We see ourselves as average people who are good at a few things like playing basketball or singing. We think of talent as a special gift that only certain people have and we did not unwrap that present on Christmas day.Read More...
I am so excited to share with you the podcast that I created for my class. It is on Innovation Leadership and Failed Inventions.
Give it a listen and leave me a comment below about which invention you would like to see innovated.
Thanks for stopping by.
Until next time,
All great managers remember that each person is true to his unique nature. Each person is motivated differently and they have their own way of thinking and style of relating to others.Read More...
We ask ourselves, “why am I going to bust my behind for a company that could easily replace me tomorrow?”Read More...
Every new parent loves when they bring their new baby home. It is such an exiting time because you are a family now and your whole life has changed. You do not know how you ever lived your life before you had your little one in your arms and you would do anything for this tiny human. You would give your left arm for them, give up your life savings, go through literal hell just to keep them safe. While I am not a parent (yet), a startup is a lot like a having a baby. You nurture it and give it whatever it needs to grow up healthy and strong. You lose sleep because of it and you spend countless hours trying to make it happy. Most importantly, you worry about providing for it in any way possible and what you startup baby needs is funding.
Let’s examine some ways the you can establish funding for your startup and making sure you chose the right path. We will briefly look at self-funding and then look at the benefits and drawbacks of family and friends, angel investors, and venture capitalists (VC’s).
Self Funding is when the the founder raises their own money and invests their own funds into the startup. Startups who self-fund and have a small cash cushion, are more vulnerable to liquidity problems and are more likely to disband. You will normally see “king driven” founders self-fund because they will want to retain control and not ahve to manage investors.
Financing Options and some of the benefits and draw backs of each:
- Family and Friends- This is what makes the startup possible in the first place
- Limitations when compared to more professional investors like angel investors and VC’s
- Usually invest much less in the startup than other types of investors
- Usually have little human or social capital to contribute to the startup and the investments do not boost the startup’s credibility.
- Most of them are not looking to make a lot of money back on their investment
- Playing with fire gap (link)
- Angel investors- a wide range of individual investors who want to invest their own money and usually do not know the founder on a personal level. They will also invest in an early stage of the startup.
- Much harder to reach than family or friends so there is less initial trust and comfort which results in weaker tires to angel investors
- have more business experience and some may act as counselors and some will ever sit on the board
- Startup may gain a lot more credibility which can play a direct role in bringing in VC’s in the future
- Angel investors can fill the gap between family and friends and VC’s
- Can lack a level of accountability and “constructive discipline” that VC’s usually have.
- Venture Capitalists-professional investors who focus all of their time on investing in high-potential startups.
- can provide more financial capital, social capital, and human capital.
- investments are not only larger than family and friends and angel investors but are also longer because they invest with the intention to continue to invest through multiple rounds of financing.
- Accountability is highly dependent on the market conditions
- Can give startups the legitimacy that it lacks and the startup can receive higher public valuations.
Lets think about the future now. Your little startup baby is growing, thriving, and successful. You are so proud of what it has grown in to, you think back on all the sleepless nights with a smile on your face and tear in your eye because it was all worth it. However, it is time for you to let it go, your little one has grown up and is off to college to live on their own. They do not need you anymore and you must say goodbye to everything you have worked for. This same thought process can be used when talking about walking away from your startup after you have worked so hard to build it into what it is. Noam Wasserman talks about this in Chapter 10 of The Founders Dilemmas and how a founder can prepare for their own departure from their company and how to make it the smoothest transition possible.
Lets take a look at some of the benefits of voluntary succession that Wasserman talks about in Chapter 10. The day will come when a founder must walk away from their livelihood or as some founders may call it “their only child.” A founder who prepares early can ensure that the following things have the potential to happen.
Voluntary succession– when the CEO or founder decided to step aside for a new CEO who frequently come from outside the startup. This is the least stressful transition, but it is rare for this to happen because founders are so attached to their startups and have high confidence in themselves.
When founders opt for a voluntary succession, the following things can happen:
- The founder is less likely to leave the startup immediately. They will most likely stay around and do their best to help out and make for a smooth exit.
