Ideas are great. Ideas germinate into businesses. But ideas are just ideas until a person takes it and actually makes something. No ideais worth anything until it gets a customer. Only then is it validated. Even hi tech science in a lab is junk until it’s commercialized and creating value in the real world.
One of the classic conundrums in early stage investing is betting on jockeys or horses. Every time I have bet on the horse, I have lost. Jockeys execute. That’s the key to success.
But there are plenty of impediments to execution. Many times, entrepreneurs build something really great. They get a family and friends round and continue down the path to monetizing their creation. Then, the first angel round comes in. This is where things can go terribly wrong.
It’s great to get the money, but at that point, you become a real live company. No longer are you just an idea. The company you created has more in common with General Electric ($GE) than it does that science research project in the lab. All of a sudden, there is oversight in the form of a Board of Directors. How do you deal with them? What do they want to know? How can you use them?
Next, you will have to hire employees. That means all of a sudden instead of two people collaborating to build out an idea, at least one of those two people will have to spend time managing and motivating a team. That can be very tricky because now the company has to deal with personalities and interpersonal relationships that didn’t exist prior to getting an angel round. Should you do the hiring, or should you engage the use of a head hunter? Should you use the principles of the Risky Hire?
What about paying these people? Do you hire an employee to do payroll, or do you stay up late at night doing it yourself? Can you outsource it-and if you do, can that company handle rapid growth if that happens to you? What about insurance? How much insurance should you give your employees, and do you need term key man insurance for critical employees?
Office space can be tougher to find than a company might think. Not just because of the costs, but the atmosphere it conveys into the culture of your company. Just switching buildings can change attitudes. Do you want a cubicle? Do you want a brick and timber loft. Do you want something else? How do you plan for growth? Do you want to carry the extra inventory of office space on your books just in case?
How are you going to sell it? When you hire a salesperson, how big of a support network will that salesperson need? What’s follow up with customers look like-and how should it be structured? Are you going to grow organically, or use a direct sales method with call centers? Sales is the life blood of any company. This is a critical facet of your business to think about.
When the topic of execution comes up, most people immediately think to writing better code, having a better user experience, or the process of selling the product to customers. Very few think about all the ancillary decisions that a company has to consider as it grows.
Even at the idea stage, begin the thought process about these ancillary decisions. This is where finding a mentor is huge for you because they have been through the wringer before. They can let you know the mistakes they made-so you don’t make them. You’ll make enough of your own!
Time and time again, I have seen companies go down because of poor execution. Many times its because the CEO couldn’t adequately handle all the ancillary decisions that come with accepting money from investors. The little things sidetracked a great idea.
What have you done in your business to handle them? I’d be interested to hear in the comments.