The five most common start-up errors

 The five most common start-up errors

1.

Mistaking desire for compulsion

All error springs from flawed assumptions. If there are no assumptions, there can be no error.

Consider very carefully whether you are truly driven by inner demons to be rich. If you are not, then my earnest and heartfelt advice to you is: do not on any account make the attempt. What are riches anyway, compared to health or the peace of mind that even a modicum of contentment brings in its wake? In and of itself, great wealth very rarely, if ever, breeds contentment.

Do not mistake desire for compulsion. Only you can know the song of your inner demons. Only yon can know if you are willing to tread the narrow, lonely road to riches. No one else can know. No one else can tell you either to do it or to refrain from the attempt.

When the going gets tough, when all seems lost, when partners and luck desert you, when bankruptcy and failure are staring you in the face, all that can sustain you is a fierce compulsion to succeed at any price.

Better to have chosen a different life, a quite different path, than have placed yourself and those you love in harm's way when early reflection and thought could have advised you differently. I repeat: do not mistake desire for compulsion. Those that do nearly always fail, at great cost to themselves and those around them.

2.

Overoptimism concerning cash flow

Cash flow is the heartbeat of your company. If cash flow is good, then no matter how badly run or poorly managed a company is, there is always a decent chance of turning its fortunes around.

You can delegate many tasks when creating a new business, but monitoring and forecasting cash flow is not one of them. It's your responsibility and your task. Nobody else's.

Keep payroll down to an absolute minimum. Overhead walks on two legs.

Never sign long-term rent agreements or take upmarket office space.

Never indulge in fancy office or reception furniture, unless your particular business demands that you make such an impression on clients.

Never buy a business meal if the other side offers to. You can show off later.

Pay yourself just enough to eat.

Do not be shy to call customers who owe you money personally. It works.

In a city, walk everywhere you can. It's healthy and sets a good example.

Check all staff travel and entertainment claims with an eagle eye.

Always meet payroll, even at the expense of starving yourself that week.

Issuing staff credit cards, company mobile phones or cars is the road to ruin.

Leaving lights, computers, printers and copiers on overnight is just stupid.

A vase of beautiful flowers in reception every week creates a better impression than £100,000 worth of fancy Italian furniture.

They want your business. Play one supplier off against another. Ruthlessly.

Keep your chin up. It could he worse. You could be working for them.

3.

Reinforcing failure

'There is no victory over customers.'

4.

Thinking small and acting big

'Success is never permanent; failure is never fatal. The only thing that really counts is to never, never, never give up.' - Winston Churchill

Once you begin to believe that you are infallible, that success will automatically lead to more success, and that you have 'got it made', reality will be sure to give you a rude wake-up call.

Believing your own bullshit is always a perilous activity, but never more fatal than for the owner of a start-up venture.

By acting small, I mean remaining in touch. Remaining flexible. Constantly examining how your company could do better. Keeping a sense of proportion and humility. Not throwing your weight around playing the great 'I Am'. Remembering that much of your success so far has been achieved by dumb luck. Acting small in the early days of your business sets an example to those around you. If staff see you indulging in long lunch hours and purchasing yourself a fancy company car, then they are either going to resent it or they are going to emulate you. This is not a good thing. You can do all that stuff later, when you've made your first fifty million.

Most of the worst errors I have made in my life came from forgetting to act small. It's hard to do when you're rolling around in coin and everything is going your way. But acting big leads to complacency, and complacency is the reason that many successful start-ups falter.

Every day you have to hit the ground running, putting in more hours than even your most dedicated member of staff. You have to stay flexible. You have to be willing to listen and to learn and to emulate success elsewhere. If you don't, if you think you have already made the cut, if you're thinking 'game over: time to party', then bad stuff begins to happen very quickly.

Think big, act small. It's a recipe that never goes out of style. While especially important for start-ups, it will serve you faithfully long after you have established yourself as a serious player. A successful and naturally modest entrepreneur is an object of reverence and respect in the business world.

5.

Skimping on talent

You need the talent to identify, hire and nurture others with talent.

'There is no substitute for talent. Industry and all the virtues are of no avail.' - Aldous Huxley

Talent is the key to sustained growth, and growth is the key to early wealth. You have to identify and hire talent. You can't skimp on it.

Talented people want a good salary, of course, but surprisingly often they are more attracted to new opportunities and challenges.

When you come across real talent, it is sometimes worth allowing them to create the structure in which they choose to labour. In nine cases out of ten, by inviting them to take responsibility and control for a new venture, you will motivate them to do great things.

Talent is usually conscious of its own value. But the currency of that value is not necessarily a million-dollar salary. The opportunity to prove themselves, and sometimes the chance to run the show on a day-to-day basis, will often do the trick just as well.

You must identify talent. Then you must move heaven and earth to hire it. You must nurture it, reward it property and protect it from being poached. If necessary, dream up a new project. Better still, get the talent to dream it up.

By the time talent is in its mid-to-late forties or early fifties, it will have become very, very expensive. Young talent can be found and underpaid for a short while, providing the work is challenging enough. Then it will be paid at the market rate. Finally, it will reach a stage where it is being paid based on past reputation alone. That is when you must part company with it.

'Everybody has talent at twenty-five. The difficult thing is to have it at fifty.' - Degas

Talent is indispensable, although it is always replaceable. Just remember the simple rules concerning talent: identify it, hire it, nurture it, reward it, protect it. And, when the time comes, fire it.

Talent does most of the work for you.