Oh, the giddy early days. I remember them well.
The air is full of hope and promise. You and your cofounders are going to get along great. You’ll execute your vision effortlessly. And they’ll be so many customers that you will have trouble keeping up.
I’ve worked with a lot of early stage startups over the past few years, and I see the same problems over and over again. If you can fix these problems or avoid these problem, then your chances of success go way up. Here are the five likeliest problems you will have and how you should fix them:
A. You have founder problems.
I did a count the other day. And over 60% of the startups I have worked with have had founder problems. That’s a huge number.
Making matters worse, many times the CEO is afraid to fire the cofounder and/or the cofounder’s whose equity is 100% vested. Now what do you do with someone who owns 30% or more of your company but has to go?
That’s a mistake.
You can fix this mistake by negotiating a fair agreement with your cofounder. The way to approach this is as if your cofounder’s equity vests over four years with a one year cliff. Remember, you have the leverage in this situation, not your cofounder (Read: How Do You Fire Your Cofounder?).
B. You have team problems.
If you don’t have a cofounder problem, then you likely have a problem with members of your team. The two common mistakes I see over and over are the hiring of brilliant jerks and waiting too long to fire underperforming employees.
Don’t take the chance of hiring that brilliant person that seems like they might not fit with your team. I can just about guarantee you that the brilliant person will flame out and fail.
But let’s say you do hire the brilliant person, and the person underperforms. The most important thing you need to realize is that your team already knows your underperforming employee needs to go. In fact, expect a response like, “What took you so long” when you finally fire the underperforming employee.
Just remember to handle yourself with class and grace when you pull the trigger (Read: What’s The One Thing Your Employees Will Know Before You Do? ).
C. You have execution problems.
It’s quite common for a startup to have trouble executing; especially if they have team issues or founder issues. And even when you fix your personnel problems, the problem with execution can usually be traced to a lack of detailed management.
The reality is that an execution problem is usually a problem with you, the CEO, not understanding how to manage projects properly. I have a solution for you. One of my favorite techniques for fixing execution problems is implementing a warboard. A warboard is an extremely detailed form of project management.
You’ll find out exactly where the problems are in your execution when you implement a warboard (Read: What’s A Warboard And Why You Need it?).
D. You have customer problems.
There are many truisms in starting a business, and one of the most common is that acquiring customers takes much longer than you expect. I had over 20 years building the type of business I was building, and I still fell into this trap. You probably forgot, just like I did, that no one knows you exist when you’re just starting out.
So you have to build an audience for your company and grow revenue at the same time. This mistake leads to you running out of money faster than you expected. (Read: How Do You Know It’s Time To Hire Your First Employee?).
E. You have funding problems.
One of the biggest mistakes you can make is waiting too long to raise your funding. It pains me when I speak to someone that tells me they are just getting started raising money, and they only have three months of funding left.
I cringe because I know that you haven’t budgeted enough time to raise your funding. You need to budget a minimum of six months, ideally one year, to raise your funding.
Why? Well, it will take you around three months or more from your first meeting with an investor to get the funding in your bank account. The problem is it might take you three months or more to get to an investor that is excited about what you’re doing.
And don’t forget to make sure that your funding lasts you 18 to 24 months. If you only try to raise enough money for 6 to 12 months, it will make it even harder for you to raise your funding because savvy investors will recognize you’ll be in a perpetual fundraising cycle. If you’re always raising money, then it makes it significantly more difficult to run your company.
For more, read: What Are The Five Fatal Mistakes That Will Kill Your Business?