10 Questions Entrepreneurs Should Ask Themselves
This is a summary of some comments I made at the American Chamber of Commerce in Hong Kong’s SME Forum on October 16, 2014.
What’s the most important thing when you’re starting up?
Many people would say “capital”, but I think the founder’s passion far outweighs the value of their assets.
That passion must be contagious, consistent, and convincing, and communicated effectively to key employees, customers, partners and potential investors.
With passion and a business idea which has a decent chance of being monetized, you can obtain capital. On the contrary, no amount of capital can buy you passion.
Do you want to have partners, or to go it alone?
You need to know yourself — and be brutally honest with yourself about your strengths and weaknesses — in order to answer this question.
Bringing partners in because they are nice folks with time on their hands is most likely not a winning strategy. This may only become clear after you either start making, or losing, a lot of money.
If potential partners are friends or family, that adds pluses as well as minuses.
If you do have partners, spend money at an early stage on sound legal counsel to draft a shareholders’ agreement. This should define — among other things — the share valuation formula applicable if one partner chooses to depart at some stage, for whatever reason. It is a very common mistake to overlook this step, which often leads to disastrous and costly results.
Further down the road, when other companies approach you with joint equity partnership proposals, take a long, hard look at each. Consider whether a better and simpler approach might be a contractual partnership. Joint equity ventures in business make marriage look simple by comparison.
What are you most preoccupied with at the starting gate?
Getting the business up and running, right?
Right. That’s normal and good, but one thing you need to think through early on are the potential exit scenarios. There are two parts to this question: your personal exit scenario, and that of the company.
Sometimes they are different facets of the same question; but sometimes not. This can also change over time.
Potential future opportunities to sell the business in whole or part should be considered when building your longer term strategic plan. Maybe you have offspring or other family willing to step in, if and when you decide to go do something else. Maybe not, or maybe you’re not sure yet. Better think about this carefully. Never assume that start-up partners will hang in forever, including you.
Are you easily swayed by the “conventional wisdom”?
I reckon I’ve made some brilliant business decisions in the past 40 years, as well as some really boneheaded ones.
The great decisions often flew in the face of the conventional wisdom of “the leading experts” at the time. Sometimes, they involved saying “no” to a newly proposed business deal rather than saying “yes”.
Both good and bad decisions were often based as much on gut feel as on empirical data. Even with all the market research data available, you need to trust your gut feel.
Don’t be daunted when people say your ideas are crazy. That’s often an indicator you’re onto something innovative and promising.
Are you too mainstream?
To be a visionary and anticipate the customers’ needs before even they are aware of them, you need to be an outlier; sometimes a loner, a wanderer, an explorer. Don’t be afraid of that. And be prepared for the reality that being an entrepreneur involves a lot of lonely moments.
How well topped up is your optimism tank?
Relentlessly refill your optimism and self-confidence tanks because they will be essential to your success, and they will be sucked nearly dry repeatedly along the way. Never underestimate the power of positive thinking, and remember that it needs recharging frequently.
Will you be able to pay key employees better than your top, big competitors?
Probably not, so you as a leader will need to inspire them better than the competition does. Think carefully about how you are going to do that, day in and day out. This is critical to your success.
How arrogant are you capable of becoming?
Jim Collins writes in “How The Mighty Fall” about the numerous examples of companies which fall from sustained greatness to dismal failure, because of “hubris” creeping into the leadership suite following prolonged periods of great success. Hubris is the kind of bold arrogance which makes leaders feel invincible, creating big blind spots, and deafening them to the intensity of the competitive drumbeat.
Hubris covers our rear view mirror with duct tape, so that as leaders we lose the ability to keep a vigilant watch on approaching competition. Whatever you do, don’t get big-headed.
Are ethical business practices and core values a tactical choice?
No. They represent a strategic decision, of the sort you need to consider at the outset.
Having well-enunciated core values and principles, even when they differ from those of key competitors, provides clarity, confidence, pride, and a sense of differentiation to key employees. They also help insulate you from a corrosive, self-depreciating, less predictable and slippery environment.
As the founder and leader, you have clear choices and alternatives. Taking the high road and communicating effectively about it has a positive impact on the bottom line, even though it may cost some lost business along the way. It will help attract better quality managers, as well as investors and partners.
How much time are you personally planning to spend on mentoring key staff?
You may not have given it much thought, but I suggest you do.
There are many aspects to total employee compensation, and in an entrepreneurial environment, exposure to mentoring from the boss can be a huge and persuasive bonus.
Paychecks to staff are not issued on a random basis. Mentoring should not be random or occasional either. Mentoring is not micro-managing. Teach them well, and let them get on with their jobs.
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