Challenge of an Early Stage Company

I have been in the workforce for longer than I care to admit, spending more than 45 years closely associated with the manufacturing community. I have worked for large Fortune 500 companies as well as high technology start-ups. This range of company size experience followed me into my consulting practice which I started in 2001. At Business Avionix I have had the opportunity to work with clients with $100M in sales, and some with no sales, just an idea.

I have to admit, I love the passion that pervades the culture of an early stage company. Entrepreneurs, almost to a one, view the future with great optimism. For most, they feel that the biggest barrier to achieving their dreams is money. If they only had the funding to really jump start their company to the next level. Access to capital is the single most talked about issue in my early discussions with start-ups. Money is a means to their end. They are drawn to the allure of their business, and the lack of enough funding is seen as their biggest challenge to business growth.

Certainly money is needed to grow a business, but most start-ups fail, and not because of lack of funding. This makes investors very cautious. Entrepreneurs often approach family members for cash which, in many cases, puts these funding sources in an uneasy position.

While many business owners spend their time chasing money, this is not, in my opinion, the biggest challenge that faces the early stage company.

My first job out of college was as a mechanical engineer for the DuPont Company at the Louviers engineering building in Newark, DE. The engineer department had 2300 employees, which included 900 engineers and their support staffs. The one thing that was prominent at Louviers was that they had a process and system for everything. It took me weeks just to get acquainted with all the rules and regulations that I was expected to follow.

Let me fast forward 20 years to the day I started working for my first high tech start-up company as VP of Marketing and Sales. After 20 years enmeshed in the highly structured culture of two Fortune 500 companies, I was not prepared for what I was walking into.

While this technology rich company had a leading edge product, the systems and structure addressing the way people did work was almost non-existent. I have worked with many small companies since the 80s, and this “non-compliant” culture has been threaded through most of them.

Entrepreneurs are the lifeblood of our economy, and the energy of the entrepreneurial company is intoxicating. That said, the culture of a small company often takes on the personality of the entrepreneur, which in most cases is one of:
1. High drive to get things done
2. Good at influencing people inside and
outside the company to embrace the
corporate vision
3. Ability to juggle a lot of balls in the air
at the same time, and almost always
on the edge of dropping some
4. Avert to compliance to rules and
regulations of any kind

The culture of a start-up almost always reflects the personality of the president. This presents a significant challenge, and I dare say the Achilles heel, for the new company.

Why?

Unless the company has a product/service that is so unique that customers will queue up to purchase, the company will have a difficult time penetrating the market. Few companies have a “Pet Rock”, “Cabbage Patch Doll”, or “IPAD”, resulting in a compelling value proposition.

The foundation for differentiation must include more than just the product/service the company was founded on. Most start-up companies do not have the systems and structure necessary to deliver a consistent product, or service. This is in part the result of the leadership characteristics of the entrepreneur. In a small company the culture usually mirrors the personality of the owner. The classic entrepreneurial profile, and the resulting business culture, results in inconsistent company performance in meeting customer needs such as “on time delivery”, “lead times”, “quality”, “timely response to quotes”, and others, that together result in a superior customer experience.

Just having a good idea is not enough. Structure and systems must be designed into the business model in the beginning to ensure a complete “customer experience” if the business is expected to be sustainable over the long haul.

In closing the loop, making the “access to capital” presentation to banks, and other potential equity partners, will be much easier with these types of controls in place.
My parting suggestion … Put yourself in the position of your customer, and what they will experience from all the touch points with your company, and a better business design will emerge from that thought process.

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