ENTREPRENEURS TOP COMMON MISTAKES (2) - Going blind because of your own dreams

I am particularly interested in this common mistake because, somehow, it requires a more detailed explanation than others.

If you have an idea that you feel passionate about, you sell it everywhere to everybody, you put together a great team, you are creative and adaptable, and you persevere in your path until you achieve your goal… It seems that there is no way you can fail…Yet, most of the startups fail. This is the REALITY.

I recently revisited the well-known book “Good to Great” by Jim Collins. In this book Mr. Collins presents the critical concepts which differentiate “good” from “great” companies. One of the concepts used in his book is totally applicable to our analysis:

“You always have to confront the brutal facts”

This doesn’t mean that you should lose faith, but YOU CANNOT LOSE SIGHT OF REALITY. Any entrepreneur should embrace what Mr. Collins come to call in his book the Stockdale Paradox:

“you must maintain unwavering faith that you can and you will prevail in the end, regardless of the difficulties, and at the same time, have the discipline to confront the most brutal facts of your current reality, whatever they might be”

In some cases, regardless of the entrepreneurs’ effort and dedication the project cannot be successful. There are many external factors that cannot be controlled: political or economic abrupt crisis; deep changes in regulation; even natural disasters. They may create new obstacles never considered before. In these circumstances, the entrepreneur has to be able to confront the facts, contain damages and reserve energy and resources for the next venture.

In some other cases there is no external negative factor and it is just the blindness of the entrepreneur not willing to see the REALITY that creates the obstacle. You remember that one of the most important skills required to be successful was creativity and adaptability. As soon as the entrepreneur recognizes one obstacle in her path, she has to be able to adapt the tactics of the battle being as creative as possible. In most of the cases the entrepreneur’s original dream HAS to be adapted to the reality of the industry and the market in which it operates.

I would like to suggest that you have a look at a video clip in YouTube related to our analysis. Please pay special attention to Guy Kawasaky presenting the idea of “building a prototype”.

https://www.youtube.com/watch?v=HHjgK6p4nrw

Although he is speaking about the software industry, the concept is applicable to any other area of business. We will talk about it in future posts…

Thanks for reading!

ENTREPRENEURS TOP COMMON MISTAKES (1) - Co-founding with the wrong partner.

When you are ready to start a new venture, you should consider very carefully the possibility of sharing your project with someone else. Co-founding has several advantages versus starting up alone, although the selection of your co-founder becomes a critical task.

Co-founding allows you to increase your initial startup capital. You can also look for someone whose skills complement yours. Co-founding with the correct partner generates a team work spirit which will be very beneficial during the first phase of your project. Your partner will be always ready to back you up in the case that you have any problem during this critical step.

When looking for your co-founder you can consider the following advice:

Make sure your personalities and skills are compatible.

Probably the most important attribute that you have to find is compatibility. You do not want to partner with someone who you can't get along easily with and you want to make sure that you share the same vision for your new company.

Define as early as possible how to share the equity.

You need to think about how much of the company you want to give to your co-founder. There is not a clear formula when determining how much equity you should give. It will be very dependent on what you really need from your partner and what she has to offer.

Consider a vesting schedule if possible.

When you offer a share to a co-founder, you can utilize stock options. This person doesn't receive the options immediately, but rather on a vesting schedule. She will receive a portion the first year, more the second year and so on.

Startup shares usually vest over a period of four years which means that you and your co-founder are making a long-term commitment.

Headstart Foundation, a non-profit focused on fostering entrepreneurship, has created a database, which helps entrepreneurs to identify potential co-founders. It now has more than 600 entrepreneurs registered with it. Arpit Agarwal, a director at Headstart, believes it is important to write down a co-founder agreement that includes each founder's stake and specifies what happens if a founder leaves.

Most investors are now pushing for a clear definition of stakes and roles to help deal with disagreements or break-ups.

Finding the correct co-founder may be a hard task.

Make sure you finally chose someone who you can definitely trust.

ENTREPRENEURS TOP COMMON MISTAKES – INTRODUCTION

Let's continue turning the wheel…

I am happy with the good progress that we are making:

I made some introductions in the first few posts. I presented several examples of outstanding entrepreneurs and I just finalized my selection of top common skills found in successful entrepreneurs last week. Now we are ready to review some of the basic mistakes that startups usually fall into. We need to learn as much as possible from them. Entrepreneurship is not about taking risks, it is about pursuing dreams by minimizing and controlling the risks as much as we can. Let’s do our best to avoid these frequent mistakes.

Here is my selection of top common mistakes:

1. Co-founding with the wrong partner.

Finding the right partner is a critical question. If you make a mistake with this selection you are likely to suffer a lot of bad and painful headaches. You need someone who you can work with, someone who you can openly disagree with and at the same time have constructive discussions.