- Founders are more likely to play a central role in the search for and choice of the successor. They will choose to serve on the board or committee that is selecting a candiate.
- The founder will be more likely to remain in a senior executive role because they have not been forced out. The investors will also appreciate the transition period from former CEO to new CEO and encourage collaboration.
- The founder is also more likely to remain on the board of directors because will help the founder to still feel involved and important. The founder can maintain a title that makes them feel like they are still a part of the startup before completely transitioning out.
While no one likes to think about the end when they are just starting out, it is very important to plan ahead, especially in the business world. I mentioned to someone that thinking about an exit plan when starting a business is a lot like writing a prenuptial agreement before your wedding, it is not something you want to think about but it can save you a lot of stress down the road. Thinking about your exit plan is very important when you are looking at the potential for investors and should be done sooner rather than later.
In terms of my business, I will certainly think about an exit plan for my business. While, I like to think that I will be making soaps when I am old, grey, and arthritic, that is not the smartest decision. I want my business to continue on after I decide to hang up my apron and retire to a beach somewhere, I want my name and company to live on long after I am gone. Having an exit plan in place will ensure that happens and that it happens on my terms. I also plan to self-fund for as long as I can and then I want to look into angel investors as opposed to VC’s. I want to maintain some control in my business because I am a “queen” no matter how much I try to tell myself otherwise.
As always, I found these chapters interesting and I learned a lot about investors and developing an exit strategy. I hope you learned something from reading my post. Leave me a comment below telling me which type of investors you will pick: self-funding, friends and family, angel investors, or venture capitalists.
Thank you for stopping by.
Until next time,
As an entrepreneur, there are certain things that I think about or dream about quite often. I have three main topics that I dream about and imagine quite vividly when it comes to my business.
- The day I tell my boss that my business needs my full attention and I have to quit.
- What my shop will actually look like. I can picture the paint colors, the layout, the flow of the shop, the displays, the wood color, and even the smell of the shop.
- The day I need to start hiring employees because I cannot keep up with the work myself.
I was happy to read the chapter about the hiring dilemmas in The Founder’s Dilemmas by Naom Wasserman because it is a topic that I think about often and it gave me a lot of insight into what I will need to think about when I start hiring my dream team for my business. Let’s take a look at some of the hiring dilemmas I might face.
- You need to evaluate the hiring needs for each stage of the startup and when you will need to replace employees, bring someone on to supervise them, or just replace them with more experienced workers.
- You need to think about if you should hire a generalist who can adjust to their environment and become a specialist down the road. Generalists are great at the beginning because they can do many jobs, but later on, you might need a specialist to focus on the main task at hand. Give some thought to who you hire and if they can transform into what you need in the future or if you will need to replace them.
- Remember that different stages of the startup will require different compensation plans or packages. When you are first starting out, you may not be able to pay people a lot so you offer them lower salaries and more equity in the company. However, once the startup is established, you can offer new employees better salary but you may not want to offer them more equity in the company. Make sure to develop this plan in the beginning to prevent confusion or tension.
- Make sure that you think about what you will do with under performing employees who are friends or family. Founders will hire friends or family to start out because they are easy and make for a comfortable work environment. This can create the risk of “playing with fire gap”
- Playing with fire gap– team members who have a prior personal relationships with the founder may be less likely to discuss sensitive issues. This can lead to facing major damage to the relationship is things in in the startup go sour. You could be left with no employees and no social circle at all.
- Look at your company structure and the positions within your company. Establish a pay structure that is unique to each position or department instead of making the same pay structure for the entire company. Different jobs and employees respond to different pay structures. A sales employee is going to work well with a high performance compensation structure because it will help them see how they are doing in their role. An IT employee is not going to respond well to this pay structure because it does not correspond well with their job duties an objectives.
- Founders may be hesitant to even begin hiring because they are scared they will hire the wrong person for the role. But if you link the roles with the right reward structure, the weak or under performing employees will weed themselves out. If an employee is working in a performance based compensation structure and they lack self confidence, they are not going to perform well in the job. Therefore, they will not get paid as much and the result will be they leave because they are not making enough.
