The first year of any startup tends to be the hardest. Often, entrepreneurs bursting enthusiastically off the starting line soon hit a wall of unrealistic expectations. They might have overestimated their potential market or assumed their product is viable when it still had a way to go. At the same time, they’ll be struggling to juggle all the key parts of the startup - managing the team, raising funds responsibly, and establishing a solid business infrastructure.
It's not all doom and gloom. Founders have to realize that setting up a business is hard, but also that most challenges can be surpassed if tackled with the right mindset and skills.
Working with numerous early-stage founders in their first year has taught us the value of rapid experimentation, and learning from mistakes. So here are 5 common missteps and solutions founders need to learn to get through the rocky road of their first year and reach the steadier ground.
Be honest with yourself
Founders are prone to being a bit starry-eyed when it comes to their “baby.” As great as your product probably is, in that first year, it’s likely to not be all that well-rounded yet.
Founders tend to have selective hearing when it comes to their new business, preferring to hold onto the positives while shrugging off that all-important negative feedback that will help refine your product and strategy.
For example, we have known founders who adamantly believe that their audience is significantly bigger than the data shows, or who state their business is growing when the data shows otherwise.
These mindsets can be damaging to your business, and they must be met with harsh realism. As founders, when looking at metrics and calculating strategies, you have to clear away your emotions and make objective, rational decisions.
If you’re unable to do so, you have several choices:
- Establish that most of the business’ strategic decisions will be data-driven.
- Pay closer attention to critical feedback, process and act on it.
- Invest in analytics and identify where you’re going wrong and why.
- Surround yourself with honest advisors who you trust and who can make those important decisions for you.
Learn to delegate
Founders go above and beyond to get their business off the ground, often working long hours and not taking holidays. But we all know that the model is unsustainable. Everyone burns out, and let’s face it, a lack of sleep is not going to fare well in board rooms, networking events, or even in motivating your own team. And if you’re micromanaging, you have less time for the executive stuff - fundraising, meeting movers and shakers, etc. In the meantime, employees are out of the loop as the necessary information to perfect their assigned roles barely trickles down.
We have a client that really struggled to relinquish control to his team, demanding that the sales, marketing, PR and product work all pass through him. That created a bottleneck that really slowed the business down, with tasks being backed up or even forgotten about.
Yet it’s seriously hard for business owners to delegate their tasks, often because they’re protective of the process and get frustrated if jobs aren’t done exactly as they’d like (maybe blame the lack of sleep). And employees are out of the loop as tasks keep
That can cause friction between you and your team, without actually freeing up anyone’s time.
The main solution here is pretty clear, founders just have to learn to grin and bear it. Start delegating tasks to your team, but begin with non-critical tasks and flexible deadlines. For example, you can give an employee a task that doesn’t need completing until Friday but set a deadline for Wednesday, to give you some wiggle room in case changes are needed.
Our client eventually came to us for a heart-to-heart and confessed that he was under a massive amount of stress both at work and in his personal life, and needed help. Even so, it was a struggle for him to let go and we knew it would take 6 months to resolve the problem. We worked on one area of business at a time, with the client gradually handing over decision-making responsibilities to the corresponding team leaders and tone down how much was being reported back to him.
What’s important here is trust. To ensure there is enough trust between founders and their team, it has to be there from the outset: take time making smart hires, rather than quick ones, so you know they can give you quality assignments. But also inspire your team to be as passionate about the business as you are. I think the mistake that founders make here is that they expect employees to have the same drive and belief in the business as they do - in reality, they’re coming in from the outside, which means that kind of passion doesn’t appear organically.
There are many things you can do to inspire your team - be transparent and generous about showing them how the product and the business work. Be very clear about business objectives at all big meetings, and specifically what individuals’ responsibilities are in reaching them. Pay employees well. And be empathetic, especially when times are difficult.
Learn to let people go
Letting people go from the team is something many founders struggle with, as they’ll try their best to avoid conflict. They’ll often come up with excuses to keep people onboard even if they are not a good fit for the team, like not wanting to create an uncomfortable situation at the office, or put the person in financial trouble.
