This article also appeared in Finweek Magazine in their 7-Feb-2013 issue
Four years out of our MBA degrees, my MBA classmate Joanne* was working in a senior position at a leading global FMCG company. She was extremely well-paid, got to travel extensively and had all the usual corporate perks. Everyone thought she had the perfect set-up. But inside, Joanne was desperately unhappy. Her dream was to start her own business, and she would spend all her spare time researching an idea she was passionate about. However, she had two children whose private education didn’t come cheap, a sizeable homeloan to pay off, and her husband’s investment business had taken a knock in the global financial crisis. So the family depended on Joanne’s salary. As much as she wanted to quit her job in corporate, she didn’t think she could. Sensing her unhappiness, Joanne and I met for lunch to explore if there was a way she could successfully make the leap from corporate to a start-up. Some valuable lessons came out of our discussion that hopefully can help others in the same predicament.
I made the transition in 2007 and it was the best career decision I have ever taken. The entrepreneurial environment, however, isn’t for everyone. And corporate will be extremely tempting when you hit the inevitable rocky period in your venture. Before making the leap from corporate to start-up, you need to understand what you’re getting into and if you’re cut out for it.
So the first question to address is: What traits do you need to have in order to succeed in a start-up?
- Are you agile and adaptable? By their very nature, start-ups are pushing the accelerator. Things move quickly, and almost every day a new challenge that you haven’t faced before arises. Unlike in corporate, you don’t have the luxury of spending a week away with your team to deliberate new strategies. In a start-up you need to be comfortable with the frenetic pace of change and to be able to make decisions rapidly under pressure. Do you thrive in more process-driven, systems-orientated corporate environments where standard operating procedures define the steps in each process, so that everyone can follow them in exactly the same way? Then you could well struggle with the uncertainty and lack of systems to fall back on in a start-up, and it may not be for you. However, if you are frustrated with the sluggish pace of change in your corporate job, and you’re always looking for new challenges and new and better ways of doing things, you could be a start-up animal waiting to shed your corporate skin.
- Are you comfortable with uncertainty? When I worked at Eli Lilly, the company had been in existence since 1881, focusing on pharmaceuticals from the start. So the amount of institutional knowledge inside those walls was astounding. When I was faced with a new challenge I hadn’t previously encountered, chances are someone somewhere in the company had faced a similar issue before. Many people had worked for the firm for a good few years and there was always someone you could turn to for advice, someone who could answer the question: “How did you deal with this when it happened to you?” Start-ups are completely the opposite. Often there is no predefined roadmap. When you’re working on a completely new concept that didn’t exist until now, you’re building the roadmap. Start-ups typically have only a few staff members, and no-one has been with the company for a long period of time, because the start-up hasn’t been in existence for long. So there’s often no-one to ask, and very little institutional knowledge to tap into. How do you deal with this uncertainty? It takes a unique kind of person to shine in this environment. If you like coming to work on Monday not knowing what the day or the week holds, then a start-up could be for you.
- Do you like to experiment? When faced with uncertainty, you need to be comfortable trying new things, experimenting to find what works, and to keep questioning the status quo. Some things will flop, others will be a success. The key is to forgive yourself when things don’t work out, learn from these mistakes, and to keep tweaking. A start-up may completely change direction as the experimentation process reveals new better ways of working, new business models, new markets to explore, and new products to focus on. This culture of “launch then iterate” is what can make start-ups such exciting places to work.
- Are you risk-tolerant? In a start-up it’s about successfully taking calculated risks again and again, without fixating on mitigating risks. The SWOT analysis, Pestel and Porter’s models and complex 4-by-4 frameworks that they teach you in the MBA, are counterproductive in a start-up (in fact I’ve very seldom used them). Why? Because over analysis leads to paralysis. This inability to take action and to embrace risk will kill any start-up. Although planning and market research is important, customers will frequently tell you they want a product or service, when the reality is they aren’t willing to pay for it. So very often you don’t know if something will sell until you put it out there in the market for customers to try. When faced with very little information and the pressure to make a decision quickly in a start-up, you need to learn to trust your gut instinct. If you find it hard to take risky courses of action and you rely exclusively on theoretical models to make your decisions, a start-up is probably not for you.
- Are you results-orientated? To excel in a start-up, you need to be very self-motivated and driven to succeed. If you do achieve, there won’t be a promotion or a raise to reward you, so your motivation has to come from within. If you don’t achieve, on the plus side if you are the entrepreneur, you don’t have to worry about your boss firing you, because you are the boss. However, not achieving could hurt your company and cost you your investors, so there’s no time to dwell on your mistakes. You need to learn from them, move on and come up with something better that does work. Also, the demands of a start-up environment do not keep office hours, and you cannot leave them at the office. Be prepared for long work hours, with commitments that demand your nights and weekends and eat into your free time. As any entrepreneur will tell you, “Work-life balance doesn’t exist for entrepreneurs”.
- It’s execution, not perfectionism, that counts. In a start-up, resources are in short supply and competitors are not. So time to market is often more critical than delivering 100% perfection when you launch your product or service. Getting up and running quicker means you can start selling quicker, and that may determine the difference between success and failure. On the one hand, you need to deliver high quality quickly, and not take short cuts with customers and clients. On the other hand you don’t have the luxury of time to make things perfect. So you need to find tools and technology to help you work smarter and get the priority items done well and fast. However for the rest, good enough is good enough. A fellow entrepreneur and I often have heated arguments about this issue, and my view is, “You get paid for results, not for the pretty touches.” So if you’re pressed for time, 80% is good enough, and let that last 20% go. According to the Pareto principle, the first 80% will take 20% of your time and effort, the next 20% will take 80% of your time. So is it really worth it? A case in point is building your website. Just last week I heard an entrepreneur talk about how their product had been finished and ready for customers in October 2012. “How are sales going?” I asked. The response? They couldn’t start marketing or selling their product because they were still building the perfect website with all the most fantastic features, and at the end of January it still wasn’t up and running. So that pretty website was costing them revenue, and four months of it already!
Perfectionists also don’t make good team-players, as they prefer to do the work themselves, believing that no-one can do the job as well as they can. So a perfectionist streak can be toxic for a start-up.
- Job specs and job titles don’t matter in start-ups. You won’t find defined job specs in start-ups. Everyone can and does do a bit of everything. I’m a big fan of delegation to free up your time so you can get on with what you’re good at. However in a start-up, you often don’t have the luxury of a PA or marketing manager to do the admin or marketing for you. You need to be willing to pitch in and do even the most menial tasks. Not only is this fantastic experience, but it also keeps you from becoming the big-headed company founder, and helps you understand what your staff at the customer cold-face experience. I recently went to a launch event for a fellow entrepreneur’s company. On the launch day, the two co-founders and the CFO chipped in to set out tables and chairs, to get the venue ready, and to fetch attendees from the airport. It doesn’t matter what fancy job titles you have in a start-up. It’s about getting the job done and everyone pulling their weight to produce a great end-result. If you’re the guy in the Fed Ex video that says, “I don’t do shipping”, then you won’t cut it in a start-up.
- Are you resourceful? Things in start-ups seldom go as planned. So you need to be able to change course quickly, and to make another plan. Running out of capital in 2008, founders of successful US start-up Airbnb resorted to selling collectible cereal (and even eating it) to help them stay afloat until they got funding and turned the business around. It’s this kind of resourcefulness that will make you successful in a start-up.
The start-up environment isn’t for everyone. However if you have these traits, you’ll find it an incredibly stimulating and exciting space to be in.