SEASON CLOSING

During the last 20 weeks we have covered three main sections in my blog: a selection of outstanding entrepreneurs, the top common skills found in successful entrepreneurs and the top common mistakes that entrepreneurs usually make in their new ventures.

It has been a great and interesting exercise. I am happy to see how the number or readers following my posts has been increasing steadily. I have received positive feedback and several ideas for improving future posts. In particular a comment made by one of my loyal followers points out the fact that it is great to read about all those concepts but he needs something more concrete, something practical that he can actually apply to particular situations. I thought that it was a great feedback and I plan to take it into account as probably many others would also appreciate this practical approach.

I have decided to take some time off to prepare and elaborate a set of study cases specifically oriented towards providing good practical training for startups. I am not sure at this point which is going to be the best format to implement this idea but I will figure it out during the next few weeks. I will probably "build a prototype" and test it before we go into “production”.

Based on this idea I will share with you my posts after the summer break. Thanks for your support during the last four months. I will be back early next September.

Have a great summer and all the best with your new ventures.

ENTREPRENEURS TOP COMMON MISTAKES (5) – running out of cash

We are at the end of the “common mistakes” section. This week I am going to present the most common among all the common mistakes: running out of cash.

You may remember that I already categorized this mistake in the section’s introduction post as the most critical one. So you realize that it is a dramatic combination: most common + most critical.

Cash management is not fun for most of us, yet it is essential. Protect your cash as a jewel. It is the most necessary instrument to continue pursuing your dream. It is actually the sap of your dream. Keep cash management in your top priority to do list.

When it comes to cash flow planning you have to make some important decisions related with how to finance your venture: Are you going to put your own equity to start operating? Do you need investors? Which portion of your business are you going to share? Are you going to be able to open some credit lines with your banks to mitigate punctual liquidity problems?

Each venture requires a specific analysis and specific solutions but there are some general concepts that can be applied in most of the cases:

1. Start lean. Apply lean management concepts. Don’t spend a single dollar that is not required. You CAN do more with less. Create a lean culture maximizing the output of every dime you spend.

2. Focus on developing and establishing your revenue stream. Spending money is pretty easy. For a new venture, generating revenues is much harder.

3. Don’t rush to escalate and grow. In some cases, after a first quick success, startups raise a significant amount of money from Venture Capital firms or other investors to support ambitious plans for growth. I haven’t seen a single company going into bankruptcy because they were not able to grow and escalate fast enough. I have seen many escalating WAY too fast without an established and sound revenue stream.

4. Set up a reliable method to measure and control cash. In cash management you cannot afford bad surprises. Follow up regularly. At least on a monthly basis. Much better if you follow up on a bi-weekly or even weekly basis.

The season is coming to an end… Next week I will focus the post on evaluating the last 20 weeks and start planning for the next 20.

For those who are following the blog:

Any advice or suggestions for the next season will be welcomed.

ENTREPRENEURS TOP COMMON MISTAKES (4) - Hiring the wrong people

If you have been following my posts you probably remember that the ability to build strong teams was one of the common skills of successful entrepreneurs. Nevertheless hiring the right people is a problem for many entrepreneurs. Let’s try to shed some light on this problem.

Usually the startup’s demands are enormous during its initial stages. The entrepreneur is probably covering five jobs at the same time. She is extremely busy and she needs urgent support in terms of human resources. As a consequence, she has to add a new task to the list: hiring people. And you know what? “This is something that has to be resolved quickly!!” The entrepreneur rushes to hire some folks to help her to grow the business. Companies are hiring people all the time… “Come on… it cannot be that complex!” Yet, it is very difficult to find the correct person for a specific job. You need to spend time and effort to do it right. If you are lucky it will take you a couple of weeks. In many other occasions you will have to keep actively looking for the correct fit for months. Yes, that’s right: months!!!

Make sure you don’t look only at the candidate’s ability to do the job. You have to find the correct attitude, correct culture, and correct values for your venture. This is important for every single company at any moment but is particularly critical for a startup during its early stages.

Take five minutes to watch this video clip in YouTube and think about the hiring process required to select this flight attendant. Believe me! This is not just an exception. If you have had an opportunity to fly with Southwest I am sure you would have experienced something similar:

https://www.youtube.com/watch?v=Jy0Yf1CAsuQ

Do you think they were looking for someone who could just do the job?

Let me share with you some of the rules I have applied during my career:

1. Never compromise. Define clearly what you are looking for and search and search and search until you KNOW that you have found THE candidate.

2. All in agreement. As soon as you have two or three people in your team ask them to participate in the hiring process. If any of the interviewers considers that it is a NO, it is a NO for all.

3. Avoid, if possible, full-time employees outright. Find a way to test how they perform and how they fit your organization before entering into a full-time contract.

4. If despite all your efforts and attention, you make a mistake, correct it immediately. Keep in mind that attitudes are almost impossible to change.

Thanks for reading!