Lessons from a peer Founder

I am an Entrepreneur; How do I manage my business while avoiding chaos?

I’ve been an entrepreneur for 20 years now and along with my brother Ricardo we have founded 4 companies; as everything in life we’ve had our ups and downs (mostly ups thank God).

Here are some lessons learned I could share with the entrepreneurial community.

When founding your company:

One thing they don’t teach you at business school or anywhere else is:

Partners Selection – Selecting your Shareholders and Founding partners.

Just like marriage, this is one of the most important decisions you are going to make in your life … Also just like in a marriage you need to get to know the person before you commit.

  • How they react to different situations?
  • How they think?
  • What expectations they have from the company and from you?
  • Do they want to be actively involved in the company next to you?
  • Do they want to keep the company growing or do they just expect to reap dividends from the company?
  • Are they expecting a big cash out in the next 5 to 8 years or do they see it as a lifelong family business?
  • How much you are going to earn as salary and compensation, and how much will they earn if operating with you?
  • Be very clear about each others roles within the company.

These questions do apply not only for your founding partners, but also for any Fund or Investor you invite to the party.

Highly recommended: write and sign a Shareholder agreement beforehand, that way you establish the game rules.

Remember the number one and two reasons companies fail are: cash and fights between shareholders, so make sure you choose the right partners.

Managing your Business

The Next Step is how you are going to manage your business, it is not only about the “Technology” you just developed that is going to give you success, but how you operate as a whole.

In my experience the following are the most important aspects in business; just like Verne Harnish from the scaling up methodology present them:

Strategy – People – Money – Execution

Strategy – There are many great definitions of strategy (Michael Porter has perhaps the best), but I am going to think of it as:

  • What you are going to do?
  • Where you are going to play (your market)?
  • How you are going to deliver your Value Added?
  • What is your competitive advantage (why are you better than other)?
  • What you are NOT going to do?
  • Which Customers you are going to serve and which customers you don’t want?
  • Which People and Tools you need to serve your customers?
  • What are you values as a company?

People – People is big part of the Strategy and you need to know who is going to be with you on the bus ride and which seats each of them is going to fill.

When choosing your team, make sure your values are aligned and that doesn’t mean they will say yes to everything you propose.

Ask yourself these questions:

  • What positions the will fill?
  • What are their objectives?
  • How will they achieve their objectives and in what timeframe
  • What will their KPIs be? (Key Performance Indicators) or OKRs

Make sure you get people that complement you rather than think just like you.

A good methodology and book for hiring is: https://whothebook.com

Cash – Remember: No Cash = No Company

It is not an overstatement, but Cash is King; you might loose money for a few years and not be profitable, but your company always needs to have cash in the bank.

You need to understand your Cash Cycle in order not to run out of it, especially in times as turbulent as the ones we are living right now.

Cash Cycle is the time from where you begin to spend a dollar to produce anything to the time your customers pay you, that is measured in the numbers of days.

Some Founders are Techies or Product Founders, if you are one of those, don’t lose sight of your cash and project how much you are going to spend a year in advance and project how you are going to collect in order to have a clear idea of the money you will have available to grow and to pay your people and your operations, otherwise you run the risk of running out of money, therefore going broke.

When raising cash with investors for your company expect 6 to 12 months to close a round and have the money in the company’s bank account.

NEVER start raising money when you need it, star raising it 9 months in advance and again be choosy with your investors.

Execution – Execution is a vital part of your Operations and you might have heard that Leaders prefer a mediocre strategy greatly executed than a great strategy poorly executed.

Execution is about discipline and freedom; execution is the rhythm your business take.

Once you have defined your strategy you need Prioritize your next steps and have a Score card on how your reaching each Objective.

I do recommend to choose a few priorities and be laser focused on them; one of our Board members a very high-level executive at a large company in Monterrey once told me: I only choose 5 Priorities at a time because I only have five fingers in my hand, the rest are forgotten …

You need a system to follow-up on your Priorities and Objectives, some sort tracking where you can know how you are doing, to measure your priorities progress you could have a system like:

  • Super Green – You surpassed your objective by more than 20%
  • Green – you are at a 100% of your objective
  • Yellow – you are below 100% and need some help from your bosses or peers
  • Red – you are not delivering and are not asking for help, there is trouble here.

You need a Rhythm where you meet regularly with your team to see how they are advancing towards their goals, I do like how Verne Harnish recommends:

  • Daily Huddle: 7 minutes to see how everybody is and if somebody need help from any other department, what will the main tasks of the day, what are we going to sell and collect today?
  • Weekly Meeting: Where each department score is explained and any needed help and what every department is going to do next week to achieve green status
  • Monthly Meeting: To see how we did during the month, any corrections we need to make as a company and how the competition is doing.
  • Quarterly Meeting: Review results, setting up priorities for the next three months
  • Yearly Planning: Planning Priorities for the next year, which new initiatives are going to drive growth, what are the trends going forward, what do you as a team foresee for the next 5 years.

This might seem like a lot of meetings, but believe me, this will give you freedom to focus on many strategical issues rather than the day to day fires coming up.

Along with scaling up, here are some of the best methodologies for managing your company while growing and avoiding chaos:

I hope this article is helpful for any Founder, don’t stop learning and We welcome you in Monterrey to set up your technology or innovating Company.

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