Friday, January 17, 2014

Co-founders and married? Conduct yourself right!!!!

Let's talk about drawing a lakshman rekha as part of the wedding vows when marital partners also happen to be co-founders of their organization. How do you make sure that clear lines are drawn between office and home?

Some couples have found it very easy to leave home behind but others have not been able to do so. Here are some cardinal rules that I have put in separate buckets:
Personality type: To my mind, this is the starting point. It is very important that couples do personality mapping and then decide whether they can partner with each other.  
If both are of the type who say ‘my way or the highway,’ or both are of the laid-back, lotus-eating type, it is best to steer clear of the 
business even if they are ideally suited in terms of skill sets. It is important that they have a yin-yang personality match to nurture the business.
Responsibility matrix: When spouses are co-founders, it is very important that the roles and responsibilities clearly outlined, and as far as possible, there is no overlap in there.
This should also be communicated to the hired teams in such a fashion that neither one breaches them. Not the co-founders and certainly not the team members.
Equity structure: As far as possible avoid having equal stake holding in the company. The rules that apply to unrelated co-founders should apply here as well.
Stake holding should be decided on the basis of what he or she brings to the table in terms of experience, competence, skill set and capital. Also, it helps if there are one or two other co-founders who are neutral so that if there is ever an impasse, it can be resolved by that neutral. And whatever happens, avoid sweat equity.
Good financial practice: In most organizations, there are two signatories to cheques and statutory documents. Spouses should never be cosignatories. This could become a showstopper at the time of raising capital.
Remuneration: Salaries of spousal co-founders should be market-driven and not based on the consideration that husband and wife should draw the same salary.  It should be a function of responsibility, experience and skill set.
Professional courtesies: During office discussions, even if spousal co-founders hold different views, their expression has to be within the professionally defined framework of respect, courtesy and decorum and not in terms of spousal familiarity.
Reporting: Depending on their roles, it may happen that one spouse reports in to the other. This has to be treated with as much sanctity as one would have reporting to someone else. If this is not treated seriously, not only will it impact their relationship but the teams will start taking advantage of it and the whole organization culture may become endangered.
Shared vision: In spousal co-founders, it is important to remember the vision for the business that brought them together.  In the rigor of managing family and managing the business, somehow certain unpalatable adjectives creep in.
Words like patronizing, condescension, even contempt could sound a death knell.
It is important to take each other seriously and respect what both bring to the table, evaluate performance objectively, support and nurture for the enrichment of the organization. As in marriage, so in business too, it is important to give primacy for values like respect, trust, pride, confidence and passion.
The best example of a well-balanced relationship was brought home to me when I recently attended the board meeting of one of my mentees.
The company has four co-founders, including a couple. And one of the team members said to me that unless someone told you, you would never know that these guys are a couple!

Tuesday, January 14, 2014

The One Thing Your Startup Really Needs to Succeed

Your startup is not special. You are not going to get the big bucks from investors. You did not go to Stanford and are not located in Silicon Valley. You have no track record of running a business, and your business plan is based on made-up numbers and hoped-for assumptions.
All you have is a good idea -- and you know that history is littered with failed startups that were born of good ideas.
You suddenly realize that no more paychecks are coming in. Your friends who cheered you on when you launched your startup have disappeared into their own problems. No one is knocking on your door or offering help. You start to realize that people promise things and then don't deliver. You don't feel like you're accomplishing anything.
You look around and find that there are many others like you -- people dreaming of business success. And you know that most will fail. Will you?

Don't panic. Your startup can still succeed. But it will depend on one thing and one thing only. Can you guess what?

Really? Doesn't this sound obvious? It is obvious. And yet, I meet so many "entrepreneurs" that get so wrapped up in being an "entrepreneur" and monkeying around with their spreadsheets and pontificating about their grand plans that they forget that in the end they're supposed to be running a business. And a business simply needs customers.
Your startup will likely need one or two years to be profitable. During that time you must bring in work. That means that while you're building your product you're also hiring yourself out as an engineer at an hourly rate. Or while you're developing that new killer application you're doing some other programming work on the side. Or while you get that shop set up you're selling your products on eBay or Craigslist. You will lose money, but you will learn and build some history.
Potential investors and lenders don't want stories, they want results. They're interested in an existing, viable business that needs their help to grow. They want to see real financial statements showing revenues from live customers that you're turning into a future model rather than fictional plans and ideas based on assumptions.
I'm sure your idea is good. And I'm sure your plans are fine. Just don't spend too much time obsessing over them. Build a business -- go out and get some customers with what you have.

Monday, January 13, 2014

How Hiring and Firing Employees is Just Like Poker

Business, like poker, is a gamble. Some people will lose, some will win and some will simply break even. Employees are one of the most critical variables in your success at the table -- they will make or break you. You can up your odds of success by taking the following steps:
Don't be afraid to go "all in." A good employee is almost always worth a big bet; they are like the pocket aces of the poker world. If you are fortunate enough to find one, do what you need to do to get them on board and keep them engaged.
Granted, reading people isn't quite as easy as reading cards. "Aces" don't always announce themselves. There is a deluge of recommendations on how to identify great employees. You'll have to decide for yourself what is most valuable to you and your organization. Is it cultural fit? Is it aptitude? Experience? There's no single "right" answer. The best thing to keep in mind is, if in doubt, then odds are you don't have pocket aces. Don't rush a hiring decision.
Betting large is a good thing, but only if you've taken the steps to figure out what kind of hand you're holding. This may involve multiple interviews in different settings with different people (e.g. other team members if this isn't your first hire). Background checks are always a good idea. People lie. A few minutes on the phone can save you from a costly mistake. Going "all in" with pocket nines may mean you never make it to see those pocket aces.