The truth is if someone is not a good fit you are doing them and yourself a disservice. They will likely never fulfil their potential with you, while they could flourish in another environment.
We had a client who had an individual on their team with a floating role, helping out wherever was needed, which is not uncommon within startups. The work they produced was excellent and they had a good work ethic. However, they couldn’t earn what they wanted to, and at the same time, they didn’t have the necessary skill sets to assume more responsibility. Over time, they became disheartened and their work fell in quality.
We noticed that his skills would be great for outbound lead generation. Eventually, the individual left the startup and set up his own successful outbound lead generation company. We also recommended him to some of our own clients and worked with him on projects to help get started. Meanwhile, the original company was able to find someone who was more suited to the role and helped the internal team run more smoothly.
If you have tried to help this employee grow within your company, but that hasn’t worked, give them the opportunity to find a place where they can fulfil their potential.
Your job as a founder is to help someone discover a happy and fulfilling career, not just pay their wages. You can even help them find this opportunity elsewhere. Your team won’t blame you if you make the right decision about an employee and treat them with respect.
Learn from mistakes
One of the biggest misconceptions about getting your business off the ground in that crucial first year is that it’s about getting everything right. But it’s primarily about learning - learning where you went wrong, what your product’s flaws are, what a better sales model looks like, to make your business demonstrably better.
That’s not a weakness, it’s something investors value in entrepreneurs as it shows self-awareness, room for improvement, and that you won’t fall into the trap of overestimating your product.
One of our past clients had a bad year, but rather than onboarding our plan to get the company back on track by improving on past errors, the founder buried his head in the sand. He would deny that mistakes had been made and tell investors that things were running fine. The investors knew this and refused to finance the coming year. Eventually, the founder accepted the problems and returned with a realistic view of the company; the investors told him “we have been waiting a year to hear that,” and agreed to provide the additional money.
Many founders are so set on achieving all goals immediately that end up growing too fast with absolutely no foundation. First, work through all the essential elements of business delivery, learn what works and what doesn’t. Once you have this experience, you can create a baseline for your business, and then begin to scale, focusing on those marginal gains that you can definitely achieve. Remember - it's a marathon, not a sprint.
Learn to communicate your long term vision
Pitching is a key part of making it past your first year with good financial prospects. But it’s important to remember that any investor or potential co-founder you talk to will have different personal objectives, and these may be at odds with yours. For example, they might have an early exit strategy that isn’t in line with your long-term vision for the company.
To pre-empt this, you cannot assume that you and potential stakeholders are on the same page (or that they have the same motivations as the previous person you spoke to). Make sure your business’ short and long-term prospects are clear and repeat your goals to your audience on a regular basis. Make it clear where they would fit into that vision, and how you both would benefit. Investors and entrepreneurs will be perceptive, and if you’re on the same page, they will be sure to show you that your interests are aligned. If they clearly aren’t, don’t be afraid to walk away.
The same goes for communicating your vision to your team - if your staff isn’t clear about where the business is heading, it’ll be hard to inspire them, and outsiders will also sense the disjointedness. From my experience working in large companies of up to 60,000 people, staff all too often are clueless about the overall business objectives. A great test is to ask employees one-on-one what the company’s goals are. When STC did this with clients, we found that answers were wildly different. Companies in this situation have to repeat their targets at every weekly, monthly and quarterly meeting. Yes, people get sick of hearing from you, but no one is confused about where they and their business are heading.
One of the hardest things a founder can do is relinquish control over your business - the company won't be faultless and not every decision will be the right one, but that's what will drive you to continue perfecting your startup for years to come.
About the author
Dan Wheatley is co-founder of StraightTalk Consulting, a SAAS operations and growth consultancy which works with founders to implement long term data-driven growth strategies.
Apply to the Online Seedstars World Competition 2020/21 and compete to be one of the 10 startups selected for a USD 50K growth program investment with a Global Winner getting up to USD 500K in investment.