One key for every CEO to clearly define her / his responsibilities and outline the gaps and what else needs to happen to effectively manage and grow the business. The CEO must manage hiring executive leadership team members to do these tasks and fill the gaps the CEO has identified through smart delegation and holding each leader accountable for growing a team under them.

It is just as important that the CEO ensure that each leader is an effective manager and / or can be trained to be an effective manager. Otherwise, the company is doomed and failure is around the corner.

For each new leader, to build and manage a dynamic team, it is imperative she / he avoid the “Smartest Person in the Room Syndrome” and that starts with these 5 leadership Don’ts:

1. Do not walk in the door thinking everyone before you failed – respect those before you as they likely accomplished a lot.

2. Do not think your new ideas are new – most often they are not new and they have been discussed, presented and / or evaluated before you arrived.

3. Do not walk in the door with an agenda – be humble and listen and learn before arriving at any conclusions.

4. Do not prejudge, as hard as that is – even if you have outside perspectives beforehand, leave those outside, walk in the door and start with a clean slate – then arrive at your own conclusions.

5. Do not walk in the door trying to move mountains – move a few pebbles while you learn, build credibility then develop a strategy to move mountains.

I would love to hear about your experiences with the “Smartest Person in the Room.” Give me a shout at harry@hollinesgroup.com or visit my blog and comment at https://hollinesgroup.com/blog/.

Remember, the key to leadership is Humility!!!

The post The Top 5 Startup Don’ts of Effective Leadership that Derail Startup Growth appeared first on Hollines Startup Growth Strategy & Transactions.

Unfortunately, in the haste of starting a company, many people overlook the less glamorous side of building a business. It’s easy to make painful and costly mistakes as you focus on building, growing and scaling an early stage company.

Learn how you can avoid these common roadblocks with a trusted business advisor.

1.     Co-founding clarity

Your cofounder might be your best friend or even a family member, but that doesn’t mean you can operate a business on a handshake. Too often companies are split apart by feuding cofounders.

The best thing you can do for yourself and your cofounders is to draw up a formal agreement with a seasoned business lawyer. Your lawyer will write a legal document outlining who owns what percentage of the company, vesting schedules, job responsibilities, how to operate if a co-founder wants to leave and a vision for the business.

2.     Business filing

No matter the size of your company, you need to form a legal entity if you want to scale in the future. Filing as a legal entity protects your personal finances from liability in case the company is sued.

You can file as a sole proprietorship, partnership, C corp, S corp, or an LLC. The right entity depends on your goals for the future, so don’t be afraid to think big. Filing incorrectly now will give you headaches down the road.

Of course, will your taxes and operations may get more complex so consult with a legal and business experts to make sure your company selects the optimal business structure.

3.     Contracts

Early stage companies don’t always create proper contracts when they should. When you’re in the business of growing your company, a contract protects your business.

Minimize liability by drawing up contracts for vendors, clients, and employees. A lawyer can help you draft a standard, templated contract that will help you minimize your liability.

However, you do not want the legal process to slow down your business growth. To avoid this outcome, you must streamline the contract process and develop a playbook of common negotiation issues that can be addressed upfront.

You must minimize and shorten the negotiation phase so you can focus on delivering your products and services. Consult with a business advisory firm like The Hollines Group to minimize this cycle and implement a process for the fastest path to revenue.

4.     Intellectual property

It’s likely that your company has built something the world has never seen before. Early stage companies live and breathe by their innovative products and processes.

How would you feel if another business got wind of your idea, copied it, and made millions? Unless you’re guarding your intellectual property through the legal system, you have little recourse for dealing with copycats or thieves.

File patents, copyrights, and trademarks to protect your valuable ideas. Patents protect physical products while copyrights cover authorship or art. A trademark is essential to guard your business name or tagline.

You must also implement Non-Disclosure Agreements (NDAs) to cover yourself. This gives you legal recourse if someone shares your proprietary information.

Additionally, one of the critical components to building a repeatable and scalable business is implementing a licensing scheme and framework that aligns with the goals and objectives of the business. This is critical if you want to create a recurring revenue business and garner the highest valuation multiples.

5.     Taxes

Business taxes are very different from paying taxes as an individual. When you’re in the thick of starting a new company, the tax implications can be overwhelming and even paralyzing.

This is why it’s so critical to choose the right entity for your business. You’ll have different requirements for taxes on the federal and local level. Sales tax, payroll taxes, tax credits, and deductions play a role in your company’s success.

Partner with a stellar lawyer and sharp accountant to do the heavy lifting. You want your company to stay compliant as you scale, or risk toppling your hard work.

6.     Employment

Hiring employees is a monumental step in your journey to growth as an early stage company. But many startups fumble the employment process.

So many companies fail to properly classify employees. They don’t require identification, forms, or contracts when they hire and onboard new employees.

The most common legal employment issue for startups is incorrectly classifying workers. Many startups want to avoid the cost of full-time employees, so they hire “contractors.” However, the law is very clear about the difference between an employee and a contractor.

This is a recipe for legal and tax problems down the road. Don’t get in hot water because you aren’t following employment guidelines.

7.     Naming

You probably already have a name for your startup. However, naming can be a legal minefield, and it should be taken seriously.

Just as you protect your business legally, other business entities do the same. It can be difficult to know if your name is legally free and clear. If you don’t do your due diligence, you can get into hot water for violating trademarks.

The worst part is that I’ve seen startups decide on a name and then realize it’s taken. They’ve already spent thousands on materials and a website, only to receive a cease and desist letter.

Hire a business advisory service to start on the right foot and engage a lawyer to do professional background research on potential names to avoid legal problems.

