Posts

Hiring Great People Reduces New Biz Risk

/in , /by

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.

When Farm-to-Table Was Too Risky

/in /by

All businesses have risk, especially new businesses. There are things that new business owners can and should do to mitigate the risk, but often don’t.   At the top of the list: make good business decisions based on industry knowledge.

 

It is much easier for a new business owner to make well-informed decisions if he or she has a deep knowledge of the industry they are entering.   And this is why many business advisers will suggest if you are thinking of starting a business in an industry with which you are unfamiliar, you first should spend some time working in that industry, even in an entry-level job.   Failing that, other ways to gain additional industry knowledge are to attend trade shows, or talk to a business adviser who has worked in that industry. If you don’t have the budget to hire a consultant, try speaking to a SCORE counselor.

 

If you have a choice between launching two different new businesses, and you have prior industry experience in one, give that choice first consideration. I had a conversation some years ago once with an individual who wanted to raise investor funds to start both an organic vegetable farm and a nightclub simultaneously. The big idea: the organic vegetable farm would supply the nightclub with organic vegetables to serve to patrons. The individual had some prior exposure to farming, but everything about owning and operating a nightclub would be new.  Either business would be a lot to learn, so it was better to choose just one, in his case, probably the farm.

 

The current issue of Inc. magazine has a cover article “The art of the pivot.”  It is one thing for Howard Schultz to come back on board at Starbucks and manage a “pivot”, but as a new business owner, hope you won’t have to do any pivoting your first few years, you may not have the needed financial resources. And with the right initial decision-making, it hopefully won’t be necessary to do a pivot.