Tips for young companies

Tips for Young Companies

I've been involved in a few startups and a few rules of the game are already apparent:

Contingency plans: Contingency plans are not plans made during a contingency, but plans made in advance for a possible contingency. Entrepreneurs often fear to consider worst case situations because they are ... well, bad. Surprisingly, the worst case often manifests itself, and then you scramble and make all the wrong decisions in your desperation.

One of our companies has had a) its major investor die, b) our only customer close down 5 months after factory commissioning (we had a 3 year 15 million dollar contract with that customer), c) the next customer almost go bankrupt and suspend payments, d) an almost closed VC deal (with more than a hundred thousand dollars worth of "lawyering" over 3 months) fall through ... all in the space of two years. Remember Murphy's Law and you'll be better off.

Budget: The budget is not only a tool for the Fortune 500 companies. Have the patience to realistically and sincerely allocate budgets to people and tasks. Otherwise you'll find yourself always servicing the short term requirements for money at the expense (no pun intended) of the longer term, yet possibly as critical, needs. In the startup referred to above, we found ourselves never finding the money to invest in marketing though we knew it was something we should do. When our only customer went bankrupt and closed down, we had plenty of time for regret.

Avoid too much multi-tasking: If any person in your core team needs more than 2 or 3 sentences to describe his responsibilities to a layman, chances are he's neglecting some of those. At one place, I was for almost a year in charge of manufacturing concepts for the factory, as well as of sales and marketing. None of it got done very well. It is better to allocate fewer tasks and then change the allocation so that every aspect gets covered. Try using MS Project or a similar tool.

Systems: Remember that as soon as you get to a certain stage, you'll need to put in systems to manage the growth. Plan on having one pretty smart operations-minded guy for putting in systems.

People issues within the company: So much to be said on this... Will fill this in sometime.

Managing investors and friends of the company: This is far more important than you think.