5.3: Nuts and Bolts of Company Formation
Be frugal
One of the hardest-hitting errors of startups is that when people get overconfident, they spend their capital on luxuries that they could have done without. When your company is young and there is no revenue coming in, the burn rate of your capital can break you. Even seemingly essential expenses like office space and advertising can suck your funds into a black hole. After working hard to raise your capital, don’t blow it on unnecessary stuff.
Keeping your company lean is one of the hardest, but wisest, things you can do. Plan for long-term success. Stay focused on your initial product or service. Almost anyone who has made the mistake of growing a company too fast will tell you that it can be an expensive lesson to learn.
Hire wisely
Running your business frugally also means hiring just the right number (and just the right kind) of people to do the work at hand. Analyze your product or service and where it’s going, and decide who the key people are. You may need engineers, you may need customer service reps, or you may need finance managers.
When hiring anyone who will hold a position of leadership in your company, analyze how well they know the culture of your business, their connections to funding, and whether they have the personal chemistry to attract other employees to work with them. It’s also important to find someone with the entrepreneurial passion that will keep them loyal from a bare-bones startup to a successful company.
Another thing to realize is that, as an entrepreneur, you are essentially a jack of all trades: you take part in every aspect of the business, but are the master of no single aspect of the business. As your company grows, you want to professionalize and enhance company expertise by finding people who are better at certain tasks than you are: a marketing expert, perhaps, or a financial manager, office manager, etc.
Hire higher
Many times, entrepreneurs who bring an idea to life stay on as the company’s president or CEO, and hire to fill in other roles. But there are occasions when the entrepreneur either doesn’t want to or admittedly can’t handle the responsibilities of being an officer. It’s good to know your limits.
Hiring your boss can be a great experience. How often do you get to be responsible for hand-selecting who you’re going to work for? You get to decide what qualities make a great officer, and better yet, who has those qualities. Consider a person’s attitude, their experience in a related field or market, what kind of business philosophy they have, and any other special skills or qualities they can bring to the table.
Frank Hertz, VP of Operations at Massachusetts-based Newmediary, Inc., talks about hiring your own boss:
“First things first, you have to recognize that you do indeed need a boss. Many entrepreneurs think they can be a CEO right away, and, while some can, others need to realize the combination of honed and practiced skill and years of experience in a CEO goes a long way. Whether it’s raising funding, making tough staffing and strategic decisions, or dealing with a Board of Directors, an experienced CEO is an extraordinarily huge factor in a successful business venture. Your product could be best-of-breed, but if you don’t have someone who knows how to grow and run a business, you could fail, and fail quickly.”