Lessons Learned in the First 12 Months of Being a Startup CEO
“It’s fine to celebrate success but it is more important to heed the lessons of failure.” – Bill Gates
In this article, we will look at 1) personal lessons, 2) product and marketing lessons, 3) operational lessons, and 4) hiring lessons.
PERSONAL LESSONS LEARNED WHEN BEING A STARTUP CEO
Mike Evans, co-founder of the internet-based food ordering website Grubhub.com highlights his main misconceptions as a first-time entrepreneur. One of which is:
1. Your Time Is Not Free.
At the beginning of any new venture, the entrepreneur usually spends a lot of time doing most of the work herself. This often means product development and design, market analysis, selling, marketing and all the financials. Whatever needs to be done is done and this translates into long work hours. All this is done for no cost at all. More than money, the cost here is opportunity. When there is an attempt to complete everything with little or no prioritization, then there is the ever present danger of letting important, value-adding tasks slip through the cracks. Evans suggests looking at your time a bit differently.
“Because it is so hard to get a comprehensive prioritization of tasks in a startup company, I usually ask a few short cut questions. If my time cost me $500 per hour, would I be doing this task? Can I get that hour back in profit?”, says Evans.
These questions can help a startup CEO spend her time where it matters most.
Martina Iring, a small business marketing consultant also shares her top lessons from her first year as an entrepreneur. She says:
2. Be Prepared for Ups and Downs.
Many first-time CEOS who are entrepreneurs look forward to the freedom that comes with being their own boss. This is not as easy a situation as it appears to be. There are many days full of downs when it is hard to stay motivated and where it becomes difficult to live with instability and insecurity. The fun and excitement of entrepreneurship takes a backseat and there can be a sense of being overwhelmed. This feeling is part of the package, however. Iring remains positive,
“There will be ups and downs in all things in life. It doesn’t mean you should give up or that you made the wrong decision. You probably just need a little extra TLC. The upswing is right around the corner.”
3. It Will Take Longer Than You Plan For.
Another common mistake made by entrepreneurs is the assumption that once the business is set up, things will move quickly and the company will be ready to go. Often, the time assumption is downright naïve because setting up a business requires a lot of work, and a lot of unforeseen issues and problems can crop up unexpectedly. Something new always needs to be addressed and handled. There is no timeframe that can be applied generically, but every entrepreneur needs to make a realistic time estimation based on their industry and its peculiarities.
4. Be Prepared to Spend More Money.
As with the incorrect assumption of time, there is a tendency to overestimate when the cash will start flowing in. Even if the business is up and running and product sales start picking up steam, there are expenses that will crop up and need to be managed. Most often however, it takes time for the product to become known and for sales to grow. Therefore, it is important for the entrepreneur to have contingency plans in place to manage finances in difficult times.
5. It Will Require More Smarts Than You Anticipate.
A new CEO is required to perform many different roles and wear as many different hats. There will be a need to think on your feet, learn on the go and acquire new skills every day. All sorts of new abilities will be picked up and more boundaries will be pushed than were ever thought possible. This learning process needs to be anticipated and embraced right off so all the necessary information is absorbed and used effectively.
Another entrepreneur, Larry Kim, is the CTO and founder of WordStream. He shares his five reality checks as a founder.
6. You Are Not Really Your Own Boss.
Kim says that if you take on investors, you will not really be as in control of your company as you want to be. Without investors, your customers are your ultimate boss. These customers may be a whole lot more demanding than a traditional boss ever can be. Ultimately, there may end up being less freedom and a lot more responsibility in a startup business as compared to traditional employment.
7. You May Not Get to Do More of What You Are Good At.
An entrepreneur may get into a business because of her passion and interest. But with the launch of the business, there is an influx of other activities that need to be done and there may be a need to find other people to do tasks better than she can. The most enjoyed hobby can become tedious when it becomes full-time work and a livelihood. Eventually, the entrepreneur needs to make herself redundant by building a strong team and helping them grow and develop.
8. You Always Have Something to Lose.
When an entrepreneur sets out to create a business, there is always the threat of failure, as something like 80 percent of all businesses fail in the first year. To reach success, the business has to make a splash and become known. This means that a possible failure will also be immensely public and can often bruise the entrepreneur’s pride. To avoid this feeling of shattered ego, it is important to stay as positive as possible and ignore those who are discouraging and looking for you to fail.
9. Turning the Dream to Reality Is Indescribable.
One positive lesson cited by Larry Kim is the feeling of watching your dream become a reality. He says,
“I greatly underestimated just how awesome it really is to show up at work and watch your company grow over time, and to watch the dream become a reality.”
The overwhelming experiences of a first office, the first team celebration for an achievement, an industry award or happy customers are difficult to anticipate.
PRODUCT AND MARKETING LESSONS LEARNED WHEN BEING A STARTUP CEO
Mike Evans also has lessons for the product and marketing aspects of a startup. Some of these are:
1. All Ideas Do Not Need to Be Kept Secret.
Often, entrepreneurs are excessively paranoid about a new, seemingly unique idea being stolen by competitors while it is being developed. This paranoid mindset can continue well into a mature growth stage. However, if the concept is sound and the management team competent, it is better to focus on achieving success through competitive differentiation than a lot of secrecy. A product idea is only made better when it is closely scrutinized and studied, especially by those that make up the target market. So at the design stage, it is necessary to have the product go through a period of trial and error which cannot be done when secrecy is the foremost concern.
2. Not everything is about Speed.
With a new idea, entrepreneurs are often tempted to run with it to ensure that their customer base is secured before everyone else. This problem crops up every time a new opportunity is explored. The idea behind the urgency is that once the customer is in hand, they will be kept in hand. However, this is not always the case. True customer loyalty, the kind that is long-term, comes from the quality being offered rather than how fast a product was offered. It is the best that wins, not the first. So take the time to develop the right product tailored to directly serve a customer need, and you will be in a better position for long-term and sustainable success.