If you are able to find the correct partner you have a great opportunity to complement your skills. Nevertheless keep in mind that is better to be alone than to have a partner who you are not able to work effectively with.

2. Getting blind by your own dreams.

Launching your new venture should be a conscious decision. This decision should be exempt of any emotions and it should be based on facts. Getting emotionally attached to your business idea may jeopardize the whole project. Get your idea validated with facts rather that counting only on your gut instinct to move forward.

If you find signs telling you that it won't work, pay sufficient attention to them. Perhaps it is the moment to redefine your strategy or even minimize your losses and start thinking about the next opportunity. Don’t lose objectivity!

3. Living in your silo.

Get out of your office and talk to potential customers. Ask for feedback constantly. Normally they have the key which allows you to discover what is going to work and what isn’t. Don’t stay in your comfortable silo pretending that you know that everything is going to work out. Your customers have to let you know…

4. Hiring the wrong people.

Do you feel that you spend more time explaining how to do things than the time it would actually take you to do it?

Do you suffer problems aligning your employees or partners with your vision?

Do you get overwhelmed with personnel problems when you should be focusing on your clients?

You may have hired the wrong people for your venture…

Unfortunately this is a common problem in many startups.

5. Running out of cash.

This is the most critical mistake among all those presented. If you run out of cash, the game is over: R.I.P.! In business there is a very limited tolerance to this problem.

This is something pretty obvious for everyone yet it is one of the most frequent reasons why companies have to close the door. If your income or cost forecasts are shown to be wrong and you don’t have enough reserves to offset the difference your situation will probably be very precarious.

During the following five posts we are going to analyze each of them in more detail. Let’s start thinking about what my ideal co-founder partner would look like…

Entrepreneur top common skills (5) – Persistence and Resilience

I am going to finalize my selection of top common skills with what I have called persistence and resilience.

I haven’t seen a single venture in business that is exempt of obstacles. They will appear sooner or later, in an unpredicted or predicted manner, but it is certain that they will show up.

An entrepreneur is always ready to face difficulties. Somehow the entrepreneur is expecting them. He (or She) develops a sort of “battle mode” that allows a quick and determined reaction against a new obstacle standing between him and his objective. He battles and eliminates the obstacles just to keep going. This is the nature of entrepreneurship: keep going toward the objective regardless of how many trenches you have to overcome.

It has been said that men become great mariners when sailing in troubled waters, not in calm seas. Every venture has a number of storms ready to hit the entrepreneur. These storms will be typically weathered with limited resources but in most of the cases with successful results. The crew becomes stronger and continues the voyage…

Entrepreneurs really become tough people; tough fighters. As a result of all these battles they develop significant strength, self-confidence and maturity.

There is a motto that I learnt years ago which I find inspiring: “when the going gets tough, the tough get going”. I have repeated it to myself so many times since I learnt it…

All that said, in some cases the best (and toughest) decision is to turn out the lights and close the doors. Unfortunately this is how many business ideas end up. For those persistent and resilient entrepreneurs that we are talking about this doesn’t mean defeat. It means a great opportunity to learn invaluable lessons. Lessons that will be applied to the next venture.

At the end of the day, entrepreneurship is a lifestyle. It is a mindset. It is about a strong desire to succeed; a compelling reason to keep going.

Next week I am going to start evaluating some of the most common mistakes. I am going to speak about those mistakes that should be avoided in order to be successful in a new venture.

Keep reading!

Entrepreneurs top common skills (4) – Creativity and Adaptability

We have been making good progress reviewing the skills that are commonly found in successful entrepreneurs. Today we are going to look into creativity and adaptability. These two concepts come together when we talk about entrepreneurship. We live in a changing world. Our modern world is changing more quickly than ever and the ability to create new ideas, adapt ourselves and adapt our ventures to this changing world is key to being successful.

Probably one of the most unique traits that every entrepreneur has is the talent to recognize opportunities that others do not. They are able to understand a problem that exists for consumers or a need that has not been yet resolved and they “create” a solution. Usually this solution requires to be adapted as it is being implemented. Here is where creativity and adaptability tie together: the entrepreneur has to be creative again to adapt the original idea taking into account the new circumstances as they appear.

I recently read an article in www.businessnewsdaily.com that presented the idea that creativity is a bigger indicator of success in life than intelligence. This is an interesting concept although it is clear that not too many institutions or business are worried about how creative their future students or employees are. It is true that creativity is something difficult to identify and even more difficult to quantify.

Something also interesting to be mentioned is the fact that creativity needs some structure to gain traction. Not really too much structure, as it may jeopardize the spontaneity, but enough to guide the process toward the correct result.

