An Open Letter to Budding Entrepreneurs
Legend has it that each U.S. President leaves a letter with some pearls of wisdom for the person who will hold the office next. I’ve…
Legend has it that each U.S. President leaves a letter with some pearls of wisdom for the person who will hold the office next. I’ve wondered what the entrepreneur version of such a letter might be . . . but, unless you’re John Connor, you can’t leave yourself a letter from your future successful entrepreneur self.
These thoughts are particularly relevant to those in the seat for the first time or thinking of founding a business, and who have taken on or plan to accept risk capital from friends, family, angels, or venture capitalists.
So, here’s the next best thing━my open letter to all budding entrepreneurs:
Luck Abounds: Be aware that there is a lot of luck influencing the success or failure of every business venture. Just like everyone who has started or led a business before you, you, too, will be impacted by luck. If you don’t love that word — substitute fortune or timing instead. Of course talent matters; but, remember that luck is almost equally important. When things go in your favor do celebrate success and at the same time remain humble.
There Is Rarely a Single Truth: Remember, for all complex questions, there is no single truth that applies in all circumstances. Of course, there are simple questions with one right answer; such as, the amount of cash in your bank account at the end of the month. However, because most business problems involve a unique combination of objectives, people, and constraints, expect nuanced answers and respectful disagreement. For example, there is no single “best” sales incentive compensation plan or a “correct” definition of a qualified lead or a “best” go-to-market strategy or the “right” pricing plan that applies forever.
Independent Advisors are Invaluable: Most financing sources, even those who market themselves as “founder-friendly,” aren’t always aligned with your interests. Investors are diversified across a portfolio of companies and thus generally willing to take much more risk than you. Investors aren’t interacting with your team on a daily basis and don’t have to live with the impact of decisions on individual people. Once an investment decision has been taken, investors typically emphasize upside outcomes much more than downside risks. As you build your business you will face difficult decisions. To help with these challenges, seek out an independent advisor, neither an employee nor an investor, whom you respect enough to engage and whose feedback you will thoughtfully consider. The right person can be a valuable additional sounding board beyond your investor Board members.
Beware of False Positives: You’ve poured weeks, months━likely years━into bringing your vision to life. A confirmation bias exists around whether you have finally achieved product-market fit. Your sales and product leaders will want to tell you that you’ve got there. They’ll point to the number of customers. And your investors, who want their investment to grow big, rapidly and also don’t want to hurt your feelings, will tend to agree with you if you think there is product-market fit. Depending on the size of your target market, you could get to a sizable number of customers and still only be attracting customers who fit into the category of what Geoffrey Moore of Crossing the Chasm fame calls “innovators.” Believing you have product-market fit when you don’t and thus choosing to invest heavily in growing your revenue team prematurely at the expense of continued product development and expense control can doom your business. Be careful when making the decision to invest heavily in scaling your business. Remember false positives around product-market fit abound.
Cognitive Dissonance is a Gift: Recognize it as such. Create a culture that encourages everyone to speak up, particularly when speaking up means questioning the “more powerful person’s” point of view. Ask people around you what they think is wrong with your idea or proposed decision — they will be unlikely to speak up unless you encourage it. And, remember to receive disagreement well — listen carefully, indicate you will consider the input, ask clarifying questions and thank people for providing food for thought. Pay extra attention to information that contradicts your preferred point of view. It takes courage to disagree with those in power━there is usually at least one nugget of wisdom somewhere in there.
Failure can be a Great Teacher: I’ve seen many founders and CEO spend all their “customer facing time” with their highest spending or most satisfied customers. And almost no time with those who churn or get close to buying but don’t. Spend more of your time understanding why things broke or failed than why they succeeded. Ask yourself what could be done differently if the situation were to re-occur. In my experience, wise people spend a lot of time learning from mistakes and developing strategies to avoid repeating them. The natural tendency is to concentrate on how best to recreate successes. Given the abundance of good fortune━see #1 above━this effort usually yields a lower return than digging into failure.
For example, when clients churn or employees leave (and both will invariably happen), resist the urge to seek out an explanation that identifies the reason for the specific customer churn or employee loss as unique to that client’s own problems or an employee’s own preferences. Rather, ask yourself and your team what the firm could have done better or differently to retain the client or employee. Then, assess and decide on your course of action. Bad news offers a tremendous opportunity for learning and innovation. Failure is very common, even though we don’t like to talk about it openly. Use failure as an opportunity for learning and a driver of innovation.