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8 Ways to Avoid a Messy Startup Disaster

Young businessman looking stressed in officeYoung businessman looking stressed in office

The Entrepreneur Insiders network is an online community where the most thoughtful and influential people in America’s startup scene contribute answers to timely questions about entrepreneurship and careers. Today’s answer to the question “What are some tips for maintaining a successful startup?” is written by Brett Brinton, cofounder and CEO of Zonar Systems.

A great idea can both create a new company and help transform an existing company. And a great team that knows how to execute is the foundation that will enable you to create a successful business with any idea. A stellar team can take an existing company—maybe even a brick-and-mortar business—and re-invent it.

Once you’ve built a successful startup, the challenge then becomes how to maintain it. There are a lot of elements involved, but here are few key ones that I always come back to:

1): Follow on funding
How a business manages and spends its money is a make-or-break decision, and it’s not a one-size-fits-all decision. My first company was a family business, which we built “old school” from the ground up. My father had enough initial seed money to get to first revenues, and from there we partnered with suppliers to extend credit and promised our loyal customers quick pay discounts. It wasn’t the cheapest way to manage operating cash needs, but we were able to grow the business until it would support a more traditional line of credit from the bank, all with zero dilution.

With Zonar, we’ve achieved success through a combination approach—initially with our own funds while partnering with our suppliers and customers. From there, we raised funds through a series of small rounds, selling equity to friends, family, and an angel investor, while simultaneously leveraging debt from a bank. By raising money through a series of small rounds—timed with ever-increasing valuation—and supplementing the remaining cash needs with debt, we did, of course, dilute, but didn’t give away the farm. Today, we are debt-free, and the profits of the business more than support our cash needs.

See also: Here’s What Happens When Your Job Candidates Have Bad Experiences

Contrast the two examples above with going the financial sponsor route (VC, PE, etc.) out of the gate. You may get a lot of money, but you’ll end up giving away a big part of your new business. Follow-on rounds are needed and, again, erode your equity position. There are other creative ways to fund your business while holding onto enough equity to keep you smiling.

2) Take a risk
There are a lot of smart people out there who have never started a business. The difference between them and the guys who have is the willingness to take risks. Essentially, you’re betting that funding will take you through the first year and that the market will bite on your first products. Once you make the first bet, you have to keep going with ever-increasing bets that build on themselves.

One of the big mistakes I see successful startups make as they start to get larger and more profitable is that they lose that ability to take risks and make those bets, which begins to limit them. Risk tolerance is a very critical element to building and maintaining a successful business.

3) Embrace the idea that failure is not an option
A big reason that startups fail is that people give up too soon. We’ve all seen it or experienced it: You get to a point where people are questioning how you’re going to move forward, and you give up. Don’t. Be persistent. Have faith in your vision, your team, and your business. Not all of your bets will work out, but that’s okay. Pull back, assess, adjust, and restart.

4) Ignore the naysayers
Even the most well-meaning person may not “get” your vision. Where you see opportunities for your business or products, they may only see the risks and advise you to play it safer. Believe in your vision and ignore the naysayers. Keep driving forward.

5) Crown the company
As your company grows, the company culture expands as well. It becomes less about “we—the founders” and more about “we—the company.” As a leader, it is important that you foster a culture that gets everyone passionate about and engaged in your company. You’re effectively investing in yourself.

 

6) Create a power posse
As you start to scale up, cultivate a top-notch team. These team members are essentially CEOs of their respective parts of the business. Their success is the company’s success: The stronger they are, the more the company as a whole succeeds.

At the same time, however, don’t be afraid to make a change. If someone on the team is just not the right fit, make a change. All too often, people think they can change somebody, or they don’t want to hurt someone’s feelings, but not acting ultimately does the opposite—it hurts the company and hurts them.

7) Make decisions
It’s critical that you have executives who can make decisions. It sounds easy, but I have seen countless times when people have a decision to make—about a business or a product—and they hit paralysis by analysis. They get committees together. They agonize over the pros and cons to make the perfect decision.

Making a decision is like making a bet. Some bets will be right, and some might not work out as planned. For a business to be successful, you need to make decisions—and often. Either way, you continue to move the ball forward. That’s a mantra that has stayed with me my entire career: Keep the business moving. Even if some of the decisions don’t work out, when you keep moving forward, in the big picture, that one decision has a smaller impact.

8) Run a marathon, not a sprint
Throughout all of these steps, remember why you’re doing them. Why did you create this startup business? Maybe it’s because you wanted to work for yourself or create a great business to pass on to your family, or have more time with the people you care about. Your business is part of your life, but it’s not your whole life. I’ve gone through a couple of phases where my business-life balance got out of sync, and it hurt. So keeping balance and understanding why you are building this business will keep you charged up. You’ll be able to run a marathon, not a sprint.