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Forming The Team You Need Before You Can Afford It Whenever I start a new company I seek to get the highest quality people involved possible. This is only common sense, and anyone can tell you this. However, there are many forces working against you at this early-stage of development, and probably until you hit several million dollars in revenue. There is a catch-22 because the highest quality people have good paying, stable positions and little motivation to take on the inherent risks of a startup company. There is also a budget limitation. And there is the fact that for many of the skill sets you need you will not need a full-time person to get it right during the first one or two startup years. You need quality really, not quantity. No matter how good the opportunity and your selling skills the executive level people will understand that the odds are gravely against any startup succeeding in a big way – at least 10 to 1. If they don’t understand this they are probably not the right person. So these mature people, with families, big mortgages and maybe kids in college are likely pretty risk adverse. This is especially true since the bubble burst and people have all heard the stories of how hard it is to raise capital now. In addition rarely can you pay these senior people as well as established companies, and yet you want and need even more hours and dedication. In addition to all this most senior people will not, or cannot, roll up their sleeves and do the job they did many years ago. They want to have some staff, more leverage and to work on planning and strategy, not on execution. All these things combined raise the bar pretty high and require creativity and a fluid plan that will evolve the internal team and draw upon some outside experts to help fill this vacuum as the company evolves. You can rarely afford the three or more senior executive level people you will need later to build a significant company. This would require a staff salary budget of at least $300,000 on day one. Therefore you will more likely have people with individual contributor and management level experience making decisions (and planning some if you are lucky) instead of executive level people with 10-15 years experience. This might work for a while, but as the organization grows the wheels can come flying off pretty easily without the planning, foresight and experience that experienced executives will bring. One solution that works well in smaller businesses is a partnership. In this case the rewards of ownership are split more equally and so there is more motivation and reward for the risk, long hours and low pay that could last for two or three years, or even longer. The important thing here is that the partners have complimentary skills and personalities. A good partnership can greatly increase the chances of your success, as two heads are always better than one, and you can always have someone “watching the store”. However, differences can also cause problems down the line in partnerships.
My Favorite Solution An alternative, and more common solution that works well for companies as they begin to have some revenue flowing is to use a couple of virtual senior executives to help get to the next level. In this scenario you might have on tap a virtual CTO, VP of Marketing or VP of Sales that you could never afford or recruit for a full-time position, but you can get as a consultant or coach. This input and senior level advice will increase your odds of success enormously at relatively little cost if you find the right people. No doubt you will go a little slower in this area of the business, and/or not do everything as well, but you can get 80% of the key decisions right in this way. This is an especially effective strategy for a company that is a Stage 3 company (generating some revenue, but does not have all their secret sauce figured out yet to scale). At this stage you can afford to pay for this talent in small slices and the payback will be fairly quick too. In fact not doing this can be very expensive, though as a hidden cost from lost opportunity. At this stage you need to be looking at the potential of success, not just the absolute cost. In other words the cost of NOT doing it could be huge compared to the cash needed. Refining your business model to scale and injecting the right professional management practices from this outside help may save many months of trial and error. This could mean much more revenue, quicker and even potentially larger market share. What The Outside Perspective Adds Until you have a complete team that can address all the critical areas of your business you will need to get help from outside consultants. I always have one very senior person, who is not on staff just because this person is extremely valuable in preventing groupthink. They will know less than anyone inside, and hence have a perspective or mindset more similar to the customer. They will also have little bias and less self-interest in their decisions and recommendations. Ideally this person should either complement your own expertise, or at least address a major area of risk in the business. The reasons you need some outside perspective:
Using a carefully selected consultant can and will grow your business faster with little overall cost, and probably a very quick ROI. So don’t be penny wise and pound-foolish. If your business has been going sideways for some period of time you are likely reaching the limits of the internal staff and yourself. A good consultant can help you identify these limits and restart your growth again with little analysis and cost. Bob Norton runs the CEO & Entrepreneur Boot Camp and coaches and consults for CEOs and entrepreneurs to help grow companies more rapidly. He can be contacted at bob@CLevelEnterprises.com. The
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