It’s Not What You Think
Do you love how almost all the brilliant business experts say a startups’ biggest problem is not enough cash?
It can be unclear if this refers exclusively to startups that acquired enough cash to actually start operations. It’s debatable what constitutes the bare minimum requirement to consider a startup actually in business. It could be based on whether or not any sales happen. Yet, plenty of startups spend all their money and never have any sales. Let’s define startups as any business where the founder has a plan and hope.
Ran out of cash and failing to raise more capital being the biggest factor catapulting startups out of business is hard to argue with. After all, “mathematically speaking” they’re not wrong. When you’re out of money you’re usually out of business. It’s also not wrong to point out that going broke in a business is part of the downward vortex death spiral caused by founder’s thinking. Notice I didn’t say founder’s decisions. Decisions are results of our thinking.
Let’s analyze the two biggest mistakes founders just let happen. You’ll see how these two mistakes intertwine and can be solved simultaneously. That is if you’re willing to do the hardest thing imaginable and change the way you imagine business models.
#1 Mistake: Limited thinking fostering refusal to hire top talent
Typical founder statements:
“I got that covered. We don’t need help with that.”
“Maybe later when we’re more stable then I’ll get help with that.”
“We don’t have enough money to throw at that right now.”
“I’ll save the money and spend my time on it instead until we’re bigger.”
If this following statement does not sound ridiculous to you then you’re likely a future failed founder. Listen closely to this statement, “I don’t have the money and don’t know how to acquire talented men and women of any nationality to make my business awesome. That’s okay though, I’ll figure it out myself.”
Being a Jack or Jane of all trades is a recipe for disaster. Not to mention that the scalability of the people and processes required to run your business is going to catch up with you in a devastating way. For this reason, I implore you to start on the right foot by being hell-bent on solving talent needs first. Make scalability the number one factor you build your business model on. By business model, I mean the day-to-day operations of whatever your business is about.
When you have guidance from the right people then money problems can be solved in numerous ways. Sales solve cash flow issues. Pre-sales provide capital ahead of inventory concerns. Loans can be structured in various ways to fit your needs. Capital sources can come from all types of people and organizations. Purchasing and inventory needs can be negotiated. Here’s the thing though, trying to solve all your problems by yourself is debilitating. Get the right talent on your team and capital constraints dissipate.
Solution Summary: Start with thinking grounded in solving talent issues instead of capital issues. Sound counterintuitive? Well, it’s not. Change the way you think so you do what it takes to find and align with the best-proven talent in spite of limited funds. This may involve vesting top talent in lieu of having excess capital to pay. Be creative and open-minded. Getting people invigorated into your vision is more about how you communicate, inspire, and most importantly the vibe you give. Yes, I said the vibe. This is the energy, the aura, and the intangible momentum radiating from your being manifested by your words, actions, and inactions.
#2 Mistake: Hypocritical philosophy on the standard of living
Typical founder statements:
“Labor is our biggest expense so I have to be conservative with wages.”
“I have to pay my staff little so my business can survive in this industry.”
“That’s just the pay rate this industry works on.”
“It’s hard to find good people who want to work hard like me.”
If this following statement does not sound ridiculous to you then you’re likely a future failed founder. Listen closely to this statement, “I want to make a lot of money. Past companies I worked for didn’t pay me fairly and treated me badly. I refuse to pay top dollar for my employees though because we have to save money to get the business off the ground.”
Being a founder is a great responsibility to more people than just you. Yep, you’re in it for the money and that’s okay. Just don’t lie to yourself or others and claim it’s all about making the world a better place. That’s noble and worthy, but it’s not your number one driver. Why should it be? Well, breakthrough thinking happens with the realization that putting Staff Experience first is the key to Customer Experience.
Great pay is equally paramount as employee treatment. When Staff Experience is treated as vital the people and processes needed to scale Customer Experience into differentiated products and services become possible. Now we’re talking about operations. Business operations comprise the people and processes that management and culture must coexist with. These elements are symbiotic. Ultimately, how founders structure these elements within their business model makes or breaks them. As Renaissance Methodology prescribes, aligning and balancing these elements requires energizing the people and nominating your champions to accelerate your plan.
Solution Summary: Do everything in your power to build into your business model the ability to pay staff more. “More” is defined as a true living wage. It’s counterintuitive to pay more for labor when it’s already your biggest expense. However, this is exactly the breakthrough thinking that will manifest the founder’s dreams. Holding down others by paying reasonable wages/salaries is a silent and seemingly justifiable business decision. Survival of the fittest is the theme of life. You may have to change or do something in your startup that seems unfathomable for you to pay staff more. What if you think in a new way that forces you to restructure some or even your entire business model? Breaking traditional thinking for running your business requires pushing the envelope.
Conclusion: It’s not a lack of capital killing startups. Having capital often perpetuates limited thinking. The limited way founders think about capital destroys them. Most founders are not willing to do the hardest thing imaginable and change the way they imagine their business model. They already believe they have differentiated products and or services. Hence, they have imagined to their current limit.
Their beliefs about how magnificently they differentiate from competitors are usually a delusion immersed in cow manure. True differentiation is immensely difficult for your market to detect. Most everything is a commodity and the faster founders embrace this the better. The talent we have on our teams makes a critical difference. Talent in business revolves around the people and the processes. If you seek to be a founder then get as creative as it takes to assemble your team of talented people from all walks of life and empower them with the ability to help solve these two biggest startup killers. It doesn’t just take money to get the right people. Invigorate people in your vision and share heartedly in the rewards. Be the servant leader who cherishes your team and lets them run the business. This starts with breaking your limited thinking and hypocritical philosophies on what you deserve more than others. Deserve is based on equitable fairness, and that my friendly founders is a fleeting fantasy in life. What’s not fleeting, is people’s ability to solve problems. So get the right people and build the business model that allows this to happen. You’ll need to change the way you think about your business to make this happen. Money doesn’t solve problems, the right people solve problems. Stop wishing you had more money and get aligned with the right people. Money will follow.