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Key Human Resources Practices for Start-Ups

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This is the second of a series of four blog posts highlighting key practices for successfully launching a start-up business.   Each of the four blog posts will tackle a different functional aspect of launching a start-up:  Finance, Human Resources, Operations and Marketing.

 

HUMAN RESOURCES 

Staying Lean but Balanced

Savvy start-up entrepreneurs try to go with lean staffing while they are still proving their business is viable, getting team members to cover multiple roles when possible.   In order for this to be successful, it is important for the entrepreneur to know:

— which tasks can be deferred,

— which can be economically outsourced, and

— which team members have the ability to take on assignments outside their normal area of functional expertise and still accomplish them with excellence.

 

If many key roles are outsourced then it is incumbent on the entrepreneur to facilitate exchange of  information among resources who don’t see each other in person as often as they would in a more traditional business organization.

 

Getting Everyone on the Same Page

In addition to getting the right mix of specialties there is also the matter of getting people with the right attitudes, who will contribute to the culture that the entrepreneur has in mind for his or her company, and who are in synch with the challenges of a start-up.

 

One of the challenges of working for a start-up is that there is typically not a lot of money available to pay contributors, so being “in synch” may mean being willing to work on some sort of deferred arrangement.    This becomes more compelling when the business has a product/mission that the team members believe in, when it is easy to envision the long-term potential success, and when the entrepreneur has traits that build the confidence of team members.

 

It helps if the entrepreneur is good at orchestrating the talents of sometimes extreme extrovert or introvert individuals. On the TV show Silicon Valley, the mythical company Pied Piper is headed by CEO and founder Richard Hendriks who manages to keep a steady hand on the helm despite his soft manner and the array of brilliant but sometimes childish employees: hardware specialist Gilfoyle, software specialist Dinesh, dry-witted Ehrlich, and sensitive Jared.   This show is clearly fiction but it mirrors my real life experience in this one way: the best leaders communicate their company culture through their actions and just a word of coaching here and there.

Key Financial Practices for Start-Ups

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This is the first of a series of four blog posts highlighting key practices for successfully launching a start-up business.   Each of the four blog posts will tackle a different functional aspect of launching a start-up:  Finances, Human Resources, Operations and Marketing.

FINANCES

Managing the finances of a start-up entails spending money on what is essential and nothing more, to optimize the chance of attracting money from investors before initial funds are depleted.

Some business owners are able to decrease the up-front financing needed by launching a reduced version of  their product, or a so-called Minimum Viable Product.  This may have a lot of merit for a web-based service, where consumers are used to being offered both free and premium (i.e., freemium) versions of the same service.  However, in the world of packaged foods there may only be one chance to get it right.  If consumers don’t purchase and enjoy your “minimum viable” food product when it first is presented to them in a store, and those customers do not repurchase, retailers will likely pull it from the shelf as sales falls below their minimal expectations for turnover.  So MVP becomes a risky gamble.

In order to function effectively within your initial start-up funding it is important to have a current and accurate understanding of what you are spending. If budget is available to hire a part-time bookkeeper, then do so, and have him or her formalize how money is spent by creating purchase orders beforehand when that makes sense, and receiving, checking and recording invoices before vendors are paid.  All of these best practices will enable more proactive understanding of where your money is going, and whether spending is being managed within project budgets.

Savvy start-up entrepreneurs try to go with lean staffing at the onset. By getting team members to cover multiple roles when possible an owner can manage risk by committing fewer dollars to staffing until the business successfully achieves  critical early milestones which will unlock further funding. The key is knowing which tasks can be deferred, which can be economically outsourced, and which of your team members have the ability to take on assignments outside their normal area of functional expertise and still accomplish them with excellence.

Hiring Great People Reduces New Biz Risk

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New businesses owners need to execute exceptionally well, otherwise they are increasing their risk of failure. Exceptional execution is usually the outcome of hiring exceptional people. As Dan Geller, founder of Gate Guru described it at a Wharton Entrepreneurship panel discussion I recently attended: “10% of start-ups are successful; those are the ones that hire really great people.” Savvy entrepreneurs who lack the funds to hire top people can at least identify their intended team members to potential investors, to reassure them that a strong team will coalesce once they invest.

 

For certain businesses, securing the right people talent is a case of hiring the right service provider.   The most outstanding example of this I ever witnessed was when helping Richard Ellenson with the financial model and competitor analysis for the launch of Blink Twice: he engaged Frog Design, Flextronics and some of the leading linguists in the U.S. for the design and development of the Yakk, a ground breaking alternative augmentative communications device.

 

Strong execution also is the outcome of sequencing the business growth wisely. A second Wharton panelist mentioned the approach at HopStop, where the founder decided he was going to prove the business “in one market, and one use case, before going broad.”   Starting in a single market is the best way to prove that the demand for your product or service is at the level you believe, and that you will have the capacity to meet it at a service level your customers expect and at a cost where you can make a profit as you expand. With those kinds of in-market results to point to, you will have a better chance to raise outside capital for your new business.

Starting a Business in a Bad Economy

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Is a bad economy a good time to start a new business? Maybe so, according to a 11/18/08 Marketplace report, broadcast by American Public Media. Resources are less expensive and available, such as highly skilled workers and consultants. Investors who have been burned by the stock market, might be looking to invest in new ventures. And at this point, with consumer sentiment and purchases in a trough, you can plan for the worst, and hope to be pleasantly surprised if the economy improves in 2009/2010.