6 Ways to Kill Your Startup

Sometimes the best way to learn how to do something is to understand how NOT to do something—to think of things in reverse. I hope that, by doing the exact opposite of the points below, you’ll find some valuable lessons on running and starting a business effectively. 

 

1. Borrow money early

As an entrepreneur, one thing that you definitely want to have is structured payments that are due regularly stacked against cash flow that is unpredictable and unreliable. By the way, be sure to borrow money when a bank will lend it to you. If a banker is willing to make a loan, you should assume that you, by default, have the ability to pay it back. Borrow as much as you can and be sure to do it early in the business’ life.

 

2. Hire as many people as quickly as you can

The key here is to have a very high overhead rate so that you have to keep making more and more sales. You also want to hire people when your business model is not truly proven so that you have fixed salaries to pay with uneven sales.

 

3. Focus on doing a business plan

Now what you really want to do in the first few years in business is think globally. Focus your energy on creating a dynamic, MBA-style business plan; revenue and customers can wait.  What you need is a fully-fleshed out plan of attack that would place highly in a competition held by Wharton. The most important thing you can do in a startup is plan heavily. Business is about planning, not execution. Operate under the assumption that a good plan will automatically lead to sales. On that note, be sure to have a good looking website and nice office space from day one.

 

4. Get a management team in place

Be sure you have a CFO, COO, CTO, CIO and CMO from your company’s inception. It is important to have a full management team when you are starting and building a business. A full management team provides structure in the business and, more importantly, an impressive “Executives” page on your website. The added benefit of having C-level executives in a startup is that they’re very expensive, so you will ensure that your overhead costs are very high.

 

5. Focus on perception

Spend a lot of resources on an accounting system, HR technology, office furniture, insurance and ping pong tables and games. What you want are the trappings of success, not tangible things like customers, revenue and profits. Image is important. Look at other companies like Apple and Google and compare yourself to those companies. Use them as benchmarks. You have to spend money to make money, so spend as much as you can. Customers and revenue can wait, but you only get one chance to make a first impression.

 

6. Spend a lot of time seeking venture capital and private equity money

VC firms fund about one percent of the deals that they look at, which represents a good risk vs. return ratio for you. Don’t worry about the quality of the product/service you offer. Assume that will take care of itself. Because the market is efficient and customers tend to make intelligent choices, you don’t need to worry about the quality of your product or service when you are growing your company. Customers should be honored that you are willing to provide them with your product or service.  Your time is better spent on planning and thinking and having a lot of meetings with your employees. Preferably, link venture capital money with a poor product and service, and assume that lots of capital and a bad product will really escalate your results.

 

This is (hopefully) the worst advice you’ll ever receive on starting and running a business. 

 

 

Resources: Entrepreneur.com

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