5 Hard Truths: What wannabe startup entrepreneurs should know.
By Paul Vorbach, Managing Director, AcademyGlobal Pty Ltd
With so much excitement around innovation, startups and entrepreneurship, I thought it timely to share a few sobering reflections on the realities of small business. They’re based on 15 years of establishing businesses, following a decade in large corporations including Deloitte and Citi.
- You are small, weak and vulnerable. Get used to it. You won’t be for long – if you survive. But for now at least – you are. Some might prey on this vulnerability. Service providers to small businesses are usually expensive. Some may seek to exploit your lack of time, knowledge and experience. The pricing and contractual terms are often vastly different to what I would have accepted wearing a corporate hat (and supported by legal counsel and other specialist expertise). Expect lopsided contract terms, low on flexibility and high overall costs from: a) serviced office providers, b) factoring and invoice discounting companies, c) technology and equipment leasing businesses and d) and any unsecured financiers.
- Your personality makes you susceptible. Most entrepreneurs are extravert, optimistic and opportunity seeking. You probably need to be! Unfortunately, these personality traits are rarely accompanied by high levels of attention to detail. The problem is that in any business, missing a critical detail can be enough to put you under – either directly through legal action, or indirectly – through shear exhaustion. Fail to meet a deadline and expect that once friendly service-provider to become an aggressive litigant issuing letters of demand and making a wide-range of legal threats. If you have outsourced your collections to a “business finance” organisation they will chase your customers with little regard to your hard-won relationships. By contrast, in a corporate setting systems, policies and controls will usually be overseen by an appropriately trained staffer. In big companies the extravert, big picture “ideas-person” can be supported (moderated), so the firm enjoys a much higher level of protection.
- Someone must do the menial stuff. If you don’t get your basic business compliance burdens right – accurately, on-time and cost effectively you will fail. In a large business there is usually someone to take care of it; HR manager, company secretary, in-house legal counsel, finance director, compliance staff, quality manager… In your startup, who’s going to do it? You? Not likely and certainly not realistically given the other demands on your time and your likely disposition (see above). In fact if you were to focus on this, the question is who is developing new customers, new solutions and generally promoting your business? So what are the critical compliance risks? There are at least three: tax, staff entitlements and critical contractual obligations on key supplies. Get good, timely advice as cost effectively as possible. Pick advisers that your business will matter to. Avoid the big firms – you will pay handsomely and likely be neglected.
- Who are you? Big business, media, government and other institutions will likely dismiss you (for now). It’s not until your startup flourishes and has real impact that others outside your tiny circle will take notice. Once you succeed the established businesses, university business-schools and media will fawn over you like sycophants. Especially, if you’ve come from a management role in a large corporate beware! You no longer have business cards and an email signature underpinning your status with a big respected firm. You have no clout. Phone calls and emails will go un-returned. Common levels of basic professional courtesy extended between staff of big firms, academia and government are reframed and you’ll learn quickly where you are on the pecking-order.
- It’s still worth it! If you’re not too disparaged – and still reading this, know that it really can be worth the journey. Yes, it can be hard on your family, on your ego and on your finances. But the opportunity for true self-determination lies at the heart of this ambition. There is no parallel liberty for any employee-numbered staffer. No c-suite executive, elected official, faculty dean or government bureaucrat has the freedom of expression and unbridled choice to pursue their passions as you will.
And in doing so, you will create exciting opportunities for new colleagues and partners, solve real problems for hard-won customers and contribute to the vital engine room of our community.
The author has established, failed and succeeded in startups across property finance, investment consulting and management training. He founded AcademyGlobal in Sydney in 2004, an executive development firm with assignments ranging across 20 countries on 5 continents.