Now that we have thought about all of the aspects to consider when we are hiring and building our team, lets think about our employees. Everyone has some great employees, middle of the road employees, and some not so great employees. Entrepreneurs and business owners give a lot of thought to how they can have an entire team of their great employees and probably life in fear of losing those employees at any given moment.
How to Hire A Players by Eric Herrenkohl gives business owners some great tips and ideas for how you can not only keep the great employees or A-Players, but also how to help improves the middle of the road employees so they can become A-Players as well. The key is to know where your A-Players fit into the future of your startup and the following are some steps to help you know where they fit and keep them
- Write down your business goals that you want to achieve. Give some deep thought to what success in your business looks like and how you want to get there. Once you have made it, start filling in the roles with your current employees. When you are done, you will find the following:
- You have your A-Players that you can write in easily and can put anywhere in the chart and you know they will thrive
- You will have some employees who could become A-Players if you give them a little coaching and get them up to speed.
- You will have some employees who can become valuable but more in a specialist role or limited capacity
- You will also have your C-Players who really should not be in your organization at all.
- You need to implement the organizational strategy that you created. You will need objectivity and time do make sure it happens. In order to be objective, you will need to remove yourself emotionally from your current team to build the team that you need. Also, make this your priority and cut out time to make sure it happens and does not get pushed to the side. You can consider hiring a consultant or trusted advisor to help you implement the strategies you have made.
- A-Players do not wanted to taken advantage of or to be taken for granted. If they feel this way, this could lead them to walk away from your company. Make sure your A-Players know where they fit in the future of your business. Here are so way to do that:
- Look at your organizational chart again and see where you put your A-Players. How do you envision them a few years down the road?
- Meet with each of your A-Players individually and have some ideas about what you have in mind for their future within the company but also ask them what they want for their carer as well.
- Invite them to talk about what they want to achieve with the company and where they see themselves in the future. Ask them for their perspective on what is working for the company, where the flaws are, and what would be better.
- Work to incorporate their feedback into the plans that you have for the company.
- Commit to solid next steps for making the plans you created into a reality for the company. This includes givings your A-Players the opportunity to make more money and have more pull in the company.
Top performers can do a lot for a business and help it become successful and reach its full potential. As a founder, it is your duty to help your top performers feel welcome and want to stay with your company for a long time.
I enjoyed reading both chapters this week and I got a lot of insight into how I want to run my business and help my best employees really shine. I know I have mentioned it before, but I do not know if I would hire friends or family to work at my company. I would prefer a heterogeneous team so I refrain from the “Playing with fire gap.” I know that I am a little far off from hiring any team member for my business but it is nice to start thinking about it now and to have an idea of what I am looking for when that day comes.
As always, I found these chapters interesting and I learned a lot about hiring and how to keep some of my best employees. I hope you learned something from reading my post. Leave me a comment below telling me a characteristic you look for (or will) when hiring for your company.
Thank you for stopping by.
Until next time,
Imagine you are planning a long road trip across the country with your friends. You start on your trip and you are so excited. You have your car packed with everything you are going to need and you have no worries in the world but when someone will need to use the bathroom. You think that you are all prepared and then you hit some construction and have to detour through the mountains. You might drive into a pothole and blow a tire in the middle of the Arizona desert. You could run out of gas somewhere near Amarillo and have to walk 3 miles. You and your friends could argue over who gets to control the radio through Colorado.
Starting a business is a lot like a road trip with your friends. You are going to run into snags along the way and have to figure them out as you go. The construction you hit is like having to reformat your business plan because that idea exists already. That pothole is missing out on funding because you would not give up control. The gas you ran out of is someone walking away from the startup because they are not ready to quit their job. And that radio argument is you and the other founders deciding who gets the title of CEO. You are going to face a lot of dilemmas when founding a business, including role dilemmas. Let’s take a look at the role dilemmas that Naom Wasserman talks about in The Founder’s Dilemmas
- Avoiding Conflict– Founding teams will often times try to avoid conflict by naming multiple people as key decision makers in the beginning. This causes a problem because then everyone needs to agree on company decisions and this is not ideal for split second decisions and can cost the startup dearly because everyone must agree. It can also cause conflict further down the road which can endanger the future of the startup.