Entrepreneur Nathan Beckord shares his experience as a first-time startup CEO.
3. Identifying Customer Needs Is Just the Beginning.
Though the process of identifying customer needs and creating things that people want is imperative to a successful product, this element is just one part of the entire picture. The other big chunk is to eliminate the many possible barriers to adoption that may exist. As the product goes through the trial and error process as well as different iterations, these barriers are better identified and addressed, helping to create a product with the potential for long-term and sustainable success. This is not a one-time activity, but an ongoing process.
4. No One Will Care in the Beginning.
Beckord believes that an entire generation of entrepreneurs has the mistaken belief that a great product will market itself. This is not true in most cases, and is definitely not the norm. Even the best startups need to make the effort to create an interest and noise in the market to get the right attention. There may be an initial spike of interest, but this is often short lived and needs sustained effort to continue.
5. Everyone Needs Early Evangelists.
Brian Chesky of AirBnB says, “It is better to build something that 100 people love than 1 million kind of like.” This is why all startups benefit greatly from spending time and effort to create an initial group of super users or champions. These early adopters tend to be passionate about the product or service and are more likely to tell others and give necessary and vital feedback on the product’s performance. An additional benefit is that their enthusiasm can act as a motivator for an entrepreneur who has been facing issues and negativity from other channels.
6. Not Everyone Will Like What You Are Offering.
There is every possibility that some people will never like what you are selling. These can often be those people that you really want on board but just will not see eye to eye. This rejection can take some time to accept. The need to win these people over can consume an entrepreneur and turn into an obsession. According to Beckord,
“I’ve now come to realize that although persistence is indeed a critical trait for entrepreneurs, at some point it’s time to recognize when a deal’s not going to happen. In short, don’t let ‘Deal OCD’ become a detriment to your overall business.”
7. Sell More Than the Product; Sell What Users Can Do with It.
A philosophy espoused by Steve Jobs is that it is important to highlight the benefits that can be provided by the product rather than the features that it has. People may not be able to relate to a list of features, and may not be able to recognize how these apply to their lives. But with benefits, everything offered can become relatable when pitched to the right segment of the market.
8. Building Products Is Fun.
Product development can be an extremely exciting and rewarding area, much more so than is often expected by those entrepreneurs who don’t usually work on the product exclusively. The entire process from the idea, prototype, feedback, design, build, launch, feedback to the final iteration is extremely rewarding and very gratifying.
OPERATIONAL LESSONS LEARNED WHEN BEING A STARTUP CEO
1. You Always Have Competition.
Evans believes that it is a difficult practical task to identify individual companies that are in competition with your business. Direct competitors often seem less threatening because the customer base appears to be big enough for everyone to be able to function successfully. This is a narrow view of the competitive arena and can land the company into trouble. Instead, a more realistic competitor analysis will look at all companies and products in competition for the customer’s money.
2. You Are Not Smarter Than Others.
Often, an entrepreneur may have the mistaken notion that she is better than all the others out in the market. The customer however, will not automatically rank one company over the other based on assumed smartness. Instead, it is vision, organization, patience, passion, discipline and humility that are drivers of success.
3. Online Knowledge Can Be Invaluable.
It is never a good idea to assume that you have all the knowledge needed to become successful. Constant research and knowledge gathering can be an invaluable asset for the company and the CEO. The first source of this information can be the internet, where there is a variety of diverse resources available, both free and for a fee. A busy day and a crammed schedule can make this seem like a useless activity, but it is extremely important to fit this into the plan.
4. Use Professional Help Where Possible.
A small business startup is often cash strapped and the startup team or entrepreneur is usually trying to handle all aspects of the business themselves. This do-it-yourself attitude can also come at a price. In the long run, the additional costs of hiring an accountant or a marketing professional will be balanced by the time, effort and energy you save to be diverted into other key tasks.
HIRING LESSONS LEARNED WHEN BEING A STARTUP CEO
Jenn Steele is the Head of Growth at RecruitLoop, an online recruitment marketplace. She shares her insight into hiring lessons for startups.
1. Co-Founders Often Disagree on Who and What Is Needed.
The only way to achieve unanimous decisions is to operate in a situation where there is one founder. Any more than one and there is bound to be a difference of opinion. This is to be expected and the entrepreneurs should be prepared to take the time to work out differences and reach an agreement.
2. The Perfect Person Is a Myth.
Since there is no perfect employee that will fulfill all criteria set by all those who are involved in hiring, it is necessary to be prepared to compromise on some aspects. Requirements can be broken down into good-to-haves and must-haves. Priorities may also shift once interviews begin and actual people are across the table.
3. The Right Person Will Work for What You Can Pay.
If you find a person that you really want to work for you, it is worthwhile to spend some time negotiating with them and hoping that they are also flexible. This can help reach an agreeable set of terms where both parties are satisfied and eager to work together. But it is also important to know when to let the candidate walk if their expected salary is just not making business sense.
4. You May Not Need Management at the Beginning.
Depending on the nature of the business, the first hires may be developers rather than managers, or support staff rather than specialists. Middle managers and people focused solely on their own careers have no place in a startup environment. High-level strategists that can get stuff done or people who are great at contributing individually are actually needed most.
5. Nothing Is Forever.
Though you may think you have hired just the right people, you may have to rethink your decisions at a later stage. Perhaps the most qualified candidate is unable to fit into the culture you want to foster. The first people you hire may need to be let go as early as the first month or two. Despite this uncertainty, you can work with the right person for as long as possible to build the company.
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