The Fundamentals of Start-Up Business Success – Part 1

Start-up and early stage businesses will determine whether or not the US economy makes any progress in 2013.  Though there is a great deal of advice offered to help entrepreneurs succeed, most of it is redundant and ineffective; just look at the historical record of new venture failure if you have any doubts about this.

In this multi-part series, I will identify the key ingredients for building a successful start-up/early-stage enterprise that have been proven to work in all industries.

1.  It’s a For-Profit Business, Not an Offspring:  Understandably, entrepreneurs get emotionally wrapped up in their business.  Though the deep attachment has its benefits, like any other strength when left unchecked it becomes a weakness.  Leading a business requires consistently excellent judgment; emotion is the enemy of sound decision-making.

2.  Maintain Proper Roles and Responsibilities:  Arguably the most expansive and challenging aspect for successfully growing a business.  In many instances executive management rewards early hires through promotions to bigger roles.  For example, a loyal hardworking bookkeeper is rarely equipped to become a CFO.  More urgently, entrepreneurs should set very specific ground rules for investors who become board members.  Venture capitalists, private equity professionals and the like are far more experienced in business analytics than they usually are in business operations.  I have seen more businesses harmed by amateurs with money pretending to be experts at strategy or organizational design than any other single factor.

3.  Successful Disruption Comes From Outsiders:  Hiring senior management from within the industry a start-up business intends to compete in defies logic.  Industry veterans are rarely ever able to conceive anything other than an industry’s status-quo.  Captive to convention, “that’s not how this industry works” is both the industry veteran’s favorite saying and the entrepreneur’s motivation.  Early stage companies must offer superior alternative value to the way things have been and are.  This simply can’t be achieved by those who know only those rules.

4.  The Curiosity Imperative:  Regret only the meetings you didn’t have and the people you didn’t meet.  For early stage executives, working on the business is more important than working in the business yet too often leaders claim to be too busy to do anything but work in the business, consumed by tasks.  Your bright ideas will be validated and even further illuminated by those you meet.

5. Resources are Precious:  One of the great big lies is “we need fancy office space to impress prospects and customers.” Emerging companies spending too much for swanky offices do so for their own ego, not because the customer expects it.  For every $1 fully loaded expense you had better be able to generate at least $7 in revenue.  If you can’t then expect each $1 spent will destroy your company’s value by at least $10.  And above all remember this: your most precious asset is time because you can never get that minute back you lost.  Therefore, if you do not run the business through and by meaningful plans you’re wasting too much of your time.

Despite the popular advice, there are neither short-cuts nor fairy tales for building a successful business from scratch.  If you are a start-up/early-stage business executive, I urge you to evaluate your company on each of these 5 basic fundamentals and if you don’t like what you come up with you should be encouraged!  The first step to fixing a problem is recognizing it.  

In Part 2, I’ll cover positive ways to steer the business forward. 
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