You’ve paid dearly to start and grow your business; the steep tuition of success that only an entrepreneur will ever understand. So, you would never do anything to sabotage your businesses, right? Well, not intentionally. But in my own personal experience and in working with hundreds of startups it’s clear to me that there are at least seven critical areas where entrepreneurs make mistakes that may cost them their business or severely limit its value and chances for growth.
The sabotage is always for what appears to be a very good reason in the moment. The problem is that we give in to short-sighted behaviors and habits, and I can assure you that when you look back you’ll see just how misguided these behaviors are. But that’s not going to help you now. So, to save you from having to wait until you can look in the rearview mirror, I’ll let you borrow mine, which happens to have a magnificent HD view of the past! That way you can take action now to avoid these killer behaviors.
One quick caveat first. I’m going to make a few assumptions: you have a product that the market needs, you relentlessly focus on your customers, and you are building something that has real and proven value. That’s why I call it sabotage, because when you look back it seems to be an almost deliberate attempt to destroy an otherwise healthy business.
My hope is that I can give you enough of a heads up so that when you notice yourself, or your colleagues, falling into any of these bad habits you’ll pull back just enough to see the potential damage being done.
1) Forgetting about Scale
When you’re first starting out it’s all you can do to keep your nostrils above the waterline. Each day is a challenge and a celebration. That’s a great feeling, however, it’s also the easiest place in the world to get stuck in a myopian view of the potential for your business.
Your job as a leader is to sell a vision of the long future and to keep reminding people of it. But that also means that you need to channel resources towards that vision when everyone else wants to just get through the day, week, or month. I will tell you from personal experience that one of the hardest things to do is to keep that long vision alive as your organization grows and resources are scarce. You will be laughed at. People will ask, “Can’t we worry about that when we get to that stage in our growth?” The blunt answer is “NO.” If you operate that way chances are slim to none that you will get to that stage.
“Your job as a leader is to sell a vision of the long future and to keep reminding people of it.”
So, picture yourself and your organization the way you want to be, not the way you are. Put in place the business plans that you need to accommodate growth, invest in systems and people so that you will be ready before you get to the point where you’re in crisis mode trying to ramp up, and never stop reminding people of what that long view looks like. The greatest magic in any organization is getting people to buy into that vision, believe it, and commit to it.
2) Thinking You’re the Smartest Person In Your Company
You’ve heard this one before but I’m going to say it a little differently than you’re accustomed to hearing it. The fact is that you may very well be the smartest person in the room but your job is not to convince anyone, including yourself, of that fact. Your role is to grow the people who you lead. That is job #1 for every leader.
Focus relentlessly on convince those who you’ve chosen to surround yourself with that they have the ability to stretch themselves and do the job. If you tell people they can’t do the job as well as you can or as fast as you can you will end up with a company of lemmings, all waiting on you to do the heavy lifting and come up with the creative ideas. Instead, always tell people that they can do better and then get the hell out of the way.
Will some fall flat on their face? Of course! But didn’t you as well? We learn by doing not by being told what to do. And if the people you have can’t grow and rise to the challenge then find those who can.
3) Limiting Innovation To Just A Few People
Nothing is perceived as riskier for a startup than innovation. That’s because you have very limited resources to commit to your ideas. What often happens is that new team members will defer innovation to the founder(s) since the expectation is that they are taking the greatest risk so they should be the only ones to place big bets.
While there’s clearly truth in that it also starts to shape the culture of the organization in a way that will have long term implications on the innovation process. Simply put, you will stifle the innovative urge in everyone but a few key players, or worse yet, to just yourself. I’ve seen this play out hundreds of time. If you want a culture of innovation then take the risk of building it by tasking everyone with the job of innovating.
4) Pretending It’s Not About The Money
The reason most entrepreneurs start a business goes much deeper than the motivation to simply make a ton of money. That’s a sweet seduction but it needs to be a by product of something far greater.
If anyone needs proof of that they only need to look at the fact that in a survey by the Kauffman Foundation of Inc 5000 companies from 1996 to 2014 the founders raised startup capital from their savings nearly 70% of the time, from bank loans 53% of the time, and from credit cards in 34% of all cases. Yes, those numbers do not add up to 100% because many founders need all of these sources of capital and then some. Who in their right mind would do that? You!
It’s counter-intuitive but the reason entrepreneurs put themselves out on a limb is because they’re absolutely convinced of their idea and don’t see it as risky. They’re trying to make a dent in the universe. They have a noble mission and a purpose. It’s not about money, it’s about doing something you love!