The bottom line

Startups are no strangers to bootstrapping, especially when it comes to hiring outside resources. It’s tempting to hire a friend of a friend for free advice. However, not all advisors, mentors or coaches are equal. Select an advisor that has decades of experience dealing with these issues and working inside startup and early stage companies.

Choose someone who specializes in the competitive startup environment. The Hollines Group offers end-to-end assistance with your early stage company. Start right and give us a call now.

The post 7 Painful and Costly Startup Mistakes appeared first on Hollines Startup Growth Strategy & Transactions.

Why do we accept failure as an inherent risk of founding a startup? Failure isn’t an option when you leave your life’s work on the chopping block. We don’t need any more early stage companies to taste defeat.

After 20 years in business development, corporate development and law in the technology industry, I’ve seen my fair share of failures. However, after advising and investing in many startups myself, I’ve come to realize the real reasons startups fail.

Pitfall #1: The 1,000 ping-pong ball strategy

Every startup wants growth, expansion, and scale. They have to determine how and where to sell more products and services at scale.

The problem? Most startups go too far. Instead of juggling a few ping-pong balls, they pick up hundreds more in an effort to be the best. I’ve seen that most startups will do whatever they can for their customer, supplier, or partner to make a sale happen.

This results in what I call market and sector “dabbling.” Because startups flex to make sales (any sales), they have a handful of customers spread across multiple sectors.

Suddenly you have more ping-pong balls firing at you from multiple directions. You have a small sample size of clients and little credibility in the market. You can’t specialize in or understand a specific sector because you’re all over the place.

The solution

Unfortunately, most startups don’t have time on their side. You have to pick the right sector and market as soon as possible if you want to scale.

Ask yourself one important question: “What real, meaningful, and identifiable business impact do we give the customer?”

I’m not talking about soft business drivers, but hard, measurable impact. Demonstrate how you save customers time, money, or frustration in a meaningful way. This will keep you focused as you grow in the right areas.

Pitfall #2: The “It depends” business model

Has a customer or investor ever asked you, “What’s your business model?”

If your answer was, “It depends,” you have a major problem. This steals focus away from your startup, leading into Pitfall #1 and a cycle of failure. 

You can’t change your business model to suit a different customer every day.

Every company, no matter its size, needs a scalable and repeatable business model. This business model must align to the key business drivers for customers in your market. A solid business model is critical to growth in any market sector.

The solution

Determine what your business stands for. What kind of business are you building?

Whatever your model, stay true to it. Be willing to walk away from a deal if the opportunity doesn’t align with your model.

The sooner you recognize a bad customer-model fit, the sooner you can move on to the next opportunity.

Pitfall #3: “I can’t say no!”

This point links back to all the other Pitfalls, but it deserves a special mention.

Look back on your business dealings in the past year. Can you remember a situation where you walked away from a deal? Do you remember continually changing your business model or strategy to win an individual deal?

If this happened to you, you don’t know how to say “no.” When you morph to fit every opportunity that comes your way, it’s impossible to have a repeatable, scalable, or profitable business.

The solution

Pick a strategy and business model that works. Use this model as a yardstick for every new opportunity.

If the opportunity doesn’t match your model, simply say “no.” It’s that easy.

Pitfall #4: “All I know is they purchased it”

Do you know why customers buy from you?

No? Unfortunately, you aren’t alone. It’s astonishing how many startup and early stage companies don’t know why customers buy from them.

What’s more alarming is how few companies take time to understand their customers. The result is startups wasting resources on products that don’t address customer pain points, ultimately leading to failure.

The solution

Talk to your customers. Listen to your customers. Invest the time to reach out and understand why they buy from you. Verify that they’re actually using the product and not simply purchasing and abandoning it.

What problem does your product address? What more could it do for your customers?

Quantify the value of your product for customers, whether in time saved, tasks streamlined, or money saved. Use these as metrics to market and improve your product over time.

Pitfall #5. “I don’t know how to lead”

Let’s take a page from sports here.

A head football coach can’t defer blame to an assistant coach. No matter the circumstances or actions of their subordinates, failure falls to the leader.

In the case of a startup, failure always falls to the CEO, regardless of the actions of other executives or employees. It’s this failure to lead that causes so many companies to fail.

Leadership has nothing to do with capability, experience, or your IQ. Most CEOs are incredibly intelligent.

The problem is that most CEOs fail to define their role as CEO. A CEO needs to understand how he or she works in the business. This helps them hire capable folks to handle key business tasks outside the CEO’s skillset.

The solution

There are so many types of CEOs. They have varying backgrounds in finance, product, legal, marketing, sales, strategy, operations, and more.

The key is to understand your area of focus as the CEO. What is your experience? What are your daily duties as a CEO?

Once you’ve defined your responsibilities, outline what else needs to happen to run your business. Hire team members to do these tasks through smart delegation. Hold each leader accountable for growing a team under them.

This sounds simple enough, but delegation requires a lot of awareness, confidence and emotional intelligence.

Some CEOs naturally develop these skills in life, but many others need to work on self-awareness. Leverage counselors, mentors, and consultants to help you improve your leadership style.

The bottom line

These five pitfalls are responsible for the failure of many great startups. Don’t let your early stage technology company fall prey to these mistakes.

Scale intelligently to bring your solution to the world. Skate around these pitfalls with a trusted, experienced advisor like The Hollines Group.

Sign-up above our weekly newsletter and shoot me a quick email at harry@hollinesgroup.com to brainstorm and discuss your business strategy.

The post The Real Reasons Startup and Early Stage Companies Fail appeared first on Hollines Startup Growth Strategy & Transactions.