Successful leadership in a start-up is not like that of a mature organization; it demands a sense of urgency and active leadership quite different from the "process" style of established companies. As most start-ups lose money, making money requires definitive action, including increasing sales, acquiring customers, developing products, collecting money, and so forth. Time is critical: as the longer the losses continue, the closer to bankruptcy you are. Start-ups require action, as well as correct decisions, not time-consuming deliberations that cost money. Entrepreneurs need to surround themselves with action-oriented people, and not contemplative "consultants."
Unnecessary employees can be a financial burden to your business. You must resist the pressure and temptation of hiring too many employees. While the assistance of a staff is helpful, it is also costly and can drain your limited resources. Any new entrepreneur who needs to surround himself or herself with unnecessary staff is headed for failure. As successful entrepreneurs will tell you, any fool can hire people and believe he or she is building a team for the future.
Be selective and careful, you are making an investment when you hire a new employee. He or she is a commitment of your time and money. Your decision must result in a productive employee who contributes to your success. If you hire the wrong person, cut your losses as soon as possible. Do not be fooled by wishful thinking that the person will change. Most people don't.
Take the case of Al Pretokoff, who after many years as a business planner with a leading pump manufacturer retired early to start a small distributorship of pumps and related parts. Experienced in management and finance, Al put together a business plan and arranged for office and warehouse space. To finance his business, Al borrowed against the equity in his home and pension. Because of his experience and contacts, he quickly found products to distribute. As Al had little sales background, finding customers was not for him. He realized he needed help and hired a former planning colleague, Roger Johnson, as his vice president of marketing.
Roger devoted nearly two months to developing a complete market plan, leaving little time to accomplish anything else. Finally, after much frustration, Al told Roger that planning was fine, but somebody had better start selling something. Roger, appearing surprised, did not understand the need to rush into the marketplace without a thorough analysis of customer needs. Up to this point, the company was selling to a handful of customers – not enough to stay in business. Al was running out of money and knew that if things did not quickly change, he must close the business.
Roger was unable to make the transition from corporate planning to selling pumps and quit. Al put everything aside and went out selling to save his company, which he did. When the crisis passed, he hired a salesperson and tore up the market plan.
Many former corporate executives, who have struck out on their own, do not have a sense of urgency to get a new business on a solid foundation before the money runs out. While most are educated and trained in procedural style management, while applicable to running large corporations, they may be ill-suited to launching a new venture. Al Pretokoff was able to change. Not everyone is.
Here are a few suggestions successful entrepreneurs pay attention to:
1. You need a sense of urgency to make it.
2. Action leadership, not process management, is required.
3. Survival is a leader-directed team effort.
4. Too much overhead too fast will put you out of business.
5. Invest in your employees – it will pay off.
6. Be selective in hiring.
7. Be careful about micromana-ging, but don't neglect detail in the beginning.
8. Use common sense when delegating.
9. Don't hire anyone unless you know what he or she is to do.