I’ve been advising and mentoring startups and growth companies for years, and find myself always pushing them to try something new, for the sake of growth and survival. When you try new things, you make mistakes, and I’ve seen many. Smart companies learn from their own mistakes, but some don’t pay enough attention to other people’s mistakes. In the spirit of saving you a few lifetimes of pain, here are some common mistakes that seem to happen routinely:
Wait until your company is up and growing before you formalize it. Some entrepreneurs can’t decide if they want to be a Limited Liability Corporation (LLC) or a C-corporation, or they don’t have the money, so they put off doing anything until the first venture capital round, or until the first lawsuit occurs.
The simple answer is to do something, and start simple. In almost every state, you can incorporate as an LLC with a minimal effort, and a cost in the hundred dollar range. This step shows everyone you are serious, and limits your liability on any mistakes. It also forces you to pick a name for your company and put other intellectual property stakes in the ground. It’s not that hard to change later to a C-Corp.
Company and product naming may also seem simple, but should be a key early effort, because mistakes can be very costly. You may recall the Chevy Nova, a compact car from GM. Pundits in Latino countries quickly pointed out that the name, ‘no va’ means ‘does not go’ in Spanish. Professional advice in this area is highly advised. Cultural and religious implications must be very carefully considered.
Rely on informal agreements with partners. You may all be friends, or spouses, today, but things do change quickly in the stress of a growing company. The same principles apply to strategic partners. Early co-founders often drop out of the picture due to disagreements, and you forget about them, but they don’t forget about the verbal promises you made. Later, when your venture is trying to close on financing, or even going public, that forgotten partner surfaces, demanding their original share. This problem can be avoided by incorporating immediately after early discussions, and issuing shares to all founders. I know two former friends who are still killing each other financially years later over an unwritten agreement, remembered differently by each.
Quick to hire and slow to fire. If you are growing quickly and desperate for help, you may skip on the homework of a proper job description, or validating applicant credentials are a fit before you proceed to interview. The message here is that if you don’t know exactly what help you need, you probably won’t get it. Hiring after one interview is like hopping a red-eye to Vegas to get married after one date.
Equally bad, you may know what you want, but you are trying to force-fit the candidate into the position. Maybe she’s related to the boss, or you are confident that the candidate will be a good helper, and can learn a lot from you. Helpers are expensive, since it often takes longer to jointly do a job than it would take one qualified person to do it alone.
Read more: Startup Professionals