That’s the way it should be, but the problem is that without the right business model and plan none of that will come to fruition. I’ve heard far too many entrepreneurs who are drowning in debt that it’s not about the money. Guess what? Until you’ve reached a point of economic independence, it is! To succeed you absolutely must be just as heartless and devoid of emotion when it comes to maintaining the economic health of your business, and your own, as you are passionate about your greater mission. Ignore the money and kiss the vision goodbye.
5) Not Adjusting Course Ahead Of The Market
Market’s go in cycles, there are highs and lows, and you need to be able to ride them all if you expect to be around long enough to make your vision reality. This means being realistic about the market’s and the economy’s trajectory and planning ahead of time. This is admittedly a tough one for all of us. Nobody has a crystal ball.
So, how do you pull this one off? It’s actually much easier than you think I’m going to let you in on a nearly foolproof technique that I’ve used for decades. Survey your marketplace by asking them regularly where they see the market going, where they see you, what they expect over the next 2-5 years. At my company, Delphi Group, we would conduct regular surveys asking about market, economic, and technology trends in order to better understand the trajectory of the market. The insights were uncanny in their prescience. Simple stuff, right? So why do so few companies do it? Because they convince themselves that they can do it on their own. That’s called arrogance. Trust me, it catches up with you!
Now, keep in mind that I said this is “nearly” foolproof. There are always uncertainties that nobody can predict But on balance, if you do this you will be way ahead of most other companies you’re competing with.
6) Hoping For An Exit When You Want A Lifestyle
One of the most seductive parts of having your own business is the possibility of an exit or sale of the business. That’s especially true at a time when so much attention is being paid to the value of unicorns (startups with billion dollar plus valuations). While an exit may well be part of your strategy don’t let it obscure the long term value of a lifestyle company with a healthy business model and long term staying power. The fact is that in most cases the math works out in favor of holding onto the vast majority of companies.
“…if you build a business just to sell it you’ve probably not invested in a business model, culture, or a team that works for a sustainable business.”
I know an entrepreneur who runs a series of seven car washes. It’s not a glamorous high tech business but each one spins off a few hundred thousand dollars in yearly profit. And they pretty much run themselves with minimal manpower. I sat down to do the math with him, and while it would be very easy for him to sell the business, he loves growing it and staying engaged. And the profit it spins off makes it much more attractive to hold on to since any buyer would likely discount that future value by some factor.
But here’s the irony. He didn’t build the business to sell it and because of that he now has, and probably always will have, that option. It rarely works as well the other way around, meaning that if you build a business just to sell it you’ve probably not invested in a business model, culture, or a team that works for a sustainable business.
7) Not Planning For Succession
This is absolutely the last thing most entrepreneurs want to think about. After all this is your baby. But here’s the thing about babies, they grow up and so do you. Chances are that you won’t want to be dong the same things you’re doing now in 10 or 20 years.
“If something happened and I could no longer run this business, how would it survive?”
The challenge for most small or tightly held businesses is that it can take 5-10 years to groom a successor to take over the business. Because of that you can’t wait until you need to have a succession plan in place and you can’t rely on just one person to be the potential successor. You need to constantly be thinking about, looking for, and grooming candidate successors.
I can’t tell you the number of businesses I’ve be involved in where the founder, and the business, just end up being stuck with no option but to liquidate or sell, and often for a huge loss in potential value. If I could give you one piece of advise here it would be to wake up every day asking, “If something happened and I could no longer run this business, how would it survive?” If you can’t answer that I wouldn’t worry much about waking up because I’d have too much trouble even getting to sleep!
Did any of this ring true? I’d be surprised if it didn’t, so don’t be too upset if it does. These are natural behaviors for most entrepreneurs. The key is to recognize them and keep working on them. Entrepreneurship is filled with lessons, many we have to learn on our own, and, as I said at the outset, often at a very steep price.
So, consider these seven lessons as tuition assistance for the cost of your education!
Tom Koulopoulos is the author of ten books and founder of the Delphi Group, a 25-year-old Boston-based think tank and a past Inc 500 company, which focuses on innovation and the future of business. He is also an adjunct professor at the Boston University Graduate School of Management, an Executive in Residence at Bentley University, the past Executive Director of the Babson College Center for Business Innovation, and a frequent keynote speaker. The late Peter Drucker once said of his writing, that it challenges not only the way you run your business but the way you run yourself. Tom’s latest book is The Gen Z Effect: The Six Forces Shaping The Future of Business.
This post was originally published on Inc.
The opinions expressed herein or statements made in the above column are solely those of the author and do not necessarily reflect the views of WTN Media