Thursday, September 29, 2011

10 Mistakes Growing Companies Routinely Make

Martin Zwilling, Contributor
I provide pragmatic advice and services to entrepreneurs and startups.
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9/28/2011 @ 2:04PM |1,936 views

I’ve been advising and mentoring startups and growth companies for years, … for the sake of growth and survival.  When you try new things, you make mistakes, ... Smart companies learn from their own mistakes, but some don’t pay enough attention to other people’s mistakes.  …[Here] are some common mistakes that seem to happen routinely:

1. Wait until your company is up and growing before you formalize it. …The simple answer is to do something, and start simple. In almost every state, you can incorporate as an LLC with a minimal effort, and a cost in the hundred dollar range. This step shows everyone you are serious, and limits your liability on any mistakes. It also forces you to pick a name for your company and put other intellectual property stakes in the ground.  It’s not that hard to change later to a C-Corp.

1970 Chevrolet Nova CoupeImage via WikipediaCompany and product naming may also seem simple, but should be a key early effort, because mistakes can be very costly. You may recall the Chevy Nova, a compact car from GM. Pundits in Latino countries quickly pointed out that the name, ‘no va’ means ‘does not go’ in Spanish. Professional advice in this area is highly advised. Cultural and religious implications must be very carefully considered.

2. Rely on informal agreements with partners. You may all be friends, or spouses, today, but things do change quickly in the stress of a growing company. The same principles apply to strategic partners. …

3. Quick to hire and slow to fire. … The message here is that if you don’t know exactly what help you need, you probably won’t get it. … On the other end of the process, don’t hesitate to pull the trigger fast when a new hire isn’t working, but don’t forget to be human and follow all the steps. Carrying a non-performing employee probably triples the costs, since you are paying two people to do the job, and at least one other is de-motivated by the inequity.

4. Only hire people who like you or think like you. …  Look for the thoughtful challenge to your ideas, and practice active listening, when you are selling your vision. … Make it a rule to not fraternize with your employees, and choose your partners wisely.

Diagram of the typical financing cycle for a s...Image via Wikipedia5. Be super-conservative on your cash needs. Double-check both the money you need before funding, and the size of investor funding requests.  …You should buffer the first by 50%, and the second by 25%. Severe cash flow problems are a big mistake, and may not be recoverable. When you have people and their families depending on you for their paychecks, and you are strapped for money, there certainly won’t be any money for growth. Even if you can find someone willing to help, it may be a very expensive proposition.  Cash is more important than profit.

6. Let your accountants manage the expenses. … In reality, the most important task of a every small company CEO is to review every expense with a miserly hand before the money flows out. Do not delegate this task. … The result of budget and expense overruns is not only lost growth opportunities, but lost credibility and lost support from investors and vendors.

7. Make all the decisions yourself.  …  For a company to grow, the team has to grow, and decisions must be delegated.  …Even early in the startup process, you need someone like-minded but complementary in skills to help you with the startup plans. … Lastly, make good use of your Board Members. One or two “experts” who have “been there and done that” can head off many mistakes and suggest a calm recovery plan for the ones you make.  …

8. Defining the strategy is a one-time process. Assume your initial strategy will be wrong. … Plan for strategy changes by scheduling an adjustment review every month. … Be sure to communicate changes to the team effectively and often, so it doesn’t look like you are making random changes.

9. Let the daily crisis keep you from the “most important” issues. It takes practice and effort to focus on the most important things first. In business, “most important” means time to market, customer service, low cost, and beating your competitors. It also means knowing when to delegate, when to rest, and reserving time for effective communication with your team. If you allow yourself to be driven by the crisis of the moment, you will lose the ability to set priorities and focus on goals. …

10. Ignore the mistakes of others. The biggest mistake of growing companies is failing to learn from the mistakes of others, or even from your own mistakes. … Wise people admit their mistakes easily, and move the focus away from blame management and towards learning. The …reality is that making mistakes is part of every successful growth effort.  … But the one unforgivable mistake you should never make is to repeat a previous mistake. …
Martin Zwilling
I am the Founder and CEO of Startup Professionals, a company that provides services to startup founders around the world. My background includes a 30-year track record as an executive in general management, computer software development, product management, and marketing. I'm now in "give-back mode" as a mentor to startup founders, and an Angel investor. My experience with investors includes roles on the selection committee of two local Angel groups, and working from the other side of the table with several VCs in Silicon Valley. In addition to blogging, I recently released my first book titled “Do You Have What It Takes To Be An Entrepreneur?” You can contact me directly at .
The author is a Forbes contributor. The opinions expressed are those of the writer.
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