There a numerous factors contributing to the high mortality of start-ups. Two of them revolve around decisions on what jobs are needed initially and how those jobs are structured. Mistakes here can lead to lack of execution or unsustainable overhead, both of which can be fatal.
The challenge is to commit to the proper lean mix of staff resources and no more, followed by assuring that those staff resources deliver what is needed to get the organization through its infancy.
A mature organization needs to assure that the following functions are carried out in order to sustain itself: Executive (entrepreneurship, PR/community relations, chief operating officer), Support Services (HR, communications, facilities, IT, purchasing), Sales, Finance, Production, Quality and then Marketing. But an infant organization can get by without some of these functions initially. Manning all of these would be too costly. Even if you have investment capital to fund these positions, doing so is not vital initially and robs the organization of the early profitability needed to attract additional capital to fund growth.
The vital few functions in a start-up are Promotion/Sales (combined Marketing and Sales), Finance and Production. You do need basic Support services, but can likely tag that to the existing positions (i.e. everyone answers their own phone, does their own copying, mailing, filing, software upgrades) or could be contracted out in the case of IT support.
Start-ups live and die based on cash flow. And, cash flow is about sales, producing what you sold and managing revenue and expense so as to stay solvent. Likely, the start-up had in place potential customers familiar with the intended product/service whose opinion of the idea or prototype encouraged owners to take the risk and secure the capital to start the business. So, the first order of business is to score them as customers. Then, feed off initial satisfaction and favorable reviews of the product or service to promote to those who previously did not know about the new organization (Marketing). Production needs to be sure to produce what is sold, maintain quality, timeliness etc.
What about Executive and the other functions you say? They can wait. Executive is often where problems arise. Once the business is up and running, the entrepreneur portion of the Executive role is a potential risk factor to the infant business. Entrepreneurs can sometimes be risk addicts. At the first signs of success (i.e. initial sales), they get that rush that prompts them to go on to the next great idea rather than “sticking to the knitting” to be sure that the infant business gets to a stable operating level. Partners, investors, fellow staff must all work to hold the “addict” in check until you reach stability.
Next post I will take you through the elements of a sound job description in order to officially “hat” your employees – whether new employees of a start-up or employees of an established institution. To learn more on structuring your organization, whether a start-up or a long established entity, click here. And as always, forward me your thoughts and comments.