If you’re cooking up a career as an entrepreneur, there are some key ingredients you would be wise to toss in the mix.
In an article written for the World Economic Forum, Avid Larizadeh Duggan advises budding entrepreneurs: “Be ready for the extreme ups and downs, the sleepless nights, the despair, the feeling of being alone, the hope, elation and the excitement.”
As somebody who has sat on both sides of the table, first as a venture capitalist, then as an entrepreneur and now as a venture capitalist again, Duggan is well positioned to dispense advice about the potential pitfalls of launching a startup. She recommends a potent blend of passion for your product, sound financial savvy, and strong people skills.
PASSION AND PRODUCT
Passion is an essential driver, but it needs to be tempered. Never let passion push you into picking the wrong product or being unrealistic about its progress and potential.
1) Pick a product that solves a problem:
Your product needs to:
- Solve a problem that a lot of people experience.
- Solve that problem measurably, not just make it a little better.
2) Pick a product you feel passionate about:
You are going to have to pour your heart and soul into getting this business off the ground, and that will be easier to do if you genuinely care.
3) Temper your passion:
Your enthusiasm will see you through the tough times and will infect investors and workers alike with a belief in your vision and your ability to achieve it.
However, the potential pitfall is that you might succumb to blind optimism and set unrealistic goals that you will fail to achieve, leading to demoralisation and loss of faith.
Duggan advocates what she calls “calculated optimism”. She advises: “Be ambitious, but set stretch goals that you know you and your team can achieve.”
FINANCIAL SAVVY
There are two key things that every entrepreneur needs to keep a firm handle on if their business is to survive: cash flow and sustainability:
1) Cash flow
“Cash is your company’s oxygen,” explains Duggan. Failure to keep a healthy check on your business’s cash flow could result in your company’s sudden and painful death.
- Be aware at any given time how much cash you have in the bank.
- Be “prepared for a worst case scenario and have a back-up oxygen tank”.
“If you are not good with numbers,” says Duggan, “then learn fast and hire someone who is.”
2) Sustainability
Duggan recommends that from day one you focus on sustainability. The power of your vision might attract talent and investors, but without a clear path to profitability, these will soon fall by the wayside.
- Profitability can be distant, but do make sure you have laid out a clear path by which it can be reached.
- Do your costings and confirm that you have a positive gross margin.
- Take into account factors such as the available talent pool, the competition, potential marketing costs, and any regulatory or legal considerations that might impact on the sustainability of your business.
To keep your business breathing freely, keep the cash flow regular and always have one eye on the road ahead.
PEOPLE SKILLS
Being in business means interrelating with other people, whether they are customers, employees, suppliers or members of your board.
1) Treat people well
As an entrepreneur, you are probably in this for the long game, and people have long memories. “Relationships transcend the life of a startup, therefore nurture them with care.”
If an employee isn’t working out, be honest but respectful. If you can help them get their next job, then do; you don’t know in what capacity you might need to work with them again in the future.
2) Choose your board wisely
Your board is a great resource and you should put as much effort into selecting its members as you would into selecting your company’s other talent.
- Do your research – who can bring what experience to the table?
- Create balance and diversity – you want a board that will challenge both each other and you.
- Communicate regularly with your board, and do use it as a resource (not everybody does).
People are key to the success of your business, so treat them well and use their talents.
Being an entrepreneur – building a team, a product, a brand – is exciting. Your enthusiasm and confidence are your greatest strengths, but be sure to temper them with shrewd financial management and realistic target setting.