Is your startup hiring?

If it is, you are likely asking yourself who it is you truly need to hire.

You often have many needs, but you also have a limited payroll budget. The temptation is always to hire the most technically skilled person for the job, for the least amount of payroll. Getting the biggest bang for your buck sounds logical, but is it?

If you have started your hiring search by developing job descriptions that incorporate both hard skills and soft skills, you’re off to a good start. When those resumes start coming in for review, there are other things to consider. For example, are you looking for generalists or specialists? Do you want individuals with a small company background or big company background? How about experienced versus inexperienced? It depends in part on your business needs.

If your business operation has formalized processes and procedures, you will likely want to hire a specialist because they are likely to be focused on maintaining efficiency in their areas of expertise. If your business is more flexible than formalized, you might find that a generalist is a better hire because they can tackle almost any task with some degree of efficiency and effectiveness (Wasserman, 2012). Generalists bring a broader skill set that may help you get your business off the ground, but as your business grows the job requirements will likely become more specific, and you may find the need more specialists to support your day-to-day operations.

Related to the consideration of a generalist versus a specialist is the place at which the applicant’s prior experience has occurred. While some argue that those with a lot of experience in a small company are a better fit for a startup because they have been in the trenches and likely understand the challenges (Wasserman, 2012). Conversely, those who have a big company background can bring a wealth of knowledge about operational processes that might be beneficial to a startup (Wasserman). The experience that comes from each background can add value to a startup founder, but the big company versus small company experience is just one part of the equation.

Perhaps the most challenging question is experience versus inexperience (or limited experience). Some suggest that those with inexperience bring a passion for the job and the founder or manager can teach the specifics of the job. This allows the founder to hire someone with the necessary hard skills for the position, without committing significant payroll dollars that would otherwise be offered to a more experienced individual. An experienced individual, others suggest, often brings more overall skills, contacts, credibility, and perhaps stability; however, the downside is a bigger paycheck for that individual and the inability for you, the founder, to shape the company culture as well because those with experience have different expectations of the company (Wasserman, 2012). Experienced versus inexperienced hires may be one of your most significant considerations because of what these hires may bring, or may not bring, to your business. The benefit of each type of hire is not always apparent.

So, who do you hire? I can’t tell you.

Who you hire will depend on you’re your individual business needs. I can tell you this, though: Start by framing what you need this new hire to do. Then, ask yourself if you need someone who can be flexible and tackle many things or someone who has specific skills to get the job done. Next, consider the value of their background and the location of that experience (big versus small company) and, finally, develop a job description incorporating both hard skills and soft skills based on your prior decisions. And don't hire someone like you.

I can also tell you that framing your hiring decision solely by available payroll capital is short-sighted. There are many ways to frame a compensation package, and it’s not always about that bi-weekly paycheck. Focus on the fit. Everything else will fall into place.

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Who would I hire? For startups or small businesses, I tend to hire people who are curious, flexible, self-disciplined and comfortable with decision-making, have the basic hard skills necessary for the job, and have a high degree of comfort with ambiguity. In most cases, these individuals are experienced, have one specialty area (or an area where they have several years of progressive experience and responsibility), and a mix of large and small company employment. In my experience, these attributes result in the best staff for me because of my style and how I lead and manage businesses in startup mode. Keep in mind these attributes may not work for you because you and I lead and manage differently.

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References

Wasserman, N. (2012). The Founders Dilemma. Princeton: Princeton University Press.

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David Harkins is a business strategist, speaker, and teacher.

He is the founder and executive consultant at David Harkins Company. In his spare time, he writes hikes, explores, and creates art. Although, not necessarily in that order.

Connect with him on social media below:

Fear and panic in entrepreneurship

I’ve been reading meditations from Mark Nepo’s The Book of Awakening every morning for several years. A few weeks ago, the reading from September 27 in the book struck a chord with me relative to the challenges of fear and panic in entrepreneurship. Here is that meditation and my takeaways:

 

Leaning In

Few situations can be bettered by going berserk.” – Melody Beattie

It was the philosopher Michael Zimmerman who told the story of being a boy in school when someone passed him a pair of Chinese handcuffs, a seemingly innocent thimble-like casing with an opening at each end. It was passed to him without a word, and, of course, through curiosity, he slipped his left forefinger in one end and then his right in another.

Mysteriously, what made them handcuffs was that the more you tried to pull your fingers out, the tighter they held you.  Feeling caught, he panicked and pulled harder. The small cuffs tightened. But suddenly, it occurred to him to try the opposite, and as he leaned his fingers into the problem, the small casing slackened, and he could gently and slowly work his fingers free.

So many times in life our pulling in panic only handcuffs us more tightly. In this small moment, the philosopher as a boy reveals to us the paradox that underscores all courage: that leaning into what is gripping us will allow us to work our way free.

 

I can personally identify with this story.

