Business

Gary C. Bizzo  |

Passion – We all start our businesses with passion and excitement. It starts to get strained when lawyers and consultants suddenly appear to guide you through the next steps. My current company, in the energy field, quickly became much more complicated when my new ‘compliance’ officer told me we needed to incorporate our IP’s in a corporation in the Caribbean.

What?

Why does running a start-up have to be this complicated? Of course, some things need to be complex in order to protect shares, intellectual property and investors, so you need to be prepared for change and be able to adapt to it quickly. Once the train ride begins as usual, little can stop it.

When we get weighed down with ‘stuff’, we sometimes forget why we started the fledgling start-up business. There are two things to say about all that; have fun and enjoy the ride!

Cash Flow – One of the biggest issues with entrepreneurs is how to deal with money – most manage money poorly. Be sensible, get an accountant rather than managing it yourself, and have a look at your books often so you know how your business is doing at any moment.

The most serious cause of start-up failure is money oriented. It’s either mis-spent, or there is not enough. A start-up should have a scalability factor built in so that it can grow as revenues come in. This allows you to bootstrap rather than dilute your company with investors.

Good People (Your employees) – My friend has a gem of a secretary. She has been with him through thick and thin and is indispensable. He chose wisely. Hiring staff is not rocket science, but it can be difficult. I suggest a 2-3-person team to do interviews to get different viewpoints, which will keep bad hires down.

I know it always seems easy to hire your best friends and family to round out your start-up, but this can be - and usually is - a critical mistake. Employees need to be vetted for their abilities, not their relationship to you. Once you start courting investors, you will soon find that if they are not impressed with your executives, you will lose any funding opportunities. Bad hires need to be disposed of quickly; there are no second chances in a start-up.

Partners – Start-ups may need partners for a couple of reasons. Firstly, to fulfill a weakness you have that they can mitigate and secondly, bringing a source of capital to the start-up. The latter can be the boon to your start-up business, but it can also be your downfall. Bringing in a partner might be a good choice if, for example, you can’t sell for beans but the partner is exceptional. However, it will be less costly if you hire a sales person.

I had a client who had a partner. They attended meetings together, ran the business well together but rarely socialized. It worked for them to keep business separate from their personal life. Unfortunately, most partners are bound at the hip and fall into the issues most relationships have, namely staleness, over exposure, arguments and more. It sounds like a marriage, and it is, of sorts, so it must be nurtured like any relationship.

SWOT Analysis – A client opened a restaurant without looking at the neighborhood, his competition and the market. He got into trouble almost immediately and by the time he came to me for help, the business was too far-gone for anything to help. Know your SWOT namely strengths, weaknesses, opportunities and your threats. Always figure out how to mitigate your weaknesses and threats and always have a Plan B and C.

Responsibility Does Not Mean Micromanaging – Let’s be honest, not many entrepreneurs are great managers of people. I know this by the incredible number of micromanaging business owners I run into daily who think they are the only person in the company who knows ‘how it should be done’.

Give your employees a chance. Delegate and make your employees accountable. Accountability will separate the good from the bad, and you might be surprised when they rise to the challenge. Consider getting a coach or mentor on board to help. An alternative to a business coach or mentor is to ‘invest’ in a Board of Advisors. I’ve done this for every enterprise I set up. It is a good way to help keep everyone on track.

The Founder’s Institute developed a great model to determine the compensation you might pay as incentives to your advisors - called the FAST (Founder Advisor Standard Template). The compensation is usually anywhere from 0.01% to 1% of your company, depending on their involvement and is usually given in stock or options. It’s not etched in stone, as many boards are comprised of volunteers, but if you expect some degree of participation it is best to be generous.

Why didn’t someone tell me all this when I started my first start-up? Growing a business can be hard work and rewarding but it also needs to be fun. Planning, e.g. a business plan, budget, marketing plan and SWOT will go a long way to making things easier.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

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