Dos and don’ts for startup entrepreneurs

So, you are thinking about entrepreneurship or you have made the decision and are taking those first steps in a startup. Owning your own business can be a wonderfully rewarding experience but it can also be fraught with a pervading sense of uncertainty about the “right” steps to take. While the list that follows will not assure success, it should go a long way toward reducing the risk of failure:

DO NOT listen to your family and friends without skepticism — Your family and friends care about you. This affection can manifest in exaggerated support for your business idea that isn’t grounded in market reality. Conversely, it can manifest in projecting fear and negativity that is designed to protect you which may also not be accurate. These familial support systems should be a source of emotional support and possibly a source of patient capital, but not the kind of objective business counsel that the nascent entrepreneur needs.

DO your own customer discovery — The most important voice for the burgeoning entrepreneur is that of the customer. Unless you are solving a real problem for a customer or offering them a unique benefit, you do not have a business. Understanding the problem you are trying to solve from the customer’s perspective is critical to your success and it should not be outsourced, or reduced to surveys. Have a conversation with potential customers and keep speaking to them for as long as you are in business; they hold the keys to your success or failure.

DO NOT believe the myth of the solo entrepreneur — While popular culture romanticizes the achievements of Steve Jobs, we may have never heard of him if it wasn’t for Steve Wozniak. The disparate skills required to successfully start a company are seldom possessed by a single individual. Additionally, the benefits of collaborative problem-solving using multiple perspectives are seldom eclipsed by the efforts of an individual. Successful entrepreneurs know their limitations and seek out partners, employees, mentors and external service providers that can complement their skill set and add value

DO carefully consider splitting equity — Often in the quest to find that mix of talent that can drive a startup from idea to launch, the founding entrepreneur is willing to give up equity as compensation. Splitting equity can best be thought of as a marriage, and is not to be entered into lightly. In an ideal sense, equity splits should be determined on the basis of the relative contribution of the team members but that can be difficult to determine objectively. This is no time for egalitarianism as it is unlikely that two founders are making exactly the same contribution to the value of a startup. Regardless of the split, ensure that a shareholders’ agreement exists because undocumented understandings over share ownership that occurred in the idea stage take on a different complexion when the company is profitable.

DO NOT undervalue yourself — Entrepreneurs should remember that they get paid for what they do, and they earn a return on what they own. Therefore, if you are working in the business, develop a financial model based upon paying yourself a market-based wage for the job you do because if you don’t, you are lying to yourself. You should be developing a business model that can generate a return with all of the costs of inputs included. If you develop a model that discounts your labour to zero, the model is unsustainable.

DO embrace ambiguity — Tolerance for ambiguity is the degree to which you are comfortable with uncertainty, unpredictability, conflicting directions, and multiple demands. Most people despise ambiguity, but successful entrepreneurs accept it as a normal state of existence. Operating within ambiguous situations requires a dedication to learning; learning from customers, learning from mistakes, and learning from others and then applying those lessons to better serve the market. The successful entrepreneur charts his own path to success on the basis of perpetual, just-in-time learning while those that cannot embrace the vicarious existence of the entrepreneur attribute success to timing, or good fortune. In the words of American journalist, Harvey Earl Wilson “Success is simply a matter of luck. Just ask any failure.”