I have learned the hard way that panic begets panic. I know this to be true through all my life and business trials. I also know that the majority of the times I have panicked, especially as an entrepreneur, it has involved matters of money. But, it’s often not really about the money itself. It’s more about what the money represents—a lifestyle, security, safety, and the like, and losing those things strikes a chord of fear in us. Panic always comes from fear, doesn’t it?

As the handcuff story above tells us, the more fearful we become, the more we entrench into the past problem-solving approaches, and the tighter the gripping fear has on us. The story also tells us we cannot solve our problems using our first instincts—those stemming from our past experiences. Moreover, the story illustrates the way out is not to rely on what has worked in the past, but to look for new ways. We must lean into the problem, rather than retreat from it.

I can attest to this, too. The past gives us tools and experience for moving forward. But every situation is different because the internal and external forces that influence the situation are different, or of a different mix of forces. So, the context of each situation creates something new, even if on the surface it looks as though it may be the same. A mentor once helped me understand this by telling me, “If all you have is a hammer, everything looks like a nail.” I know it’s easiest to grab the hammer. It’s on top of our toolbox because we use it often. We have more tools in our toolbox, though. Our past experiences help us to choose the right tool for the job at hand. Yes, it’s easy to grab the hammer. But, it’s not always the right tool.

All of this is not to suggest that we act frivolously in our business decisions. Instead, when faced with challenging times as an entrepreneur, we must find the courage to lean into to the future, rather than retreat into the past. We must find comfort in the gifts of wisdom, talent, and the experiences to make the best decisions for moving forward on your journey. My hope for you is that you might make strategic decisions about your business that are born from dreams, rooted in practicality, and polished by optimism.

And, try not to get caught in those handcuffs.

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David Harkins is a business strategist, speaker, and teacher.

He is the founder and executive consultant at David Harkins Company. In his spare time, he writes hikes, explores, and creates art. Although, not necessarily in that order.

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8 Shark Tank Takeaways for Entrepreneurs

The new season of ABC’s Shark Tank started a few weeks ago. If you are not familiar with the show, it’s a business “pitch show.” Each week several entrepreneurs pitch their businesses to a group of investors (also known as “Sharks”) hoping to secure funding for their venture. Although it is dramatized, like all reality shows, I am a fan because it aligns with my own experience as an entrepreneur and I believe aspiring entrepreneurs can learn a few lessons from the interactions those pitching on the show have with the Sharks.

Here are just a few of my Shark Tank takeaways for aspiring entrepreneurs and those looking to grow their business through outside investment:

1. Know your true opportunity.

Too many entrepreneurs go into business chasing what they perceive to be a market opportunity only to learn that the market is not significant enough to warrant an investor’s interest. Think about where the business could go, without being too unfocused, to grow. But be realistic. Just because there are millions of dog owners in the market does not mean you will sell every one of them your new dog product.

It is also critical to have a keen knowledge of your competition. You should consider how easy it might be to knock-off your product or service offering, or otherwise, move into your market. This is especially true if your competition is larger than you and the market opportunity is right. Competitors with deep pockets can be a startup killer. It is essential to understand how your business is realistically different.

Keep in mind that, investors want to maximize their returns. If you’re targeting a market that has limited potential, there’s little chance you’ll be funded if the investor doesn’t see a market opportunity you may be missing. Invest the time to understand the real opportunity before seeking outside investment.

2. Live and breathe your numbers.

Your business financials are the lifeblood of your company. Investors will want to know your financials inside and out. Your customer acquisition costs, cost-of-goods, operational costs, cash flow, inventory turn, and revenue growth are all key. You should also understand where improvements can be made within the operation that will increase revenue and profitability.

Investors want to know you are intimately associated with your money before they will invest theirs. They will also want to know how and when they might see a return on their investment. Often, they will ask “What if” questions about your financials and financial projections to look at the best case, the probable case, and the worse case business scenarios. With tools to run these scenarios in place, and having run various scenarios yourself, will not only help the investor understand the possible outcomes, but it will help you gain a better understanding your business financials.

3. Sales. Sales. Marketing. Sales. 

Sales will tangibly show an investor that your business may be a viable investment. If your company has sales, it demonstrates that there is some market opportunity for the product and services your business offers.

Sales numbers can also tell an investor a lot about a business. If a company has been operational for two months, for example, and sold 50,000 units of a $19.99 item, it might suggest that the entrepreneur has found the right market for the product. Conversely, if those 50,000 units were sold over three years, there could be many different underlying problems that would likely to give the investor pause.

Marketing is essential, too. Knowing how to reach your target market best and demonstrating it by consistently driving new customers to the business is vital. Keeping the customer acquisition cost low and the sales conversion high should get the attention of investors.

Know that few investors will invest much in an unproven idea. Investors want to see that the business has sales and steady growth. Operations can be improved, and costs can be reduced, but sales are necessary to keep the company going. Investors want to invest in winners and sales provide one measure of possible long-term success.