- Understanding “Title Inertia”– The founding team should decide who is going to be the best initial CEO and understand that “inertial tendencies” will make this hard to change in the future. If the person that is selected cannot keep up with the demands of the job or another founder proves that they are the better fit down the road, it is going to be very hard to convince the CEO to change once they have been crowned. Most CEOs are hesitant and reluctant to give up their status and power which can cause tension. The idea person is usually the best choice to become CEO because of their passion and vision, but the founding team should assess if they would be a better fit in a different role that requires those traits.
- Inflating Titles– The dangers of inertia also apply to non-CEO founders who take on C-level titles in the beginning. Once the business has grown much bigger, many of those founders might not fit or be best suited for their roles anymore. However, replacing or demoting them could cause tension and disruption. In order to prevent this future tension, teams should weigh the pros and cons of each person before assigning those titles.
- Wanting Allies on Board– When the board of directors if being formed or changed, founder/CEOs will often want to have allies on the board with them and they often select co founders to join them. But having more than one founder can have long term costs that outweigh the benefit. If you have more than one founder on the board, it can cause role confusion within the executive team, hinder board discussions, and cause even more challenges for the CEO.
- Ignoring Incompatible Motivations– A founder’s motivations can have a profound effect on role tensions within the team. If you have two founders who are control motivated people, they both want to be “king” and this will lead to many conflicts throughout the life of the business. However, if two founders are “rich” motivated, they are focused on the wealth aspect of the business and have the same goal in mind. These two founders can work together to achieve that goal because they will not be competing. If you have a “king” motivated founder and a “rich” motivated founder, they will balance each other out and be able to achieve their goals together. Before founding together, potential co founders should assess each others motivations to see if they will run into potential conflicts.
Now that we have worked through all of the issues that we are going to face when founding our startup and giving our founders the right titles and proper positions, we can think about who to hire and where to find them.
I do not know if I have talked about the book How to Hire A Players by Eric Herrenkohl but if you took a look at my copy, you would see a book that is full of highlights and bent corners. I really like how Herrenkohl encourages you to think out of the box when you are looking for potential new employees and how to find the best employees for your startup. The following are the different places he encourages you to look to find people with the skills you are looking for:
- Look for highly skilled women who are reentering the workforce after taking time off to raise their children. If you can off them flexible hours that they want and need, they can bring a lot of talent to your company.
- If you business is in the sales industry, you want to look to hire former waiters and waitresses. They know how to up-sell and they are good at working on the fly. Expand your network to include this talent pool and hire the highest performers that you find.
- Teachers have strong people skills, communication skills, are organized, and are often underpaid. Look for ways to utilize them during the summer months and provide them with the flexibility they will need during the school year. Some of these teachers may even end up leaving the teaching world and work for you full time.
- Starbucks and other national retailers spend a lot of time training their staff so they are highly skilled. You are interviewing them every time you interact with a barista, even if it is just for a minute. Establish a connect with the ones that really leave a lasting impression on your and over time, they may end up being one of your star employees.
- Building relationships with professors and other university influencers can help even small companies attract top talent. These connections can help you connect with students who fit into your A-Player profile.
- Designing an internship program can help your company find A-Player talent. Set up some clear goals and objectives for your program and make sure to create great experiences for your interns. This will generate positive word of mouth and quality referrals for next years students seeking internships.
I would have never thought about looking in some of these places for employees. I was a waitress for 3 years and I would have never thought of myself as a “salesperson.” After looking at some of the options, I think that I would love to hire a few former wait staff and implement an internship program. Having interns for certain roles could bring you a lot of A-Players and insight into what younger people are looking for (if that is your target demographic) and what is new in the world of social media.
I enjoyed reading about the role dilemmas because it was something that I never gave a lot of thought to because I always pictures myself just running my shop by myself but if I want it to be as large as I plan, I am probably going to need some help. Knowing what role dilemmas I could face in the future will help me to prepare for them before I run into them. Also, thinking outside the box to find A-Players will help me to get a jump start on getting the best farm team I can and getting the right people into the right position.
I learned some interesting things while reading these sections and I enjoyed it. I hope that you learned something in reading my post. Leave me a comment below telling me some unconventional places where you would look for A-Players.
Thank you for stopping by.
Until next time,