With the immediate threat of a U.S. recession causing entrepreneurs to take stock north of the border, now’s an opportune time for me to share some key insights from the book I co-authored with Jana Matthews, Lessons from the Edge: a chronicle of entrepreneurs who lost or almost lost their companies, and what they learned in the process.
The book was inspired by a series of panel discussions I had organized for Entrepreneurs’ Organization (EO) conventions, the first one taking place 15 years ago. In each session, a few entrepreneurs shared the story of their biggest business mistake and the lessons that came out of it. These Lessons from the Edge panels were highly rated, due, I think, to the business owners’ candour, the similarities the audience members saw in their own companies and the often nightmarish scenarios described. The book collects the intellectual capital from these sessions in hopes of helping other entrepreneurs avoid the same mistakes.
Lessons from the Edge is divided into five themes that affect entrepreneurs across all industries: leadership, people, partnerships, money and the personal side of business. Although there are 50 lessons altogether, here, for anyone who’s worried about recession or hasn’t yet ordered the book from Amazon.ca or Chapters.ca (wink, wink), are my top five lessons from the edge.
1. Leadership — Have a Vision
Your most important role as an entrepreneur is to create a vision for your company, write it down and communicate it on a regular basis to all of your stakeholders. Make it a mantra. Everyone in your organization should be able to recite it. Your vision becomes the benchmark against which everything you do is measured.
In our research for the book, we saw many entrepreneurs plunge over the entrepreneurial edge because they lacked a clear vision. We saw situations in which after success in one business, an entrepreneur took his eye off the ball, started a new venture,then saw the original business go down the tubes because he lacked a well-defined goal for what he was doing.
Business is tough enough when you have a well-communicated vision. Never lead without one.
2. People — Hire Slow, Fire Fast
The top lesson that our entrepreneurs learned about managing people is to take time hiring employees, but to take no time firing them. We found that fast-growth companies make bad hiring decisions because they rush to fill the roles that proliferate as a venture expands. Their biggest mistake: believing that anybody is better than nobody, they settle for people who don’t share their values or fit their company’s culture.
It takes time to determine whether a prospective employee has those qualities. Reviewing a resume and conducting an interview will not do. Hire a headhunter, if necessary. And if you still make a mistake, don’t fool yourself into thinking the misfit employee can be reformed — just get rid of them.
3. Partners — Get it in Writing
Partnerships are the area most fraught with danger for entrepreneurs. We take on partners because we require additional skills, contacts or capital. However, partnerships are just like marriages: easy to get into, messy to get out of. As a result, it’s critical to have the commercial equivalent of a prenuptial agreement in place — namely, a partnership or shareholders’ agreement.
Forgoing a shareholders’ agreement is an all too common and critical error made more painful by how easy it is to get one — hire a lawyer to map out a contract that reflects you and your partners’ mutual understanding of the partnership.
4. Money — Raise More, Spend Less
Many of the entrepreneurs we spoke to simply ran out of money. (I’ve done it more than once.) They underestimated their capital requirements, spent like drunken sailors or ran dry when the market changed on them. Always treat outside investment like it’s your own, stash cash for a rainy day and resist leasing that Porsche.
5. Personal — Live A Balanced Life
“Live a balanced life” might be a motherhood statement, but it’s easy to let ego and passion get in the way of your well-being. We encountered many failed marriages because of entrepreneurs’ obsessions with their businesses and numerous people who lost their companies when their health failed.
Put aside quality time for the significant people in your life, get plenty of sleep and exercise, eat right and pursue your own spiritual path, including giving back in some way.
In fact, those things might be the best ways to avoid the countless other mistakes that can lead your business to the edge. So, don’t listen to me — just do what Mother told you.