Know your bankroll. While there is little formal research available on failure rates of small business, some statistics suggest that as many as 50 to 70 percent of small businesses fail within 18 months of opening, according to Tim Caroll, Deluxe's VP of small business engagement. One of the most common mistakes that leads to failure involves hiring too many employees or too often.

A business with several employees will have a harder time surviving trying times than one with few employees. It really comes down to simple physics: a smaller mass allows you to adapt, change directions and surmount unforeseen obstacles (three things that you often need to do during the business's infancy). You can't win if you don't play the hand, but you also can't win by playing too many hands. Pick and choose which hands to play, keeping in mind the risks associated with being "short stacked" (or the errors that can be made by playing too aggressively with a flush stack).
Fold your hand early. In hold'em, a 3-7 is bad hand. Sure, you can hit a straight, but the odds are against it. If you've already paid the ante and the flop doesn't bring the cards you need, it's time to fold. Too many employers make the mistake of continuing to pursue a lost cause. Perhaps because of our inherent nature, many entrepreneurs think that by sheer force of will or through coaching, they can turn a bad hand into a winner. This may be the case, but like the 3-7, the odds are against it.
If you have given your employee a reasonable shot at success and it isn't working out, the best move is usually to fold. Beyond the initial ante, continuing to play can cost you -- probably much more than you realize.
 There are six factors that contribute to bad employee costs. These include the cost of hiring, their total compensation, the cost of maintaining the employee, the cost of disruptions, severance and money lost on mistakes, missed business or unhappy clientele.
The longer a bad employee is attached to your company, the more money you will lose. Considering direct and indirect costs, by some estimates a bad employee with a yearly salary of $62,000 can cost a company around $600,000 over a two-year period. Beyond the dollar cost, most entrepreneurs can't afford the opportunity cost associated with such a loss. Fold early and give yourself a chance to keep playing.

Have patience. Mike Caro, an author, casino executive and professional poker player, once said, "Aces are larger than life and greater than mountains." Pocket aces are rare. You have to play enough hands to get them, but when you do, they can make all the difference. The same is true of great employees.

Thursday, January 9, 2014

Stop Spending Time With Toxic People !!

One of the most significant things you can control is association -- your choices of who you permit into your world, who you give time to or invest time with, and who you look to for ideas, information and education. The people around you rarely have a neutral effect. They either facilitate your accomplishment, they undermine it, or they sabotage it outright.
The first useful association tactic is the elimination of toxic people and saboteurs......It's not an easy thing to face facts about a friend, family member, long-time employee or long-time vendor when they are, in some way, interfering with or disapproving of your accomplishment. It's important to face these facts and to act on them because the more time you spend with people who are unhelpful, unsupportive, disrespectful, envious, resentful, dysfunctional or outright damaging to you, the less value all your time has.

These people don’t just harm the minutes you and they are in the same place. Few people can so perfectly compartmentalize that they can lock every thought, assertion and act of a toxic person in a little mind box and without leakage into other mind boxes. Paraphrasing a Chinese proverb (I found in a fortune cookie), if you lie down with mongrel dogs, even for a short nap, you wake up with fleas -- and they ride with you wherever you go.
Ideas, beliefs, opinions and habits work just like that. Even if you're associating only occasionally or briefly with someone who is intellectually or emotionally toxic or someone who is feckless and inept, it’s enough time for the fleas to leap from them to you, burrow in and be carried away by you to subtly affect your performance and productivity. If your creativity or constructive thinking or work performance is thus diminished, so is the value of your time.
People who are detrimental for you to associate with are not necessarily of evil intent. They may all be “good people,” but that doesn’t mean they’re good for you. Good chocolate cake is not good for a diabetic. In fact, it’s poison. Associating with somebody who is always pushing it to you, saying “Just have a tiny piece” is just as suicidal as baking it for yourself.
There are lots of ways a person can be toxic and poisonous to you. I’ve had clients describe how recurring disputes with a particular employee were mentally exhausting but couldn’t be helped because otherwise, that person was a great asset. The “otherwise” is a big problem. Many small businesses wind up with a ruthlessly defensive key person who goes into murder mode anytime an attempt is made to add a second person but is “otherwise” terrific.
There's the “we tried that before” guy. If it were up to him, we’d light the place with candles because Edison would have been limited to one try. There’s the “constructive critic,” always making you feel inadequate or undeserving, in the guise of being a cautionary ally worrying over you stubbing a toe.
On the other hand, constructive association with creative, inspiring, encouraging people can do a great deal to bolster your performance, thus making your time more valuable. Each minute of your time is made more or less valuable by the condition of your mind, and it is constantly being conditioned by association.

The entrepreneur is particularly susceptible to gaining or losing power by association because he has so many diverse responsibilities and is often operating under pressure, duress and urgency. Playing this game in a compromised mental state, weakened or wounded by poor ideas and attitudes seeded into the mind by association, is extremely difficult. Playing it strengthened and empowered by rich ideas and attitudes seeded into the mind by association can make the difficult easy.
Simply put, you want to deliberately reduce and restrict the amount of your time left vulnerable to random thought or association, and deliberately, sharply reduce the amount of time given to association with people who won’t make any productive contribution and may do harm. Does that mean you can only spend time with people you are in complete philosophical agreement with? No. In fact, such isolationism can be dangerous. But it does mean you should avoid association with people who believe and promulgate beliefs diametrically opposed to “success orientation.”

You want to deliberately increase the amount of your time directed at chosen thinking and input, and constructive, productive association. You want to associate with strivers and achievers, with winners and champions. This is an uplifting force that translates into peak performance, which makes all your time more valuable.