MaRS Library Building a business: Fixing those things that may go wrong
The day you deposit the money from your investors into your bank account is one of the highlights of building your venture. However, experienced entrepreneurs and investors know that the hard part is just beginning. Having an idea and raising money is the relatively easy part—execution is the tough part. What can go wrong after the honeymoon?
Every early-stage company has been through some or all of these issues.
Look for advice and support from your advisors or networking groups. Building a business and executing on your vision and plan takes vision, passion and grunt work.
The following list from Guy Kawasaki’s Reality Check details some of the key issues entrepreneurs have faced time and time again.
1. A founder is not delivering.
The friends, college roommates and colleagues you surrounded yourself with at the beginning of the dream—and who are now the CTO or CSO—might not be the right people to implement the product or marketing plan required to scale up.
The traditional strategy is to find another role that is a better fit for their skill set. In most cases, you will find that they are happier in the new role. If this does not work and they are affecting the organization’s overall morale, you may have to consider termination.
2. The product is late.
Early-stage companies are notoriously optimistic in their projections. However, investors want to make sure that the company continues to meet the milestones it committed to and is likely pressuring management for a solution. What do you do now?
- Pull your team together and figure out what to do.
- Change your team members’ roles as required.
- Scale back the product launch—save the cool features for a subsequent launch.
- Be candid with your investors—tell them you messed up and fill them in on your plan.
- Sandbag your new timeline—but make sure that you can meet the new timeline because your job is now on the line.
- Get to work!
3. Sales are not meeting the projections.
Early-stage teams believe that since their product is the coolest out there, everyone else will feel the same and will immediately buy the product as soon as it is available. However, your product is unproven and you are a small company with a limited amount of cash on hand. Major buyers will want to see some sustainability before they make a purchase decision.
Get your sales team together and try to get any sale you can. It tends to take longer to close a large account than a small one. Several small orders can build confidence in your sales team and provide key market information to help close the larger accounts.
4. The team is not getting along.
Start-ups are messy, busy, exhausting ventures. If it was easy, then everyone would do it and be rich. Things do not go as planned and this creates tension all around, no matter how cool and collected the individuals are. Simple answers do not exist—you have to work things out and keep talking.
An outsider may provide the team with a fresh perspective. Focus on the positive when dealing with people. Give them a second chance and do not call them out or reprimand them in front of their peers.
5. You are getting slammed by the press/analysts/blogosphere.
It happened because you believed that your product was so good that you would turn all the other products out there on their head. So how do you get around this?
Ship your product on time and fix any problems with the product as soon as possible. Focus on your customers—happy, satisfied customers are the best references you can ask for. And play ball with the press.
6. Venture capitalists are micromanaging you.
Investors do not want to micromanage. Investors want to make an investment and show up at a board meeting to hear how well things are going and exit based on the agreed-upon strategy. If an investor is micromanaging, something is not going according to plan.
Do whatever it takes to be successful—however that is defined for your business.
7. Venture capitalists are not helping very much.
There are two reasons for this:
- You believed them when they said they are hands-on investors.
- You’re not asking.
You can’t do much if the investors are, in fact, not “hands on.” You should have checked around more before the investment. But if you have not been asking, then pick up the phone or send an email.
8. You are going to run out of money before you can raise more.
This is a very common occurrence. You built too much infrastructure before you could generate cash from sales and everything came in later than projected.
Each situation is different, but some key tactics include:
- Freezing all recruitment
- Reducing marketing expenses
- Getting interns—you want free labour, they want work experience
- Cutting management’s compensation
- Determining if the co-founders can provide a bridge loan
- Doing some consulting work
- Seeing if you can get some beta sites
Kawasaki, G. (2008). Reality Check: The Irreverent Guide to Outsmarting, Outmanaging, and Outmarketing Your Competition. Toronto: Penguin Canada.