Hot on the heels – startup pitfalls

This long article comes on the heels of the last one and is based upon a CNN Money article about mistakes small businesses make. Here’s some of my take on it. 1. Too Little Cash Being under-capitalised is a pain. I’ve seen this in my day job. There’s jobs we simply couldn’t take on because … Continue reading “Hot on the heels – startup pitfalls”

This long article comes on the heels of the last one and is based upon a CNN Money article about mistakes small businesses make. Here’s some of my take on it.

1. Too Little Cash
Being under-capitalised is a pain. I’ve seen this in my day job. There’s jobs we simply couldn’t take on because we needed to extend insane credit terms to big businesses. Being a small business with shallow pockets meant we simply couldn’t do it. So – we walk away. And that’s not even touching on the idea that we have to make enough money to pay people, including the pound-of-flesh due to the VAT man. Buy what is essential. Listen to the second thoughts you will get when signing a cheque. Hold off on online banking for the same reason. It’s too easy to spend money!

2. Thinking Small
To some degree this is inevitable. If you have two engineers and you have work enough for 4 engineers coming in each week, then your guys are always going to be behind. Likewise, if building a service, you have to consider some sort of scalabilty. It would be terrible if the reason you missed out on the $million IPO was because you skimped on the server and were only able to handle 100 people.

3. Skimping on Tech
The article makes a big deal out of laptops, Treos, blackberries and wireless. I’d suggest that you seriously look at laptops (especially cost effective Macs that can boot any OS) and leave the Treos and Blackberries out for the time being. They’re an unnecessary cost in terms of up-front cost as well as subscription and IT resource costs. Consider going Bedouin (a bit like Infurious which in many cases puts the ‘bed’ in Bedouin). Get them laptops. Or a desktop with a monster screen. Leave the Treos and Blackberries to the sales guys that you’ll be hiring much later. And get a reliable email server. I’d suggest you outsource that! Small businesses have no business running their own mail server these days unless it’s actually a core function of their business (i.e. they make mail server software related stuff).

4. Underestimating the importance of sales
Remember those sales guys? This is where I say that you have to back them up except when they start to demand Blackberries and other macguffins (because I know that they will blame the Blackberry for losing the vital email that lost you the deal that would pay salaries for 6 months). Cut through the crap. Have a simple and solid infrastructure and make sure the printer works all the time. Sales people are impatient. And as long as the product you’re making makes more than you spend to make it, then you should do okay. In small businesses, cash is king. Make sure you have enough to cover everything. That means sometimes using your sales people as credit controllers and telling them to get the money in rather than just getting the sales in.

5. Losing Focus
It’s very simple. Have a vision. Follow it. Review it after some time. Does it make sense to realign the company along one product. Do you rebrand the entire company? Do you treat yourself as a product company or a portfolio company? Make sure you talk among your team about what happens when YMG come along and make a big offer for your little company. Make sure you talk about what happens if, after two years, YMG has NOT come along with the big offer and you’re still pulling 80 hour weeks for minimum wage.

OK
In closing, we make a lot of decisions in Infurious because they seem fun. We’re interested in the journey of how to “live the life” as much as we are interested in the actual achievement of the goal. We’re trying new approaches on the development side as well as new approaches in the marketing side. We’re not doing things conventionally as a brief conversation with a professional marketing person (for a big drinks company) discovered. She was horrified at our marketing approach (then again, her ideas revolved mostly around nightly promotions in bars, sponsoring race cars and television advertising). I’m not sure she “got” what we’re doing here. I’m not sure she saw the “fun” side of it! Thanks for the ideas, Anya!

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