Most of the advice for entrepreneurs that is floating around these days is focused on the 0.5% who are building venture capital-backed companies and furiously pivoting away in hopes of being the next Instagram. The overwhelming majority of new ventures, however, live in a different world with different rules. Gravity applies, so does the need for profitability, cash flow, paying customers, employees, and lines of credit. And regardless of what the meia tell you, this is where America actually produces most jobs. So it was great to see Jay Goltz, writing for the New York Times, offer his list of 10 Rookie Mistakes for Entrepreneurs.
Great "myth-busting" advice for everyone starting a new business. Here are some of my favorites…
Myth #2. Hiring someone you know and trust. Competence is more important. While hiring friends and relatives can work, it severely limits the pool from which you choose, leaving out people who could be much more qualified. Friends and relatives can also carry baggage. They can also be very hard to manage, which leads to my ultimate advice: if you can’t fire ‘em, don’t hire ‘em.
This is, in my experience, the number one cause of infant mortality in those ventures that haven't even become companies yet. Hire for what needs to get done, not for family history, friendship, or because these guys were free.
Myth #4. Keeping your prices “reasonable.” How about picking a price that will allow you to make money? Many entrepreneurs underprice their products or services in an attempt to attract business. They either have no understanding of their costs, or they are too busy to think about them. At some point, they have to hire an employee, and that low price will leave no profit after the employee is paid. It may even cause a loss…
Myth #5. Saving money on professional advice. There is nothing more expensive than a cheap lawyer or accountant. Good lawyers and accountants make good livings, just like anyone else who is good at a job. You don’t get what you don’t pay for — in this case professional, intelligent advice…
I have seen companies spend tens of thousands to fix the problems that came with incorporating on line for a few hundred bucks, or creating (or not) an accounting system that simply didn't work. If you're not sure what's the right thing to do, it's because you don't have the right mentors, or haven't asked them yet.
Myth #9. Treating your employees fairly. Well, yes, absolutely: do treat them fairly. But what is fair? Is it fair to fire someone after two months because you realize you made a hiring mistake? Or are you supposed to give it everything you’ve got, including four more painful months of hope and delusion, while your customers, your bank account, other employees and even the failing employee pay the price? I have probably hired close to 1,000 people over the last 34 years. I have never succeeded in saving, rehabilitating or dramatically changing the behavior of a bad hire. It might not be the employee’s fault; frequently it isn’t. It could just be the dreaded bad fit….
We often ask entrepreneurs, when they speak with our students, to desribe their biggest regrets. Inevitably, on the short list is, "I wish I fired people sooner." It's simply too easy to blame yourself, or avoid the tough conversation.
Myth #10. Falling blindly in love with your product or service. Fall in love, certainly. But a wonderful product or service won’t make up for bad decisions and deficiencies in marketing, management or finance. Being a successful entrepreneur means being a competent entrepreneur, in addition to being the best baker, computer programmer, picture framer, hairstylist or whatever it is you are.
Some of the best products and services failed to make it to market because the entrepreneurs were so busy building the product they forgot to build the business.
There are 10 lessons in all, and you owe it to yourself to read them through at the source: 10 Rookie Mistakes for Entrepreneurs. There's more to starting a new business then venture capital, pivoting, and cashing in.