4. Be realistic with your valuation.

Most of us overvalue our businesses when seeking investment. Not everyone has $1,000,000 valuation. Few startups do. There are many ways to arrive at a business valuation and the more common formal method discounts the cash flow over a period and then compares the ROI of the investment with a risk premium to the safest investment in the market. It can be complicated to calculate, and few entrepreneurs take the time to learn how to best value their company.

Too often entrepreneurs opt to look at sales numbers and factor some fuzzy math. Some might argue, for example, that steadily increasing sales from $250,000 to $800,000 over the last three years and being “on track for $1,500,000 this year” puts the value of the company at $1,000,000. Maybe, but highly unlikely. The cost of goods and operating costs need to be factored into the valuation.

Investors consider risk and opportunity in the valuation of a company. If the opportunity is excellent, but the risk is high, the investor will often want more equity to offset the associated risk. This includes those situations where the investor will need to invest not only money but time and energy into the business to see his or her return. The risk-reward factor is important, but financial fundamentals are the baseline measure for any entrepreneurial investment.

5. Understand how to scale.

Many entrepreneurs think having a product or service that they are selling is, in fact, a business. While in the strictest sense of the word this might be true, investors are looking for a “business operation” in which to invest, not a corporate structure. It is not enough to have chosen to incorporate and have made a few sales.

It is important to remember that most investors seek opportunities where the business has some structure that will enable it to scale. Scalability is key to maximizing an investment return. Investors look for companies that already have, or are implementing, systems and operations for scalability. For this reason, many investors will not invest in service businesses because they are more difficult to scale than, say, an online retail store, or maybe even a manufacturing business. Scalable companies not only have the potential to reduce costs, but they might also increase revenue and, in turn, profitability.

6. You are your pitch.

Having a solid business pitch is essential, but it’s about more than just the business. Clearly and succinctly communicating your business operation, what products and services it offers, how those products and services are delivered, who the customers are, and what problems your offerings solve for customers is essential. Equally important is your background and experience as it relates to the business, and what the company has accomplished to date. And, as mentioned above, your knowledge of the business financials are an essential part of the pitch. But investors value other things, too.

Keep in mind that when pitching, you are not only pitching your business, you are pitching yourself. It is good to be professional and prepared, but don’t come across as aloof or too argumentative. Have passion, but be realistic. Tenacity is good, within limits. How you conduct yourself in the pitch, and in “real life” will factor into the investor’s decision, too. Be humble, kind, and honest. Listen and be coachable. And be personable. Investors are investing in you, particularly in the early stages. You need to be as investable as your business.

7. Know your limitations.

An entrepreneur's passion generally drives the startup idea. Quite often that passion is driven by a desire to solve a problem. Sometimes those who are motivated to solve a problem may not be or have the desire to be, a great business person. You may have created a great product, but you may not have the business knowledge or experience to grow the business opportunity. If an investor sees the value in the product, he or she might choose to invest; however, the equity ask might be 50% or more. The higher equity asks stems from the investors understanding of what needs to be done to turn your idea or product into a business. Such offers are always worth considering.

Investors willing to invest in you to help you build structure and sales of your product likely deserve a higher equity stake. In such situations, investors may well be bringing more to the table than you might be. In these circumstances, it is essential to consider your strengths, weaknesses, and interests, and then determine the real value you bring to the opportunity. This is the time, to be honest with yourself. Don’t forget that 40% of a company making money is worth a lot more than 100% of a company that is not making money.

8. Investors bring strengths and weaknesses.

Each investor will have his or her strengths and weaknesses. They know them, and you must know them, too. Whenever possible, learn more about an investor, his or her likes, and dislikes, how they have invested in the past, what they’re looking for in an investment, and what they feel they can bring to the table. Knowing this will help you choose the best investor match for your business, and enable you to tailor your pitch to the investor.

As an entrepreneur, it is just as vital for you to how you might leverage the strengths and downplay the weaknesses of a given investor in your venture. Choosing the wrong investor can be the kiss of death for an entrepreneur. Finding the best match is critical for success.

Although not every investment pitch will be made to a Shark like those on the show, entrepreneurs can learn from watching others pitch and listening to the questions asked by the investors. I watch little television these days, but I do try to catch Shark Tank each week, and when I’m traveling, I am guilty of binge-watching reruns of the show on CNBC. I am so surprised when I hear entrepreneurs tell me they have not seen the show. I think they're missing out. I learn something every time I watch Shark Tank. If you're an entrepreneur, I know you will, too.

 

P.S. In my personal opinion, sometimes Kevin "Mr. Wonderful" O'Leary is right. Licensing is the answer. But then, I'm a licensing guy, too. 🙂

 

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Featured Image Source: Getty Images/Phillip Faraone

 

David Harkins is a business strategist, speaker, and teacher.

He is the founder and executive consultant at David Harkins Company. In his spare time, he writes hikes, explores, and creates art. Although, not necessarily in that order.

Connect with him on social media below: