When you start a brand new company, it’s like going to war. You’re up against everybody and anybody who’s fighting to raise money. You’ve got competitors out there. There’s going to be survivors and there’s going to be casualties. In order to succeed, you have to have a lot of elements. Here are ten essentials for a successful startup.
1. Good people. Hire people you can trust through thick and thin. With most startups, your company will experience major ups and downs—especially running out of money or going through an economic recession. You have to find people that will pick up a rifle and follow you into battle. It’s life or death for companies.
2. Proven technology, “secret sauce,” and know how. Run your startup idea through many people and see how many “aaahhaa” and “wow” moments you get. If multiple people outside of your family are willing to write you a check, it’s a good idea. No checks? Then, it’s not a good idea. Go back to the drawing board to refine it or choose another idea.
3. All-star management. Assemble an all-star, dream team management team: A creative, innovative idea guy. A visionary chief executive officer (CEO). A tight, by-the-book chief financial officer (CFO). An anal-retentive operation/plant manager. An energetic business development/sales manager. Honest legal counsel that has your best interest.
Investors buy into an experienced team, not just a fast-talking, silver-tongued CEO.
4. Intake and offtake agreement or letter of intent (LOI). You need sales contracts for somebody to buy you goods. Intake an incoming source of feedstock or materials to manufacture your products.
5. Ability to secure funds or raise money. Have a great business plan, executive summary, smashing power point presentation, and an articulate CEO that can explain inside and out all company aspects. The CEO must know and have worked most positions in the company in order to really understand the business and people behind it. So many people have great ideas, but never find a way to raise money. This is sad, because many geniuses never get their idea out of the garage. Entrepreneurs need to find a way to hire the right financial partners to raise money to allow entrepreneurs to focus on the invention and growing the company. I think most high-powered financial guys are not good leaders of start ups and should just focus on raising money. It is rare to find this partnership between CEO entrepreneur, CFO, and investment bankers.
6. Aligned board of directors and investors. It’s hard enough having competitors out in the world. It’s a whole other ball game playing against the referees. The CEO and management don’t need distractions in hard times. Things can work like clockwork when you communicate and have a positive relationship with everybody. Invest in the relationship. This can go a long way when things get tough and go further when things click and get rolling.
7. Humble pie. Pride, get rid of it. It gets in the way of forward progress. So many individuals get caught up in titles, roles, and rank. People should focus on the job and task at hand, not the titles. People looking for big titles and roles are not planning to stay long. They are focusing on their next big gig to add to the resume so they can advance and get a higher paying job elsewhere. Build a team culture. Praise the people around you. Acknowledge all people in the company, both new and veteran. Open your mind to consultants, mentors, board members, advisors, and low level employees. They have been there, done that at high cost. They are your front line of people. They can intimately share their experiences so you dont have to make the same mistakes. Don’t be afraid to say: “I dont know,” “Can you help us?,” “You’re right,” “Great idea!”
8. Dont just look at the resume. Look for chemistry in the person. If you hire a bad apple it will ruin the bunch. People in a happy work environment can take you to the stars. It creates high quality workmanship. A bad apple will distract the bunch and create a negative wave in the company. Treat and talk to employees the way you want to be spoken to. Always bring respect at all levels. Give respect, to get respect.
9. Dont be afraid to fire someone. You have to nip this in the butt early on. If there is a bad apple in the bunch, get rid of that person. Employees see weakness like hyenas see an impala with a broken leg. I had a manager once who had two employees that would fight all the time. They could never agree on a single thing. The manager could not fire either of them, and that weakness held production back three months. So I fired all three, the manager and two employees. The new manager got production working the next week.
10. Move fast. Have the ability to move fast and make changes to adjust to extreme business climates or situations. In one occasion, when oil prices were high, it didn’t make sense to make and sell biodiesel. We just sold used cooking oil at profit and saved money in production costs not producing biodiesel. In another situation, we used to outsource companies help to clean our cooking oil. The oil cleaning vertical integration was an instant savings of 33 cents per gallon.
Don’t be afraid to fail or try. You can’t be successful until you know what failure is.
Yale Wong is the chairman and founder of General Biodiesel, Inc.