In the third of a three-part series, columnist Christine Comaford offers her advice on managing the people of the successful business equation
In my previous two columns I've covered two of the three cornerstones every business needs: an effective business model (BusinessWeek.com, 6/25/08) and money (BusinessWeek.com, 7/11/08). It's time to address the people part in this column.
Over the course of this series, I've told the story of two entrepreneurs who needed to perfect their business model and define their financing strategy. Now I'll refer to them again as I show them how to expand their brain trust with the right people.
Remember, these entrepreneurs want to build a physical studio where both professional musicians and hobbyists can jam together, record CDs, and showcase themselves to possibly secure representation. They also want to sell CDs from participating artists and create a thriving retail store (both online and offline), along with a small restaurant that has a limited menu, coffee drinks, and beer and wine. They hired an MBA to write their business plan (BusinessWeek, 1/7/08), but he had never raised a dime of financing.
Wanted: Advisory Board
In today's economic climate, it is essential to have a seasoned team, a fast path to revenue, and a staged rollout plan. The business these guys want to build has multiple pressure points: retail, restaurant, and geography—all targeted to creative artists and hobbyists—and few selling points targeted to client pain. Yowch.
What are the first questions a prospective investor will ask? People questions, of course! Here were some of mine: Do you or your team members have experience in the music industry? Retail industry? Restaurant industry? No? How about your advisory board: Do its members have this experience? No? Oh&no advisory board? Why?
It's easy to set up an advisory board, which brings you phenomenal expertise at zero up-front cost. See my column (BusinessWeek, 2/1/07) on this topic.
What is the duo's biggest problem at this moment? Credibility. They have none. They are diving into a business they know very little about. Without seasoned team members or advisers, how can one possibly trust their revenue and cost projections? They need credibility, pronto. I'd recommend they complete the following steps to build up human capital as soon as possible.
1. Lock in advisers who are veterans within each of the industries they'll be doing business in. Timeline for this? Like, now.
2. Secure contract staff to work with the advisers to audit and edit the revenue and cost projections. They can find hourly bookkeepers at any local accounting firm or at such Web sites as www.Accountemps.com or www.TeamDoubleClick.com.
3. Make sure all team members (employees, founders, contractors, advisers, web developers, strategic alliances, everyone!) sign a confidentiality and proprietary-inventions agreement. I explain why in this previous column (BusinessWeek, 5/12/08).
4. Follow standard processes when recruiting. Use STAR to screen candidates, then top-grade those you are seriously considering. My earlier column (BusinessWeek, 4/23/08) on those two techniques will help.
5. Maintain a backup bench. Always be on the lookout for the next adviser, contractor, or employee. You don't want to be empty-handed when a key hire quits and you need a speedy replacement.
6. Refine your networking skills. See my column (BusinessWeek, 11/28/07) on how to win friends and influence outcomes—a huge part of your success will be based on the ability to get others to help you.
7. Build a culture of transparency and know how to course-correct. See my column on these strategies (BusinessWeek, 5/7/07). I've found that when key executives cop to their mistakes, the team will dive in to fix any problems. All startups have problems. Set up the right culture to handle them.
By concentrating on the people part of the equation, our two entrepreneurs will have a far better chance at putting their business model into action and getting financed. And of course, once you get financed, you need to stay financed. Often, this requires continual tweaks to your business model. Remember: People, money, model are tightly linked. Refer to this three-column series if you get stuck. Good luck.