I am going to list some of the most common techniques used to stimulate creativity:

(1) Brainstorming

(2) Brainwriting

(3) Method of Creative Orientation

(4) Method of Creative Confrontation

(5) Method of Systematic Structuring

(6) Method of Systematic Specification of Problem

I will write a post in the future to review these methods. Very interesting ideas if you want to become a little more organized in your creativity process.

Finally I would like to share with you something that I find remarkable. In many cases creativity appears best at the intersection of disciplines. Most impacting discoveries occur when two or more disciplines work together. Usually more than working together is arguing together. Looking at the same problem from different angles frequently creates conflict. This conflict may bring the inspiration for a new solution. Had it not been for the fusion of these different opinions and knowledge the new solution would have never been imagined.

So don’t avoid the difficult discussions with those who disagree with your ideas. They may have the key for your success. You just have to listen carefully and give them a chance to tell you how they would improve your venture.

Next week we will tackle the last skill of my selection: Persistence and resilience.

That is going to be a good one…

Entrepreneurs top common skills (3) – Team Building

Many of the best examples of successful entrepreneurs I know about started their ventures with a DIY concept. They got the idea, they mulled over it, they created a vision for their project and they started working on it. Eventually they generated revenues and they were able to prove that the idea was profitable and it had a chance to become a real business.

This is a very exciting moment for an entrepreneur. You have worked hard, usually just on your own, to demonstrate, usually just to yourself, that IT’S GONNA WORK!!!

Up to this point everything has been handled by the entrepreneur. But there is a whole new world from this phase to the next one: if you want to increase your revenues, you need to grow and you definitely need PEOPLE to help you. You need to start hiring employees.

This is a threshold that every startup has to tackle and it seems to be easier than what it really is. Bringing great people on board is one of the most critical requirements of every company to be successful. The entrepreneur has to identify, attract and select the employees that will help him to expand his business.

Finding the correct technical skills and education is not usually the problem. The key factor is being able to find people who match your company culture and values. The entrepreneur probably has not formally defined at this point a set of values and a culture description for his project. But without any doubt they already exist. They exist as they are intimately embedded within the entrepreneur’s personality.

So, here is the challenge: You have to find skilled and educated people for the job and they have to perfectly match your culture and values.

Most of the existing hiring methodologies are focused on the first part of the challenge but they almost ignore the second one. I am going to present two examples that are just brilliant in identifying the alignment between the candidate and the company values and culture.

Let’s have a look at Zapoos. For those who are not familiar with this company it is one of the greatest examples of successful online retailers in the world. They started selling shoes in 1999 and nowadays the company sells a wide variety of products.

If you have the time, watch Zapoos’ CEO, Tony Hsieh, in this video explaining how they hire people for their organization. I hope you will find it self-explanatory:

https://www.youtube.com/watch?v=_BpWz-vw35M&app=desktop

Southwest Airlines is another great example of a company that has been able to create and maintain a unique culture for many years after its creation. Every new employee who joins the company is expected to contribute to this culture. For them the costumer is the most important part of the company and they demonstrate it on every possible occasion they have.

A couple of quotes to finalize today:

“If you want to build a ship, don't drum up people together to collect wood and don't assign them tasks and work, but rather teach them to long for the endless immensity of the sea.” - Antoine de Saint-Exupéry

"Coming together is a beginning. Keeping together is progress. Working together is success." - Henry Ford

Coming next week: Creativity and Adaptability

Entrepreneurs top common skills (2) – Excellence in Sales

There are many reasons why people choose a sales career. For some of them, a sales job is the best option to use their social and business skills. Others decide to work in sales because it allows them to travel on a regular basis and, at least in the short term, it is fun and interesting. A sales job is usually well paid, which means that valid candidates who are not sure if it is the career for them end up choosing this option.

For entrepreneurs, deciding if they want to be in the sales business or not is not an option. It is a must. “Selling” is part of every entrepreneur’s DNA. Before even thinking about a new product or service they are thinking about how to sell it. They will start creating a sales pitch before they know exactly what they will finally deliver. It will be the feedback that they receive from potential customers or friends what will help them to refine their first ideas.

Successful entrepreneurs excel in sales. They don’t need a very sophisticated training. They eventually don’t have an elaborated Marketing Plan for their business. But they just cannot stop selling! Their passion, creativity, self-confidence and persistence will boost them to sell whatever they are working on.

Great entrepreneurs are those who are able to give customers what they want. In some cases they are even able to let the customers know what they want. They are constantly following up their ideas and they build strong and trustful relationships with them. This allows them to cement long lasting relationships.

In some cases I have seen entrepreneurs use a motto that they use as a “mantra” when talking to customers. Some examples are:

“Let’s talk about building our business together”

“Our goal is to help make your project a success”

I have even seen some of them using a motto as a signature of their emails (I love this one):

“Success is helping others to succeed”

Next week team building abilities…